EMPLOYMENT, EARNINGS SET TO REBOUND
Operating conditions stabilising with last month’s PMI highest since July last year
MALAYSIA’S economy has taken another step towards recovery from the Covid-19 crisis with employment levels back in expansion territory, said analysts.
Domestic economic conditions were set to improve substantially and, thus, setting the stage for a solid earnings rebound of Bursa Malaysia’s key index constituents this year, they added.
The headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI), a composite single-figure indicator of manufacturing performance, rose to 49.9 last month from 47.7 in February.
The latest reading pointed to a stabilisation in operating conditions, with the PMI reaching its highest since July last year.
“Malaysian goods producers signalled the first expansion in employment levels for 12 months in the latest survey period,” said IHS Markit yesterday.
“Preparation for orders in the future reportedly required additional capacity and this pushed the seasonally adjusted Employment Index to the highest since April 2019,” it added.
IHS Markit chief business economist Chris Williamson said the Malaysian manufacturing sector took further welcome steps on the road to recovery last month, “with rates of order book and export decline easing”.
“While current production remains subdued, firms are gearing up for better times ahead, especially in relation to hiring.”
He noted that jobs were created at the fastest rate in two years last month.
“The supply of inputs continued to deteriorate to add to manufacturers’ headwinds but the rising global trade should help alleviate some of the shortages in the coming months, driving further expansion of Malaysian production and taking some of the heat out of prices,” he added.
IHS Markit said despite headwinds from supply shortages and ongoing Covid-19-related issues, Malaysian manufacturers had displayed a stronger degree of optimism regarding the outlook for output.
“Firms recorded the highest
level of positive sentiment in six months last month,” it added.
Meanwhile, Kenanga Research analysts said the economic landscape looked more promising as corporate earnings slowly returned to pre-pandemic levels.
“Following last year’s 5.6 per cent gross domestic product (GDP) contraction, the economy entered this year struggling to overcome the impact of the Movement Control Order 2.0.
“In terms of GDP, the first quarter of this year should likely be the last quarter of negative yearon-year growth.
“However, we see the momentum turning positive in the coming quarters both year-on-year
and sequentially.”
Kenanga Research said the stage was set for a strong 49 per cent rebound in the FTSE Bursa Malaysia KLCI’s earnings per share (EPS) in the current financial year.
“This 49 per cent EPS bounce is more than the result of a low-base impact. At projected 112.8 sen, it is some 18 per cent higher than the 95.2 sen recorded in 2019.”
Kenanga Research said stocks that were large and liquid, including Genting Bhd, Genting Malaysia Bhd, Malaysia Airports Holdings Bhd and Carlsberg Brewery Malaysia Bhd, had moved up significantly on expectation of a recovery this year.