Political changes not expected to derail current economic policies, recovery plans, vaccination progress — UOB Research

Market Sentiments | Inve$t #72

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According to a report by UOB Research, the political changes in Malaysia are not expected to derail the current economic policies, recovery plans and vaccination progress. As at Aug 22, 55.6%, or 18.26 million, of Malaysia’s adult population have been fully vaccinated while 78%, or 13.02 million, have received at least one dose of vaccine. Larger parts of the economy and more sectors are gradually reopening. Currently, six states — Penang, Perak, Terengganu, Kelantan, Pahang and Sabah — have transitioned to phase 2 of the National Recovery Plan (NRP) while Perlis, Sarawak and Labuan are under Phase 3 of the NRP. While Kuala Lumpur and Selangor remain in Phase 1 of the NRP, more restrictions were loosened on business operations and social activities recently. Malaysia has one of the highest rates of vaccination roll-outs based on vaccination doses. The vaccination timeline expects to achieve the target of 100% of Malaysian adults fully vaccinated by October. Going by this assumption, the Research House expects most economic and social sectors to reopen by 4Q21 which paves the way for a rebound in gross domestic product (GDP). Positive spill-overs from external demand will also provide further impetus to the recovery pace ahead. Nonetheless, it will continue to watch how the external uncertainties surrounding the Covid-19 resurgence unfolds in major countries, the expected US Federal Reserve quantitative easing tapering in the later part of this year and the pace of China’s economic slowdown. They maintained their full-year GDP outlook of 4% for 2021 and expect the key policy rate to be kept unchanged at 1.75% for the rest of the year 

Malaysia’s CPI up 2.2% in July 2021 

According to Department of Statistics Malaysia (DOSM) chief statistician Datuk Seri Dr Mohd Uzir Mahidin, Malaysia’s Consumer Price Index (CPI) grew 2.2% year-on-year (y-o-y) in July 2021 to 122.5, marking its sixth consecutive month in positive territory due to the low-base effect. The inflation measure rose from 119.9 in the same month last year, but the growth was slower compared with the 3.4% y-o-y increase in June 2021. Among the reasons cited for the moderate increase was the monthly electricity bill discount given to domestic consumers for a three-month period starting from July 1 under the National People’s Well-Being and Economic Recovery Package (PEMULIH). Nevertheless, the CPI remained in positive territory as there were increases in petrol and diesel prices in July 2021 compared to a year ago. The growth was mainly driven by a double-digit increase of 11.6% in the transport group due to the setting of the RON95 petrol ceiling price at RM2.05 per litre since March, compared with the average price of RM1.69 in July 2020. This was followed by furnishings, household equipment and routine household maintenance (1.7%), food and non-alcoholic beverages (1.3%), and housing, water, electricity, gas and other fuels (0.7%). For the first seven months of 2021, the CPI increased 2.3% y-oy. The core index, which covers all goods and services except volatile items of fresh foods as well as administered prices rose 0.7% y-o-y in July 2021. Among the major groups which influenced the increase were furnishings, household equipment and routine household maintenance (1.7%), food and non-alcoholic beverages (1.1%), transport (1%), restaurants and hotels (0.7%), housing, water, electricity, gas and other fuels (0.6%), recreation services and culture (0.6%), health (0.4%), education (0.1%) and miscellaneous goods and services (0.1%). The CPI without fuel edged up 0.8% y-o-y in July 2021 to 113.2 versus 112.3 in the same month last year. The CPI without fuel covers all goods and services, except unleaded petrol RON95, unleaded petrol RON97 and diesel. Five states surpassed the national CPI rate of 2.2% in July 2021, namely Terengganu (2.8%), Pahang (2.5%), Selangor and Putrajaya (2.4%), Kelantan (2.4%) and Sarawak (2.3%), compared to the same month last year. All states witnessed an increase in the index of food and non-alcoholic beverages. The highest increase was recorded by Selangor and Putrajaya (2%). Meanwhile, other states showed an increase below the national index of food and non-alcoholic beverage rate of 1.3% in July 2021 compared to July 2020. 

Eye On The Markets 

This week, on Friday (27Aug), the Ringgit opened at 4.2020 against the USD from 4.2345 on Monday (23Aug). Meanwhile, the Ringgit was 3.1015 to the Sing Dollar on Friday (27Aug). On Monday (23Aug), the FBM KLCI opened at 1519.99. As at Friday (27Aug) 10:00am, the FBM KLCI is up 73.25 points for the week at 1593.24. Over in US, the overnight Dow Jones Industrial Average closed down 192.38 points (-0.54%) to 35,213.12 whilst the NASDAQ shed 96.10 points (-0.64%) to 14,945.80.  

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