Tourism, tech and rubber gloves see encouraging rebounds
KUCHING: Malaysia’s domestic tourism, tech sector activity and rubber gloves sales are seeing encouraging rebounds, despite caution still being exercised against Covid-19 infections.
“The positive development on vaccines have given rise to hopes of greater security against infection and in due time, with vaccinations beginning in many countries in the first quarter of 2021 (1Q21), we should likely see a gradual loosening of movement restrictions worldwide after the northern hemisphere winter months end,” the research arm of Kenanga Investment Bank Bhd (Kenanga Research) said.
“With this, a greater sense of confidence that a more lasting economic recovery is upon us should take hold and encourage the return to more normal levels of consumer behaviours.
“Domestically, while we are still far from pre-Covid levels, business activities have picked up and showing some semblance of normalcy even as Conditional Movement Control Order (CMCO) was re-imposed after the viral outbreak post-Sabah state elections in September in Selangor, KL and Sabah.”
Kenanga Research recapped that earlier, business activity contraction was most severe during the period March 18 to May 4 during which the strict MCO imposed was extended three times.
The research arm also recapped that restrictions were gradually eased thereafter, with non-essential retailers and eateries allowed to operate on the condition that appropriate standard operating procedures (SOP) be implemented.
“While the ‘recovery’ phase from June 10 onwards finally allowed the number forecast operators (NFOs) and casino to operate, travelling was confined within domestic locations and entertainment outlets, pubs and karaokes were still barred which impacted the breweries. “Though still operating in a somewhat restrictive capacity, the easing has helped to jump start many stalled business activities.”
According to Kenanga Research, early encouraging signs noted were Malaysia’s wholesale and retail trade recording RM110.8 billion is September, or and increase of 0.3 per cent year on year (y-o-y) – the first positive y-o-y growth recorded since Covid-19 first broke out.
It noted that a top pick on economic reopening is Carlsberg Brewery Malaysia Bhd, which may also benefit from the likely return of EURO Champions League and Tokyo Olympics mid2021.
“Even with caution still being exercise against Covid19 infections, we are already detecting, some anecdotally at least, encouraging rebounds in domestic tourism which to some extent is due to pent up demand as restriction on foreign travel has prompted overdue local holidays instead.”
Kenanga Research also detected encouraging rebounds in tech sector activity accelerates as factories operate on increasing capacity to meet order backlogs since May.
“Companies are receiving continued interests from multinational corporations (MNCs) on trade diversion enquiries as US and China reorganise their respective supply chains with Asean as a promising alternative supply base.”
In addition, the research arm highlighted that rubber gloves sales continue to improve in the December quarter supported by sequential monthly increase of average selling price (ASP) as supply shortage looms on the back of unprecedented strong demand, while Top Glove’s first quarter in the new financial year ended August 2021 revealed similar trends for the second straight quarter.
“The Malaysia Rubber Glove Manufacturers Association estimates glove demand to grow 25 per cent in 2021, picking up from 20 per cent in 2020.”