Malaysia expects to fully reopen economy from end-October

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Published 16 Jun,2021 via Bloomberg Markets - Malaysia expects to fully reopen its economy and lift a ban on inter-state travel beginning end-October at the earliest if new Covid cases average below 500 a day, said Prime Minister Muhyiddin Yassin.

The current phase of the national lockdown is costing the economy 1 billion ringgit ($242 million) a day as most businesses remain shut, Muhyiddin said in a televised address Tuesday. The government expects to begin easing the curbs in steps starting July, he said.

The second phase that’s expected in July will begin once daily cases drop below 4,000 and 10% of the population is fully vaccinated, he said, while outlining a recovery plan that contains four phases based on three indicators: average daily infections, ICU bed capacity and the percentage of the population that’s inoculated.

The timeline will be a key test for Malaysia’s government, which has for months struggled to contain an aggressive virus that’s led to rising public anger and attacks from opposition political groups over its handling of the pandemic. Meeting the targets would ease pressure on Muhyiddin and help rejuvenate the nation’s moribund stock market.

“If these targets are successfully met, we expect investors to shift their portfolios in favor of recovery stocks” in July or August, Ivy Ng Lee Fang, head of research at CGS-CIMB, said in a note. The key big-cap recovery picks are Malayan Banking Bhd., Genting Bhd. and Malaysia Airports Holdings Bhd., she added.

Malaysia’s main stock index rose 0.1% on Wednesday. The gauge is still down more than 6% from its high in December. The ringgit was little changed against the U.S. dollar.

The lockdown is already showing results, the prime minister said. The nation’s Covid curve has started to flatten, and the health care system is able to handle new cases amid rising recovery rates.

“If everything goes well, we should expect a more convincing recovery in the final quarter of this year,” said Mohd Afzanizam Abdul Rashid, chief economist for Bank Islam Malaysia Bhd. “It is about meeting the timeline and thresholds.”

Cases Drop

Malaysia went into a lockdown June 1 after daily Covid cases crossed the 9,000 mark, placing the health-care system under tremendous pressure. The curbs were extended Friday by two weeks to June 28. New cases stood at 5,419 on Tuesday.

There’s “light at the end of the tunnel” as the pace of vaccination increases, he said.

Malaysia injected 197,963 shots on Monday, the highest daily tally of inoculations and close to the government’s target of 200,000 doses per day, according to Health Minister Adham Baba. The government aims to achieve herd immunity by year-end.

Muhyiddin last month unveiled 40 billion ringgit in relief measures ahead of the lockdown, including 5 billion ringgit in direct fiscal injection.

“I am cautiously optimistic that with proper planning, execution and support from all Malaysians, we can emerge victorious and stronger from this crisis,” he said Tuesday.

Highlights of the premier’s address include:

• Malaysia will enter phase three of its recovery plan once daily cases fall below 2,000 and 40% of the population is fully vaccinated
• This is expected to occur end-August, and will see all economic activities reopen with the exception of those on the negative list
• Social activities will be permitted in phases during this period while all economic activities will be allowed, except for those with high risk of transmission such pubs, spas and salons
• Malaysia may allow parliament to reconvene in this phase, around September or October
• In the final phase that may happen by end-October at the earliest, Malaysia will reopen the economy, allow more social activities and domestic travel

(Updates with analyst comments, market reaction.)

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