Health Minister Khairy Jamaluddin is seen during a media update on the new Omicron variant (B.1.1.529) on Wednesday. — Bernama photo
KUCHING (December 2): News of the new Omicron variant is negative to the market as it has added another uncertainty to the prospects of economic recovery for Malaysia, analysts observed.
In a report, the research team at AmInvestment Bank Bhd (AmInvestment) noted that Malaysia has paused its transition to the endemic phase as the government seeks more information about the Omicron variant.
“While no Omicron cases have been traced in Malaysia, we understand that this is a necessary precautionary action.
“Overall, news of the Omicron variant is negative to the market as it has added another uncertainty to the prospects of economic recovery for the country,” it opined.
“We understand that it should take around two weeks for more details on Omicron to surface. Our base case scenario is a recovery from Covid in 2022 due to the high vaccination rate that already exceeded 95 per cent of adults in Malaysia. We are watching closely the development on Omicron,” it added.
While corporate earnings are rather healthy at the moment as the domestic Covid-19 situation is improving, the research team at MIDF Amanah Investment Bank Bhd (MIDF Research) noted that the local equity market has been rather hesitant to rise in tandem with the improving fundamentals.
“Insofar as the short-term market performance is concerned, we reckon the catalyst is less related to earnings (and other hard fundamentals) but more on sentiment.
“In this regard, market sentiment has been in the doldrums during the past months due to several factors, namely expectation of US Fed monetary tightening, intermittent worries over contagion risk of further weakness in China property market, and perception of heightened policy risk (such as lack communication/forewarning prior to recent announcement of windfall tax).
“Presently, the market sentiment is further tampered by the emergence of Omicron, the latest Covid-19 variant of concern,” it said.
In the near-term, the potential fallout from Omicron is still uncertain, it said.
As such, it said, despite December being a traditionally positive month for the equity market, it believed its short-term upside may be capped at the recent peak of 1,600 points.
“Hence, we cut our FBM KLCI 2021 year-end target to 1,600 points from 1,650 points,” it added.