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Economic Stimulus Plan: Beyond Covid-19

Our Prime Minister will be speaking later today at 3.00 pm in regards to the upcoming economy stimulus plan. As you may have known, the 3 segments that the government are targeting will be (i) Empowering People, (ii) Propelling Businesses, and (iii) Stimulating the Economy.

Our Prime Minister will be speaking later today at 3.00 pm in regards to the upcoming economy stimulus plan. As you may have known, the 3 segments that the government are targeting will be (i) Empowering People, (ii) Propelling Businesses, and (iii) Stimulating the Economy.

 
Hence, we believe that the market participants will be focusing on item number 3. Under the Covid-19 environment, most of the external slowdown was due to supply chain disruptions in the global arena (which we can’t really dictate the pace of the recovery).

However, in the domestic scene, a few things that we could watch out, (i) construction, (ii) property and (iii) automotive. All the sectors mentioned are based on the observation of trading interest ahead of the announcement (as we understand the market is always forward-looking).
With that, the construction sector was traded actively in the past few days. These could be some signs pointing towards potential megaprojects to be announced in the near term. From what we understand, the multiplier effect of two, for RM1 investment in construction activities, it will generate RM2 in more than 120 related economic activities, this could result in pump-priming activities moving forward (i.e. rolling out of mega infrastructure at an earlier date). Some of the potential trading stocks that look attractive at this juncture based on market movement could be: ADVCON, ECONBHD, GBGAQRS and GAMUDA.

Similarly, after the Home Ownership Campaign news article last week, property sector has been heated up, we have noticed huge trading interest last week, we assume that a potential property relief measure may be seen in the short term relief plan. Some of the potential trading stocks that look attractive at this juncture based on market movement could be: SPSETIA, MAHSING, ECOWLD, UEMS.

Meanwhile, automotive stocks have been traded actively since morning, market participants could be speculating for relief measure under this segment (but in our view unlikely). Nonetheless, you may ride along with the trend; stocks to watch would be DRBHCOM, UMW, BAUTO based on the recent technical breakouts.

Watch out for a brief comment by our Research Team on the Stimulus Plan, after the announcement today

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AME Elite Consortium Bhd – 26th Feb 21

As of 3QFY21, AME is equipped with an unbilled construction orderbook of approximately RM200.0m, representing unbilled orderbook-to-cover ratio at 1.1x against FY20 construction revenue of RM185.2m that will provide earnings visibility over the next two years. While there were 22 Covid-19 cases reported at the worker’s dormitory, AME has conducted immediate sanitisation and set up a separate off-site quarantine centre.

OCK Group Bhd – 26th Feb 21

As of FY20, OCK owns and manages over 4200 telco sites in Malaysia (500 sites), Myanmar (1,000 sites) and Vietnam (2,700 sites) that will provide stream of recurring income over the long term. We note OCK will actively participate on the National Digital Network Initiative (Jendela) plan with RM4.0bn infrastructure works for more than 1,700 sites to be tendered by 1Q2021, whilst capitalising on the 5G transition that may see demand for telecommunication sites quadruple against the number of 4G sites.

market pulse

Return of volatility

The FBM KLCI has rebounded strongly amid bargain hunting activities as steel-related and technology stocks were traded higher following several strong sets of results under the respective sectors. Meanwhile, healthcare sector was the sole decliner in the broader market. We believe the market will be pricing in Covid-19 vaccination progress and market may trend on an upward bias tone, focusing on recovery theme stocks. On the commodity side, the crude palm oil price has climbed above RM3,700, while Brent oil price is firmly trading above USD65.

SLP Resources Bhd – 25th Feb 21

Moving in FY21f, we believe that sales from the local market will continue to take charge (>50%), after raking 53.3% of total revenue in FY20 as oppose to only 39.0% recorded in FY19. For now, SLP will focus on ramping up the production of kitchen and garbage bag, targeting 25% of production output in FY21f (from less than 20% recorded in FY20).

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