malaysia economic stimulus package - affin bank...mar 30, 2020 · estimated 1.5% percentage point...

30 March 2020

Affin Hwang Investment Bank Bhd (14389-U) www.affinhwang.com of 13

A large RM250bn of economic stimulus packages Malaysia faces unavoidable recessionary pressures

Prime Minister Tan Sri Muhyiddin Yassin unveiled a large RM250bn, or about 17% of GDP, economic stimulus packages, but this figure also includes initiatives from the previously announced PRE2020 measures (see Fig 1). The three key thrusts focus on protecting people, supporting businesses and boosting the economy. The allocation of the stimulus packages are comprised of RM128bn for people’s welfare, RM100bn for businesses and SMEs, as well as RM2bn to strengthen the economy (together with the RM20bn stimulus announced on 27 February 2020). Fig 1: Economic stimulus packages and measures

Stimulus Packages Date

announced Total Government Others*

RMbn

Economic Stimulus Package 27-Feb-20 20.0 3.5 16.5

Additional Measures 16-Mar-20 0.8 0.2 0.6

Additional Measures 23-Mar-20 40.7 0.7 40.0

Prihatin 2020 Stimulus Package 27-Mar-20 188.5 20.6 167.9

Total 250 25 225

Source: MOF *off balance sheet & from government ecosystem

Some of the main measures to provide for daily living assistance and targeted incentives for households for the B40 group as well as M40 group include; i) a cash assistance of RM1,600 to households less than RM4,000 (about 4m recipients), ii) RM1,000 to households earning between RM4,000 and RM8,000 (1.1m), iii) RM800 for single Malaysians earning less than RM2,000 (3m), iv) RM500 for single Malaysians earning between RM2,000 and RM4,000 (400k) and v) RM200 for students of higher education institutions (1.35m). On top of that, the measures added cash assistance of RM500 to public servants below grade 56 (1.5m), RM500 to government pensioners (850k) and RM500 to e-hailing drivers (120k). As for front-liners for Covid-19, they will receive cash assistance of RM600/month for healthcare/ medical staff and RM200/month for police, immigration, RELA & others involved in MCO. The cash assistance amounts to an estimated RM11.6bn in total (excluding front-liners’ monthly allowance), where the Government will extend the payout of RM7.4bn in April and RM4.2bn in May 2020. The latest stimulus encompasses a much wider base of recipients, and in this package, M40 group also stands to benefit in the form of cash assistance. These measures will provide some support to overall consumption spending, which has been hit hard by the ongoing Covid-19 disruptions. Direct fiscal injection from Government amounts to RM25bn

In a briefing by Finance Minister YB Tengku Dato' Sri Zafrul Aziz, the total direct fiscal injection to the fiscal stimulus package from the Government amounted to RM25bn, out of the total of RM250bn announced (10% of the total stimulus). About 40% of the RM25bn fiscal injection will be directed to Bantuan Prihatin Nasional, which is expected to benefit 3.9 million households, 3.1 million B40 individuals and 2 million M40 individuals. The stimulus package will roughly add to Malaysia’s real GDP growth by an estimated 1.5% percentage point (ppt). In addition, the Finance Minister also highlighted that aside from the ECRL and MRT2 projects, other approved mega infrastructure projects will also be continued and accelerated.

Economic Update

Malaysia – Economic Stimulus Package

Economic Research

(603) 2146 7540 [email protected]

[email protected] [email protected]

30 March 2020


Fig 2: Breakdown of direct fiscal injection from Government

RMbn % share

Bantuan Prihatin Nasional 10.0 40.0

SME Wage Subsidy 6.0 24.0

Healthcare 1.0 4.0

Cash transfer to higher education students 0.3 1.1

Direct cash to e-hailing drivers 0.1 0.2

Direct cash to civil servants 0.8 3.0

Direct cash to civil service pensioners 0.2 0.8

Other measures 6.7 26.8

Total 25.0 100.0 Source: MOF

In view of the sharp drop in global oil price, the Finance Minister also guided that the oil price assumption has been lowered to US$35-US$40/barrel from its previous assumption of US$62/barrel in Budget 2020. As a result, the country’s fiscal deficit target has been reset higher to 4% of GDP from 3.4% of GDP previously, after taking into account the lower oil price assumption, the fiscal stimulus packages and expected GDP growth in 2020.

Although the fiscal deficit target has been raised, it was reiterated that Government revenue will continue to be supported by various companies, agencies and large institutions in the government ecosystem, possibly through dividend payments. Furthermore, the Finance Minister also guided that the Government is committed and remains firm to fiscal discipline and will not fund its operating expenditure through borrowings. This will ensure that the debt level will remain below the self-imposed 55% of GDP.

For the remaining RM225bn which will not be directly financed by the Government, RM100bn (44.4% of remaining RM225bn) will be through the deferment of all loan/financing repayments for a period of six months effective 1 April 2020 which was announced by Bank Negara Malaysia (BNM) on 25 March 2020, RM40bn from the withdrawal from the EPF Account 2, RM50bn in loan guarantees from Danajamin Nasional Bhd to struggling companies seeking to raise funds for working capital, while the remaining RM35bn will be from various government agencies, see Appendix 1 for detail of measures.

Fig 3: Breakdown of remaining RM225bn injection

RMbn % share

Moratorium on loans 100 44.4

Withdrawal from EPF Account 2 40 17.8

Loan guarantees from Danajamin Nasional Bhd

50 22.2

Others (Government ecosystem) 35 15.6

Total 225 100

Source: MOF

30 March 2020


Appendix I: PRIHATIN stimulus package measures Strategy 1 Protecting people (RM128bn)

RM1bn for MOH for the for the purchase of equipment and services to combat COVID-19, including obtaining medical specialist services from private healthcare providers

Set a RM8bn fund by takaful & insurance companies to cover screening test costs of up to RM300 each for policyholders

3-months suspension of premiums by the insurance & takaful companies to those sources of income affected by the outbreak

Additional RM200/m allowance to the healthcare staff (April 2020 – until outbreak ends)

RM200/m to military, police, customs, immigration, civil defense and RELA (169k personnel, from April 2020 until outbreak ends)

Bantuan Prihatin Nasional (RM10bn)

o RM1600 to households earning less than RM4,000 (4mn HH)

o RM1000 to households earning between RM4000 and RM8000 (1.1mn)

o RM800 for single Malaysians earning less than RM2,000 (3mn)

o RM500 for single Malaysians earning between RM2,000 and RM4,000 (400k)

RM200 to students of higher education institute (RM270mn)

RM25mn to vulnerable groups (elderly & children in shelters, disabled, homeless, orang asal)

Defer 6 months loan repayment to PTPK starting April 2020 (RM149.2mn, benefit 174.5k)

mySalam extended to B40 group quarantined as patients under investigation (PUI) and can claim income fee of RM50 per day for maximum of 14 days

PRS withdrawals up to RM1,500 from Account B without tax penalties (April – December 2020)

Extend rent payment exemption for the PPR to 6 months (RM3mn, benefit 3636 units)

Rent-to-own PPR units permitted to delay repayment for 6 months (April – September 2020, RM5.7mn, 4649 residential units)

DBKL will provide similar exemption for Public Housing in KL (40k tenants)

Free internet (RM600mn) from April 1st until end of MCO

One-off cash assistance of RM500 to 1.5mn civil servants Grade 56 and below including contract workers and pensioners (850k retirees)

RM60mn to provide one-off RM500 to all e-hailing drivers (120k beneficiaries)

Strategy 2 Supporting business (RM100bn)

6 months lease exemption on all premises owned by Federal Government

Government and TNB add another RM530mn for discounts between 15% and 50% (electricity usage up to max 600kW/m) from April – Sept 2020

o 50% discount (<200kW), 25% (201-300kW) and 15% (301 – 600kW)

RM400mn to improve network coverage and capabilities

RM1bn to Dana Jaminan Makanan

RM100mn for development of food storage and distribution infrastructure and intregrated planting

RM64.4mn allocation for special funds of between RM100- 200k to Pertubuhan Peladang Kawasan dan Pertubuhan Nelayan Kawasan that are able to develop short-term agrofood projects that can produce food within 3 to 6 months to ensure supply is sufficient

Wage Subsidy Programme worth RM5.9bn, to provide RM600 for 3 months to each employee earning <RM4k per month salary to encourage employee retention by businesses (3.3mn workers).

To pay contract service workers (80k employees) that are absent from work during MCO and extend the terms of relevant service contract by one-month for duration of MCO (RM110mn)

Government and BNM to provide additional allocation of RM4.5bn to SME and micro entrepreneurs through 5 initiatives

o Add funds to the RM3bn Special Assistance Fund for the SMEs, bringing the total to RM5bn. In addition, the interest rate for the entire fund will be reduced from 3.75% to 3.5%

o Increase the size of the fund by RM1bn to RM6.8bn under the All Economic Sector Facility to enhance financing access to SMEs

30 March 2020


Strategy 2 Supporting business (RM100bn) continued

o Provide additional funds of RM500 million under the Micro Credit Scheme, which makes the total of RM700 million for easy financing. The scheme will be run by Bank Simpanan Nasional offering only 2% interest free of charge. Loan eligibility requirements are also extended with a minimum of six months of operation compared to one year of operation. The financing amount is also increased from a maximum of RM50,000 to RM75,000 per entrepreneur. The initiative is open to all micro entrepreneurs in all business sectors including 14 taxi operators, bus and taxi operators, creative industries and online merchants.

o SMEs with business records of less than 4 years can also take advantage of BizMula-i and BizWanita-i Credit Guarantee Malaysia Berhad (CGC) schemes for financing up to RM300,000.

o Syarikat Jaminan Pembiayaan Perniagaan (SJPP) will provide RM5 billion worth of securities as well as increase the guarantee rate from 70% to 80% for SME companies that have problems obtaining loans.

EPF will introduce the Employer Advisory Services program on April 15, 2020. This service includes options for delaying payments, restructuring and rescheduling employer contributions. To benefit 480k SMEs and affected companies (save 8mn jobs, RM10bn)

All sectors exempted from HRDF levy payments for 6 months with a total savings of RM440mn

Income tax deferment for 3 months for all SMEs from April 1 (750k SMEs)

Deferment of loan payments for 6 months (RM100bn)

Moratorium to loans made with TEKUN, MARA and cooperatives as well as any government agencies lending to SMEs beginning April 1 2020

B40 entrepreneurs will be given entrepreneurial training, financial management and support to develop selected businesses.

RM50bn loan guarantees provided by Danajamin Nasional Bhd. (min loan size under this guarantee scheme is RM20mn per business, May to December 2020)

Strategy 3 Boosting economy (RM2bn)

Implementation of small projects that will benefit contractors in G1-G4 class

RM600mn allocated for infrastructure projects in FELDA areas

RM350mn to restore dilapidated schools in Sabah and Sarawak

RM150mn to upgrade the Perumahan Rakyat Termiskin

Accelerate infrastructure projects – speed up infrastructure projects (ECRL, MRT2, NFCP)Source: Prime Minister’s Office (PMO) & MOF

30 March 2020


Malaysia’s real GDP growth expected to contract by 3.5% in 2020

Despite the stimulus packages, in view of uncertainty of the extent of the COVID-19 outbreak globally and domestically, we expect Malaysia’s real GDP growth to be in negative territory possibly in the first and second quarter of 2020, on the back of a sharp contraction in domestic demand and weak exports. Real aggregate domestic demand is expected to contract by 4% for 2020 as a whole, compared with 4.3% in 2019. In view of the negative impact on the country’s domestic demand, and global supply chain disruption on Malaysia’s manufacturing and external sector, we have cut our real GDP growth projection down to -3.5% for 2020, from an earlier forecast of 3.3%. The last recession in Malaysia took place in 2009 when real GDP contracted by 1.5%. Fig 4: Real GDP growth and 2020 forecast

2018 2019 2020F 2018 2019 2020F 2018 2019 2020F %yoy % of GDP % contribution point to GDP growth

GDP by Expenditure Components Total Consumption 7.1 6.6 -4.2 69.4 70.9 70.4 4.8 4.6 -3.0

Private consumption expenditure 8.0 7.6 -4.5 57.0 58.8 58.1 4.4 4.3 -2.6 Public consumption expenditure 3.3 2.0 -3.0 12.5 12.2 12.2 0.4 0.3 -0.4

Total Investment 1.4 -2.1 -3.1 24.6 23.1 23.2 0.3 -0.5 -0.7 Private investment expenditure 4.3 1.5 -5.0 17.3 16.8 16.6 0.7 0.3 -0.8 Public investment expenditure -5.0 -10.8 2.0 7.4 6.3 6.7 -0.4 -0.8 0.1

Domestic Demand 5.5 4.3 -4.0 94.1 94.1 93.6 5.2 4.1 -3.7 Net exports 11.4 8.9 3.3 7.0 7.3 7.8 0.8 0.6 0.2

Exports 2.2 -1.1 -4.5 67.6 64.0 63.4 1.5 -0.8 -2.9 Imports 1.3 -2.3 -5.5 60.6 56.7 55.6 0.8 -1.4 -3.1

GDP (2015 real prices) 4.7 4.3 -3.5 100.0 100.0 100.0 4.7 4.3 -3.5

GDP By Kind of Economic Activity Agriculture, Forestry and Fishing 0.1 1.8 -2.0 7.3 7.1 7.2 0.0 0.1 -0.1 Mining and Quarrying -2.6 -1.5 -2.5 7.6 7.1 7.2 -0.2 -0.1 -0.2 Manufacturing 5.0 3.8 -5.0 22.4 22.3 21.9 1.1 0.8 -1.1 Construction 4.2 0.1 -3.5 4.9 4.7 4.7 0.2 0.0 -0.2 Services 6.8 6.1 -3.0 56.7 57.7 58.0 3.8 3.5 -1.7 GDP (2015 real prices) 4.7 4.3 -3.5 100.0 100.0 100.0 4.7 4.3 -3.5

Source: Affin Hwang estimates, BNM Malaysia faces recessionary pressures, sharp declines in 1H2020

On domestic demand, in the short term, we believe growth in private consumption will likely drop sharply, due mainly to the movement control order (MCO) from 18 March to 14 April 2020, whereby people's movements are somewhat restricted, with restrictions of people exiting/leaving homes, closure of most businesses, as well as restrictions on entry of non-Malaysians into Malaysia. With the enforcement of MCO, as an example of the impact, domestic consumers’ purchases of the latest electronic gadgets (such as smartphones and tablets) as well as all other household electricals and consumer & household items, are likely to be lower and negatively impacted. Fig 5: Quarterly retail sales and partial breakdowns

Source: CEIC

Economic Update

Malaysia – GDP Update

30 March 2020


Similarly, during and even after MCO enforcement, consumer spending for leisure-related expenditures, such as restaurant and hotel (food & beverage) outlets, and recreational services (movies/theatres, concerts and fitness centres), will be affected somewhat. The Malaysia Retailers Association (MRA) was quoted in the media as saying that the country’s retail sales dropped by as much as 60% in February 2020 and will likely drop by 90% in March due partly to enforcement of MCO. Private consumption growth not normalising until late 2020

In the near to medium term, private consumption growth will not be normalised as households will likely be impacted from possible temporary shocks to their incomes and a slight erosion of purchasing power. Households are also likely to be cautious on their spending due to the uncertain employment situation as well as affected by the expected slower growth in real disposable income. With a drop in commodity prices, if continue, those in the rural areas, and those involved in economic activities such as plantation, may have some impact on their incomes, therefore their contribution to consumer spending will be lower as well. Fig 6: Sales of passenger vehicles

Source: CEIC With the impact from the Covid-19 outbreak continuing, we believe there is downside risk to Tourism Malaysia’s projection of target tourist arrivals of 30 million in 2020 (26.1 million in 2019), and tourist receipts of RM100bn in 2020 (RM92.2bn in 2019). Based on our own estimate, with the assumption that the Covid-9 outbreak may lead to about 60% decline in tourist arrivals, this could translate to a loss in tourist receipts of about RM50-60bn in 2020, where the direct impact from lower tourist receipts will reduce Malaysia’s private consumption and economic growth. Sales of passenger cars, a big-ticket consumer item, already declined for the second consecutive month in February by 0.1% yoy (-11.5% in January) according to the Malaysian Automotive Association (MAA) and we believe will likely to remain sluggish in 1H2020. In the months ahead, sales of passenger cars will be badly hit. Hence, for the full year, total industry volume may be challenging due to weaker consumer sentiment. Consumer sentiment is fast decelerating. The Malaysian Institute of Economic Research (MIER) survey already showed that consumer sentiment has trended sharply lower in 4Q19, with CSI at 82.3 (84 in 3Q19), its lowest reading since 2Q17. MIER highlighted that the downtrend in CSI so far was due to low employment prospects, weaker expectations of income, consumers reflecting their preference to cut back or postpone plans to shop as well as apprehension over rising prices. And now with Covid-19, and with possible shocks to household income and employment, we believe consumer sentiment will be trending sharply lower in the coming quarters, translating into weak consumer spending. Growth in private consumption is expected to contract by 4.5% yoy projected for 2020 (7.6% in 2019).

30 March 2020


Fig 7: MIER CSI and Employment Index

Source: MIER

Until we see Covid-19 fading away and effective implementation of the stimulus packages, the revival of consumer confidence will likely only happen in late 2020. While Bank Negara Malaysia (BNM) has cut its policy interest rate (OPR), we believe lower interest rates will take time to feed through to the economy. Private investment to be impacted by weak global economic outlook

On the investment front, the implementation of foreign direct investment in the manufacturing sector could be delayed or maybe cancelled as foreign investors are faced with similar challenges from Covid-19 outbreaks in their home countries. We believe that foreign investor confidence will not be restored in the short to medium term due to weak global economic prospects. This may be reflected in lower applications approved from foreign sources. There is also downside risk on private investment from cuts in capital expenditure (capex) possibly by oil-related companies. As such, we expect growth in private investment to decline by 5% yoy for 2020 (1.5% in 2019). If the recessionary pressures prolong, even with the assistance of stimulus packages by the Government, there is downside risk of some corporates/businesses facing tightening cash flow problems, which may eventually lead to an increase in non-performing debts of corporates/ businesses, raising concerns that this may translate into a gradual increase in non-performing loans in the banking system. Supply side of the economy to be impacted by Covid-19

Based on our projection on the supply side of the economy, we expect contraction in growth in main sectors for 2020. Growth in aggregate services sector is projected to decline by 3% yoy for 2020 (6.1% in 2019), due to declining transport and storage and wholesale and retail sub-sectors as a result of lower business/economic activity and declining volume of trade. While the utilities (i.e., electricity & gas sub-sectors) will be supported by increased consumption of electricity, especially households staying at home during MCO enforcement, but this will be dragged by closure of some factories and businesses during the same period. As for the manufacturing sector, weak global growth will likely drag on overseas demand for Malaysia’s manufactured goods, especially in export-oriented industries. We expect growth in the manufacturing sector to contract by 5% projected for 2020 (3.8% in 2019).

30 March 2020


External demand to also drag GDP growth

On the external front, growth in Malaysia’s real exports of goods and services is projected to decline by 4.5% for 2020 (-1.1% in 2019). Malaysia’s exports are likely to be impacted in the months ahead from weakness of nominal exports from key export commodities (due partly to the drop in crude oil & gas prices as well as lower crude palm-oil prices).

The Covid-19 outbreak is anticipated to impact both the supply and demand of the global economy. According to the Organisation for Economic Co-operation and Development (OECD), quarantines will lead to factory closures and a loss in consumer confidence while travel bans and restrictions will result in cutbacks in service provisions and decline in business and tourism travels.

Fig 8: Covid-19 impact on economic channels

Source: OECD

IMF expects outbreak to lead to a recession at least as bad as GFC

Recently, the International Monetary Fund (IMF) guided that the outbreak

will lead to a global recession in 2020 which may be worse than the

recession seen during the Global Financial Crisis in 2008-2009. The IMF

guided that emerging markets and low-income countries are faced with more

headwinds compared to advanced economies. Previously, IMF guided that

it expected global growth in 2020 to be sharply below the growth registered

in 2019 of 2.9%. The IMF will release its next World Economic Outlook in

April and possibly a sharp reduction from its current 3.3% global growth

projection, with global recession risk.

Fig 9: Baltic Dry Index Fig 10: Global manufacturing PMI

Source: Bloomberg Source: Bloomberg

30 March 2020


The negative impact of the Covid-19 outbreak has already been reflected in certain areas of the global economy. The Baltic Dry Index which is used to measure the changes in cost of transporting raw materials by sea and is normally used as an indicator of global trade and the maritime shipping industry has fallen sharply since its last peak in September 2019 of 2,501. The index fell to a near four-year low of 411 in February due to the outbreak which resulted in factories in China remaining shut after the Lunar New Year holiday. Currently the index is hovering around the 600 level but the slowdown in the global shipping industry will likely remain dampened moving forward due to slower economic activity in China as well as other countries such as Japan, the US and Europe. The manufacturing sector, which was beginning to see some improvement at the end of 2019 and early part of 2020 amid easing trade war tensions, has been negatively impacted by the outbreak. The global manufacturing PMI has also dropped to its lowest since May 2009 to 46.1 in February from 52.2 in January due to the disruption to demand, supply chains and international trade flows mainly dragged by the decline in activity and new orders in China. Possibility of another 25bps OPR cut in next MPC meeting

We believe Bank Negara Malaysia (BNM) may likely cut its Overnight Policy Rate (OPR) by another 25bps to 2.25% for 2020 (possibly in the next MPC meeting in May) in an effort to mitigate the impact of the Covid-19 outbreak as well as the potential downside of global oil prices on the domestic economy. Even though Malaysia’s reliance on oil-related revenue has declined in recent years, the global oil prices still has important implications for the growth of the Malaysian economy and currency. The Malaysian Ringgit is expected to remain volatile in the near term, and we revised our 2020 year-end target to RM4.30/US$, from our earlier projection of RM4.20/US$, but the Ringgit will be supported by economic fundamentals, such as liquidity in the domestic market and sound financial markets, as well as healthy current account surpluses. Better global and domestic economic growth prospects in 2021

Going into 2021, as a highly open and trade-dependent economy, Malaysia’s real GDP growth and external demand will likely be influenced by the state and health of the global economy, which is anticipated to be better than 2020. Domestically, in 2021, we are cautiously optimistic that consumer confidence and sentiment will return and Malaysian households will remain financially sound, with healthy financial buffers to service debt obligations as well as improvement from recent temporary shocks to their incomes. Consumer spending will be supported by improving employment conditions and stable incomes, as global and domestic economies recover next year. Private investment is also expected to be supported by revival of infrastructure projects in 2021, such as the ECRL and MRT2 projects, as well as other approved infrastructure projects. As private investment is highly correlated with external conditions, the anticipated better global economic growth prospects next year will support investment activity. We believe Malaysia’s economic fundamentals will remain sound, supported by government’s fiscal discipline, a sustainable (though narrowing) current account surplus, healthy foreign-exchange reserves as well as manageable inflationary pressure.

30 March 2020


Appendix II: Summary of previous announced stimulus measures

Date Additional Measures

23-Mar-20

EPF contributors aged 55 and below allowed to withdraw from EPF Account Two over a period of 12 months (max of RM500 per month)

Allocation of RM500mn to the Ministry of Health for acquisition of medical equipment

RM100mn allocation for the Ministry of Health to employ 2,000 contract staff especially nurses

RM130mn allocation to state governments to assist in combating impact of Covid-19

Extension of the repayment of PTPTN loans worth RM750mn from 3 to 6 months beginning 23 March until 30 September 2020

16-Mar-20

RM600 every month over a maximum period of 6 months for workers forced to take unpaid leave and contributors of the Employee Insurance System (EIS) with a monthly salary not exceeding RM4,000

Provide 2% discount in monthly electricity bills given to industrial, commercial, agriculture and domestic users

Payment of RM200bn to all BSH recipients brought forward to 16 March 2020

Additional RM100 to BSH recipients to be paid on May 2020

Small projects focusing on rural infrastructure worth RM2bn will begin implementation from April 2020

Source: Prime Minister’s Office (PMO) & MOF

30 March 2020


Appendix III: Stimulus package summary from earlier PRE2020 Strategy 1 Mitigating impact of Covid-19

Easing cash flow

Allow deferment of monthly income tax instalment payments for tourism sector

15% discount in monthly electricity bills to hotels, travel agencies, airlines, shopping malls, conventions and exhibition centres

Exempt HRDF levies for hotels and travel related companies

Exempt 6% service tax for hotels (Mar – Aug 2020)

BNM to provide RM2bn relief facilities to SMEs at interest rate 3.75%

BSN to allocate RM200mn in microcredit facility at 4% interest rate

Bank Pembangunan’s Tourism Infrastructure Fund of RM1.5bn

All banks to provide financial relief in the form of payment moratorium

Hotels to offer discounts and shopping malls to reduce rentals

MAHB to provide rebates on rentals, landing and parking charges

Assistance for affected individuals

One-off payment RM600 to taxi drivers, tourist bus drivers, tourist guides and registered trishaw drivers

Monthly allowance RM400 for medical doctors and medical personnel, RM200 for immigration and front line staff (Feb 2020 – end of pandemic)

To provide necessary management resources for Covid-19 disease

Human capital development

Double deduction on expenses incurred on approved tourism-related training

RM100mn to HRDF to fund additional 40,000 employees from tourism and affected sectors

RM50mn to subsidise short courses in digital skills and highly skilled courses

EIS to increase claimable training cost from RM4k to RM6k for affected sectors

RM30 per day provided to trainees under EIS

Stimulate tourism sector

Personal income tax relief up to RM1k on expenditure related to domestic tourism

Digital vouchers up to RM100 per person for domestic flights, rails, and hotel accommodations to all Malaysians

RM500mn will be provided for tourism promotions and vouchers

Relaxation of guidelines limiting use of hotels by Government agencies

Strategy 2 Catalysing rakyat centric economic growth

Rakyat’s assistance

EPF contribution reduced from 11% to 7% with the option to opt out (Apr 2020 – Dec 2020)

BSH RM200 payments for May 2020 to be brought forward to March 2020

Additional RM100 to be paid to all BSH recipients in May 2020, additional RM50 e-tunai

BNM to provide Agrofood facility of RM1bn at interest cost of 3.75%

RM10mn allocation to FAMA to help reduce food prices

Grants of RM1k to 10,000 entrepreneurs to promote products on e-commerce platforms

Allocation of RM20mn to MDEC to transform Pusat Internet Desa into e-commerce hubs

Rural stimulus RM2bn for immediate implementation of infrastructure repairs and project upgrades

MoF to provide special relaxation on financial procedures: 1. Increase procurement threshold RM50k to RM100k (balloting) and RM500k to

RM800k (quotations) 2. Ensure Ministries channel sufficient allocations to respective implementing agencies

by 1Q2020

Strategy 3 Promoting Quality Investments

Sustain public investments and expedite in 2020, the tenders and implementation of development expenditure projects

Agencies and Government linked companies will accelerate planned investment

Co-Investment fund of RM500mn to be co-invested and matched by private

Waiving of listing fees by Securities Commission and Bursa Malaysia for one year

BNM will provide an SME Automation & Digitalization Facility of RM300mn at an interest cost of 3.75%

Accelerated capital allowances >2 year period on expenses on machinery and equipment

Tax deduction of up to RM300,000 on renovation and refurbishment cost

Import duty and sales tax exemption on importation or local purchase of machinery and equipment used in port operations

Source: Prime Minister’s Office (PMO) & MOF

30 March 2020


Focus Charts Chart 1: Fiscal deficit Chart 2: Gross development expenditure

Chart 3: USD/MYR vs OPR Chart 4: Current account surplus

Chart 5: Operating expenditure Chart 6: Government debt

Source: All data for charts sourced from CEIC, DoS and BNM

30 March 2020


Equity Rating Structure and Definitions

BUY Total return is expected to exceed +10% over a 12-month period

HOLD Total return is expected to be between -5% and +10% over a 12-month period

SELL Total return is expected to be below -5% over a 12-month period

NOT RATED Affin Hwang Investment Bank Berhad does not provide research coverage or rating for this company. Report is intended as information only and not as a

recommendation

The total expected return is defined as the percentage upside/downside to our target price plus the net dividend yield over the next 12 months.

OVERWEIGHT Industry, as defined by the analyst’s coverage universe, is expected to outperform the KLCI benchmark over the next 12 months

NEUTRAL Industry, as defined by the analyst’s coverage universe, is expected to perform inline with the KLCI benchmark over the next 12 months

UNDERWEIGHT Industry, as defined by the analyst’s coverage universe is expected to under-perform the KLCI benchmark over the next 12 months

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