KUALA LUMPUR: Malaysia’s RM260 billion stimulus under three packages is neutral on the local equity market, said Principal Asset Management Bhd chief executive officer Munirah Khairuddin.
This is given that large companies are not the main beneficiaries of the stimulus.
Munirah, however, said there would be consensus earnings downgrade in the short term as corporates assessed the impact of the Covid-19 pandemic.
She noted that of the RM260 billion, a total of RM126 billion was to sustain private consumption and confidence.
Another RM111 billion is to preserve the viability and alleviate insolvencies of domestic business entities, with focus on small and medium enterprises..
The remaining RM3 billon was to strengthen the domestic economy, Munirah said.
“Bank Negara Malaysia, when it released its 2019 Annual Report on April 3, guided that gross domestic product (GDP) growth for the year will range from 0.5 per cent to -2.0 per cent.
“It would be reasonable to expect a contraction in GDP especially in 1H2020. This would capture the impact from the Covid-19 outbreak globally and Malaysia’s containment policy,” she said.
She expects the government to fund a portion of the RM25 billion direct injection from the domestic bond market.
The rest would come from higher dividends from government-linked companies and spending reallocation.
“This is a balance that policymakers would need to strike with an eye on future funding and
responses from rating agencies,” she said.
On its investment strategy, Munirah said Principal was taking a defensive equity stance in order to preserve capital.
“We will continue to adopt a barbell approach of buying high yield and growth stocks but will be more selective on quality names with resilient earnings and track record.”.
It would be looking out to identify the turning point (flattening of epidemic curve) for domestic Covid-19 cases to reposition the portfolio, she added.
Principal advised investors to make informed decisions based on their risk tolerance, investment goal, as well as consider dollar cost averaging and make the best of opportunities due to market correction.
“For conservative clients, we recommend funds in mixed assets with a combination of
growth and income either globally or locally diversified. For clients with higher risk tolerance, we would recommend them to focus on growth- oriented funds that offer exposure to growth areas in Asia, China and Global REITs,” it said.