Govt-PH MoU is positive for political stability, institutional reform - CGS-CIMB

KUALA LUMPUR: CGS-CIMB Securities is upbeat on the potential market impacts from the signing of the Memorandum of Understanding (MoU) on Transformation and Political Stability between the federal government and heads of the Pakatan Harapan component parties.

"We are positive on the signing of the MoU as it could lead to political stability, and if carried out, will allow for parliamentary and institutional reforms which will be positive for the country in the medium- to long-term.

"It is also a sign that the 15th General Elections would unlikely be held before July 31, 2022," the research house said in a note today.

Under the MoU, the government has promised a series of reforms and a time frame to achieve them.

In return, PH promises not to use its votes to block Budget 2022 if the reforms proceed on schedule, and that it is consulted on the Budget Bill.

The government has also agreed to PH's push for a RM45 billion fiscal injection to fight the COVID-19 pandemic, including additional funding for the healthcare system, additional aid for the vulnerable and support for businesses.

The government will also seek interest exemptions for loan moratorium recipients from the bottom 50 per cent of the population for the fourth quarter of 2021 (Q4 2021).

However, CGS-CIMB Securities noted that this would be a potential earnings disappointment for banks.

"Our banking analyst estimated that this could reduce our net profit forecasts for banks by 5.0 per cent," it said, adding that it viewed the move as a 'neutral' for the banking sector.

It said investors are likely to look for signs of recovery as the government rolls back on movement restrictions in the coming weeks.

As of Sept 13, 65.4 per cent of Malaysia's total population have received at least the first dose of the COVID-19 vaccine, and 53.5 per cent have been fully vaccinated.

Malaysia's new COVID-19 cases fell to a 50-day low of 15,699 yesterday.

"There are also plans to reduce the number of standard operating procedures in the National Recovery Plan from 181 to only 10 soon as the country transitions to the endemic phase.

"This will likely revive business activities and corporate earnings in Q4 2021 forecast, in turn potentially boosting sentiment on recovery stocks," it added.

-- BERNAMA