Malaysia Stocks, Currency Decline After Nationwide Virus Curbs
(Bloomberg) -- Malaysia’s stocks and the ringgit fell after the government unexpectedly tightened restrictions on movements nationwide in a bid to curb a fresh wave of Covid infections.
The FTSE Bursa Malaysia KLCI Index closed 0.4% lower on Tuesday, mirroring losses in Asia. Sime Darby Plantation Bhd. and Genting Malaysia Bhd. led declines on the Malaysian benchmark gauge. The ringgit weakened 0.3% versus the dollar.
The latest curbs came days after the government imposed similar restrictions in capital Kuala Lumpur and in Selangor, its richest state. The development raises the risk of earnings disappointments for the REIT, tourism-related, casino, consumer, property, and auto sectors, according to CGS-CIMB Securities.
The move is a “slight surprise,” CGS-CIMB Securities analysts Ivy Ng and Michelle Chia wrote in a report. The prime minister had earlier indicated in March that the government would use a more targeted approach rather than a “blanket” move to reduce its negative impact on the economy, they said.
The movement control order will stay in force from May 12 to June 7, Prime Minister Muhyiddin Yassin said in a statement on Monday. While all sectors of the economy will stay open, educational institutes have been ordered to close and social gatherings, including visits during Eid, are banned.
“Malaysia is facing a third wave of Covid-19, which can fuel a national crisis,” Muhyiddin said. “The chain of infections can only be broken by encouraging people to stay at home through stricter curbs on movement.”
The decision comes just as economic activity has started to pick up. Malaysia’s April manufacturing Purchasing Managers Index hit a record high, while March exports posted the strongest year-on-year growth in almost four years. An index of factory production showed its strongest gains in March since July 2013.
Gross domestic product shrank 0.5% in the first quarter from a year earlier, Malaysia’s central bank said Tuesday, compared with the 0.9% contraction expected by analysts in a Bloomberg survey. Compared to the previous three months, the economy grew 2.7% on a seasonally adjusted basis, beating expectations for 0.6% growth.
The nation is facing a surge in Covid infections with the onset of Ramadan that has left some hospitals low on ICU beds. Daily new infections exceeded 3,000 this month for the first time since February, prompting the government to review its strategy of relying on targeted curbs in affected sites.
The detection of the one case with Indian Covid-19 variant has added to the risk, and Malaysia is struggling with the pace of vaccinations. Less than 3% of the population had completed their vaccination series as of May 9, data compiled by Bloomberg show. That tally trails Indonesia and Singapore, and puts Malaysia at risk of falling short of its vaccination target for the year.
Only 30% of management staff are allowed to work in the office, Muhyiddin said, adding that travel between districts and states is not permitted.
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