The Week Ahead: Recovery package may boost market sentiment

This article first appeared in The Edge Malaysia Weekly, on June 8, 2020 - June 14, 2020.
The Week Ahead: Recovery package may boost market sentiment
-A +A

The glove mania on Bursa Malaysia is far from over, but the short-term Economic Recovery Plan announced by Prime Minister Tan Sri Muhyiddin Yassin last Friday may divert the attention of investors away from rubber glove counters.

Investors will have an extra day to digest the announcements as the country marks the Yang di-Pertuan Agong’s birthday on Monday — a public holiday.

Although market sentiment for the property and automotive sectors remains weak, the recovery package offers some positive signals to industry players.

Notably, Muhyiddin announced that the government is reintroducing the Home Ownership Campaign, which offers up to RM1 million stamp duty exemption for name transfer letters for properties priced between RM300,000 and RM2.5 million, and 100% stamp duty exemption for the financing agreement.

Property tax will also be exempted for Malaysians for disposals of up to three properties between June 1, 2020, and Dec 31, 2021.

In addition, consumers can take advantage of a sales tax exemption on new car purchases, a measure designed to promote the growth of the automotive industry.

The government will grant 100% sales tax exemption on locally assembled or completely knocked-down cars, and 50% on imported or completely built-up cars, from June 15 to Dec 31.

The share prices of automotive firms — such as Bermaz Auto Bhd, MBM Resources Bhd, Tan Chong Motor Holdings Bhd and Cycle & Carriage Bintang Bhd — started inching up in late trading last Friday.

The tax exemption, it is anticipated, will help boost sales and ease the cash flow of distributors and dealers, as well as reduce existing built-up inventory at manufacturing plants. It will also keep the retail networks of dealers operating with some revenue.

Outside Malaysia, China’s May data flow begins on June 7, with trade figures and inflation and monetary indicators over the course of the coming week.

It is also a big data week in Japan, crowded by April economic indicators, which should shed some light on its gross domestic product (GDP) growth in the current quarter.

Like China, trade figures for Taiwan and the Philippines are likely to show accelerating export weakness, according to ING Asia economist Prakash Sakpal.

“The same goes for Malaysia and India’s manufacturing releases after these countries saw the worst fall in exports by -24% year on year and 60% respectively in April,” he wrote in a report last Friday.

FXTM market analyst Han Tan highlights that Malaysia’s April industrial production data is forecast to contract 13.7% y-o-y, offering yet another glimpse of the economic carnage caused by Covid-19.

The rollout of Malaysia’s RM35 billion short-term economic recovery plan, however, is expected to alleviate downward pressures on the domestic economy.

US-China relations will still be in focus even as US President Donald Trump may be increasingly occupied with domestic protests, which spread across the country following the death of an African American at the hands of the police in Minneapolis.

UOB senior economist Alvin Liew says China’s various monthly data for May could give insights into how the Chinese economy is recovering from Covid-19.

“Besides, there is a substantial G7 economic data calendar, dominated by US jobs and prices, while in Europe, the focus will be on the April industrial production data,” he wrote in a report last Friday.

These include US May headline Consumer Price Index (CPI) on June 10, US April Producer Price Index (PPI) and US initial jobless claims on June 11, as well as the final print for 1Q2020 GDP from the eurozone on June 9.

On the corporate front, companies that are expected to release their quarterly financial results include Pos Malaysia Bhd, UMW Holdings Bhd, Chin Hin Group Bhd, Tex Cycle Technology (M) Bhd and UEM Sunrise Bhd.

Kejuruteraan Asastera Bhd will convene its extraordinary general meeting (EGM) on June 12. It is important to note that the EGM, which was scheduled to be held physically, will now be done via a fully virtual meeting through live streaming from the broadcast venue.

Likewise, Bumi Armada Bhd will hold its virtual annual general meeting (AGM) on June 9, as will Telekom Malaysia Bhd and Petronas Dagangan Bhd on June 10, Press Metal Aluminium Holdings Bhd on June 11, and Sunsuria Bhd and PPB Group Bhd on June 12.

Meanwhile, all eyes will be on whether Petroliam Nasional Bhd will confirm or deny a news report late Friday that its president and CEO Tan Sri Wan Zulkiflee Wan Ariffin will be leaving the national oil company.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.