Thai stocks fell on Monday while Malaysian equities tumbled to a seven-month low, leading a selloff across many of southeast Asia’s markets, after the government in Kuala Lumpur extended a nationwide lockdown due to elevated Covid-19 infections.
The FTSE Bursa Malaysia KLCI Index dropped as much as 1.3% on Monday, while Indonesia’s stock benchmark fell the most in six weeks. In Thailand, the key index sank by as much as 1.1% to the weakest since late May, although it later pared losses and was down 0.2% at the close.
The baht and Philippine peso led declines among Southeast Asian currencies, weakening 0.3% each versus the dollar. Indonesia’s rupiah dropped 0.1%.
Nations across Southeast Asia are struggling to contain the pandemic, clouding recoveries in their economies. Indonesia reported fresh records in daily cases while the Thai goverment suspended dine-in services for a month at restaurants in Bangkok and nearby provinces.
“The tightening in restrictions in some parts of Southeast Asia to curb rising Covid-19 cases will hurt domestic demand and hold back economic recovery,” said Khoon Goh, head of Asian research in Singapore at Australia & New Zealand Banking Group Ltd. “Given the need for more policy support, especially on the fiscal side, this is weighing on domestic asset prices in those countries.”
A gauge of Southeast Asian stocks tumbled as much as 0.9% to the lowest level since May 21. The measure is down 7% from a January high.
The Philippines will likely shed light on whether to keep or relax its current restrictions as early as Monday night when President Rodrigo Duterte holds a recorded televised weekly press conference. The Manila capital region and neighboring Bulacan province are under “general community quarantine” with “some restrictions” until June 30. The benchmark index was down as much as 0.6%.
In Malaysia, the government expects that its economy will bounce back in the final three months of the year, as the ongoing lockdown poses risks to its growth trajectory. The World Bank on Wednesday slashed its 2021 growth forecast for the nation to 4.5% from 6%.
Malaysian Prime Minister Muhyiddin Yassin will unveil a stimulus package to protect the people and restore the economy at 5pm local time on Monday, according to a tweet from the premier.
Downward pressure
”Stricter controls in several countries will hurt the market sentiment,” said Kitpon Pripisankit, an analyst at UOB Kay Hian Securities (Thailand) Plc. “This should push downside pressure on the equities, whose valuations are stretched on optimism about economic reopening.”
The movement restrictions will stay in place until daily cases falls below 4,000, the official Bernama news agency reported on Sunday, citing Prime Minister Muhyiddin Yassin. The government will announce more comprehensive assistance programmes for all groups on Monday or Tuesday, he said during a visit to a vaccination center in the state of Selangor.
The Malaysian stock index is down more than 8% from a Dec. 11 high amid concern over the government’s handling of the pandemic and rising political risks. The country returned to a hard lockdown this month after new cases topped a record 9,000 by end-May.
The closing of all but essential sectors is costing the economy 1 billion ringgit (7.7 billion baht) a day, Muhyiddin said earlier this month while unveiling a recovery plan. The prime minister announced a 40 billion ringgit package at the end of May, the government’s third this year.