UOB: Investors should remain cautiously optimistic on corporate earnings growth

KUALA LUMPUR: Investors should remain cautiously optimistic about corporate earnings growth this year, although promising developments on COVID-19 vaccines have injected some optimism into the financial markets, said UOB Malaysia Bhd.

Its managing director and personal financial services country head, Ronnie Lim, said a full global economic recovery will likely require widespread COVID-19 vaccinations worldwide, continued government stimulus as well as stronger business and consumer sentiments.

The roll-out of additional government measures earlier this month in response to the current surge of

COVID-19 cases in Malaysia showed that the recovery journey could be bumpy, it noted.

“We believe that countries and industries that are supported by ongoing government stimulus can recover strongly this year, especially if COVID-19 vaccinations start by the middle of the year.

"As more people around the world are vaccinated, governments can slowly lift pandemic-related movement and travel restrictions, which will help the global economy to rebuild gradually in the second half of 2021,” he said in a statement today.

Lim said central banks would continue to keep monetary policies loose to support the economic recovery.

“However, UOB expects the recovery chart to show diverging paths because some regions and sectors will emerge from the recession sooner and in better shape, while others that have been hit harder will recover more slowly.

“For example, industries such as e-commerce, electronics, technology, gaming apps and services, and pharmaceuticals are thriving amid the pandemic.

“With low interest rates and higher economic growth, we expect corporate earnings to recover from

2020 levels this year,” he said.

Meanwhile, UOB expects Malaysia’s gross domestic product (GDP) to grow by 5.0 per cent this year

and will likely have to wait until at least 2022 to see a return to pre-pandemic levels.

Previously, the bank had initially forecast a 6.0 per cent expansion in Malaysia’s GDP in 2021.

“We revised our estimate after the reinstatement of the Movement Control Order (MCO) 2.0 in all states except Sarawak to curb the rise in COVID-19 cases.

“Assuming the affected states will be under strict MCO until the end of February with essential business sectors operating with only up to 70 per cent capacity, Malaysia may suffer an estimated economic loss of RM12 billion in 2021,” he explained. - Bernama

Source: The Sun Daily