By Dr Mohd Afzanizam Abdul Rashid
The recent data points have been quite decent. Sales in the manufacturing industries have turned around by 19.1 percent to RM90.2 billion in May compared to April. The Total Industry Volume (TIV) for the automotive sectors have shot up to 22,960 units in May from an all-time low of 141 units in April. Sentiments among the manufacturers have also improved to 51 points in June, surpassing the demarcation line of 50 points that separate the expansionary and contractionary zone. The FBMKLCI too has risen from its low point of 1219.72 points on 19 March to 1603.75 points as of 29 July 2020.
So what’s not to like about the numbers? For starters, the amount of economic stimuli have been sizeable. The fiscal authorities have introduced RM295 billion worth of economic stimulus package which dwarfed the RM67 billion fiscal supports during the Global Financial Crisis in 2008 and 2009. Bank Negara Malaysia has also been forthcoming with the Overnight Policy Rate (OPR) currently hovering at 1.75 percent, the lowest level since the benchmark rate was introduced in April 2004. The government has also announced the extension of loan moratorium. But this time around, it will be a more targeted approach, the focus is on those who have lost their jobs and those who suffered pay cuts. Therefore, it makes perfect sense for the economy to stage a V-shaped like recovery following the reopening of economy since May.
Nonetheless, the number of new infection cases for Covid-19 spread have gone up especially in various parts of the world. Locally too, there seems to be sharp rise and the Prime Minister has hinted that the Movement Control Order (MCO) might make a comeback if the situation goes out of hands. If that happens, all hell will break loose. True enough, the jobless claims in the US rose to 1.4 million for the week ended 17 July from 1.3 million in the prior week. The US Conference Board Consumer Confidence also declined to 92.6 points in July from 98.3 points in the preceding month, suggesting that consumer spending which accounted for more than two thirds of the US economy is likely to derail from its present course. So the naysayers have their grounds to be pessimistic.
Following this, the constant anxiety over the path of economic recovery could potentially clouded our view. With or without Covid-19, businesses have to evolve and complacency is a big No-No. I recently spoke to one of the main Oil & Gas (O&G) players and they are contemplating to venture into Renewal Energy (RE) as a way to diversify their revenue stream. That really makes sense as it almost a natural progression for the incumbent O&G players to go into RE. It was also reported in the news that one of the listed property companies are looking to have their footprint in the healthcare sector. While the success rate to change business direction is highly uncertain, companies are not resting on their laurels.
Admittedly, investing during crisis is never a walk in the park and the simplest way to navigate the current predicament is to stay in cash and invest in the low risk assets. That might work. However, there are always values in the equities market. For now, the healthcare sector seems to be the darling among the investors in light of the ongoing health crisis. Technology and Logistic sectors could be value for money in view of the new normal. So, investors may want to look into these industries as potential candidates for their portfolio. Investing in properties may have also its value proposition too with house prices witnessing some form of correction. The latest House Price Index during the final quarter of 2019 has moderated to 1.8 percent compared to the same period of the previous year. This was in stark contrast of 13.4 percent, 11.3 percent and 9.5 percent appreciation during 2012, 2013 and 2014 respectively. With the interest rates at a very competitive level, venturing into real estate market could be the right move.
Therefore, the road to recovery will never be easy but sitting still and do nothing would leave us to nowhere. So, start looking out for new investments. Always remember, every crisis would create opportunities and this could be it.