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Malaysian assets fall after government imposed a full lockdown

(Bloomberg) – Malaysian stocks fell and the ringgit weakened after the government imposed a two-week nationwide lockdown to contain an unstoppable surge in Covid-19 infections. The FTSE Bursa Malaysia KLCI index even fell 1.6% on the Monday before paring to 0.7% at the close of trading in Kuala Lumpur. The ringgit fell 0.4% to 4.1480 per dollar, while 10-year bond yields rose three basis points to 3.25%. The government said Friday that most businesses will be closed from June 1, except for key economic and service sectors. “The government is finally biting the bullet,” said Alexander Chia, an analyst at RHB Investment Bank Bhd Risks to FY21 earnings growth, even if it is essentially a postponement of growth to FY22. “Malaysia’s return to a hard deadlock is due to the record daily infections, with cases over 9,000 on Saturday. The resurgence of virus outbreaks in Asia has led some countries, including Vietnam and Singapore, to tighten restrictions. A similar lockdown in Malaysia last year cost the country an estimated 63 billion ringgit ($ 15 billion). Vietnam tightened social distancing measures in Ho Chi Minh City for 15 days from May 31, while Singapore re-enacted some lockdown conditions it set this month, restoring a year ago. Restoration DimsMalaysia’s lockdown will “hurt the country’s recovery, with a good chance GDP growth will decline sequentially in the second quarter,” said Khoon Goh, head of Asia Research at Australia & New Zealand Banking Group Ltd. “We’ll likely see the ringgit continue to underperform in the region, but its weakness will be controlled by a soft US dollar.” Aid package Monday at 9 p.m. local time, according to his Facebook post. Still, Monday’s market slump pales from last year, when the KLCI slumped up to 5% a day after announcing a nationwide lockdown, expecting a “mild” response is due to vaccine availability and a government plan to increase daily vaccination rates in the second half of 2021, Ivy Ng Lee Fang, an analyst at CGS-CIMB Securities, said in a report. Strong export sales, robust market liquidity and low interest rates have also helped limit the market decline. GDP outlookMalaysia’s gross domestic product shrank by 0.5% year-on-year in the first quarter, the central bank announced at the beginning of May. Growth in the forecast range of 6% to 7.5% is expected for the year as a whole. Banks such as Public Bank Bhd. and CIMB Group Holdings Bhd. gave way, while Maxis Bhd. and Supermax Corp. were among the largest declines in the benchmark, falling more than 2%. Top Glove Corp. was the top gainer in the key share figure with an increase of 1.8%. The Malaysian stock benchmark is down 6% from its December high as investors raise concerns about the impact of tighter restrictions on movement on riskier assets in cyclical sectors, a longer-term investment outlook is needed, with an emphasis on getting a cheap Entry price, ”said Chia from RHB Investment. “The trading angle will remain an ongoing theme in the coming quarters, continuing to focus on small-mid-caps with stable growth attributes.” (Updates with PM broadcast in paragraph 7) More stories like this are available on bloomberg.com . Subscribe now to stay ahead with the most trusted business news source. © 2021 Bloomberg LP

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