The COVID-19 Pandemic

• The global community entered the first day of 2020 with an unprecedented event, which initially spread across Mainland China but is now global.
• The coronavirus which was first detected in the Wuhan province of China was reported to the World Health Organisation (WHO) in China back on 31 December 2019.
• As soon as several authorities in different countries has confirmed their cases over the following days, WHO declared the outbreak as a Public Health Emergency of International Concern on 30 January 2020.
• On 11 February 2020, WHO announced a name for the new coronavirus disease as COVID-19 which stands for Corona Virus Disease 2019.
• To date, there are 2,407,414 confirmed cases were reported globally with 165,073 deaths occurred.
• Countries around the world are implementing measures to slow the spread of the COVID-19 from national quarantines to school closures with China, Italy and France among the few with the most restrictive mass quarantine measures.
• In mitigating the economic impact of the virus, several countries had announced their economic stimulus packages.

Crude Oil Price War between Russia and Saudi Arabia

• On top of the faltering in crude demand amid the COVID-19 pandemic, the crude oil market was further dampened by the collapse of the steeper production cut talks between OPEC, led by Saudi Arabia and its allied partner Russia.
• Saudi Arabia wished to lead OPEC and its allied producers to make deeper cuts to oil production to stablise the oil market.
• However, Russia refused to join the initiative as they believed the move will only lead the US shale oil production to keep expanding and strengthening their position in global crude market.
• In retaliation, Saudi cut its official selling prices for April for all crude grades to all destinations by between $6 and $8 per barrel in an attempt to punish Russia.
• As a result, both the Brent and WTI crude oil futures fell 24.1% and 24.6%, respectively on 9th March 2020, their biggest daily fall in nearly three decades.

Federal Reserve Emergency Rate Cut and The Quantitative Easing Programme

• The Federal Reserve slashed the benchmark interest rates by half a percentage point on 3rd March 2020 to combat the economic impact of COVID-19 outbreak.
• The decision, which was outside the regularly scheduled policy meeting, was the first emergency rate cut since the financial crisis in 2008 which left the benchmark rate in a range of between 1% and 1.25%.
• Nevertheless, the Fed cut the rates again on 15 March 2020 to a range between 0% and 0.25% and launched a massive $700 billion quantitative easing program to shelter their economy.
• At the press conference following the decision, the Fed chairman Jerome Powell said that they will maintain the rate at the current level until the economy weather the recent events and gets back on track to achieve the maximum employment and price stability goals.

US Economic Stimulus Package 2020

• Like any other nations, United States had also announced its own economic stimulus package amounted $2 trillion to fight the spread of Covid-19.
• The package, which was the largest emergency aid package ever in US history, represented a massive financial injection into an American economy aimed in helping the American households, small businesses and industries.
• The key elements of the package include direct cash assistance to individuals and families, a major expansion of unemployment benefits, money for hospitals and health care providers, financial assistance for small businesses and $500 billion in loans for distressed companies.

The Signing of US-China Phase One Trade Deal

• The trade friction between US and China was indeed the main highlight for almost the entire 2019 where the trade tension went between escalation and de-escalation, bringing much volatility and uncertainty to the global market.
• However, the market had at least gained some calm in the middle of January this year when both nations signed a phase one trade deal on 5 January 2020.
• The agreement includes provisions to root out intellectual property theft and forced technology transfers and increase Chinese purchases of U.S. goods.
• It was mentioned that the US government aims to start negotiating the next piece of the trade agreement before the November 2020 election.

Britain Officially Leaves European Union

• After claiming a majority victory in the election, the Prime Minister of United Kingdom, Boris Johnson through the governing Conservative party, was able to break the deadlock in their Brexit Deal at the parliament.
• With that, the country’s 47 years of membership in the European Union officially ceased on 31 January 2020.
• Under the terms of the withdrawal agreement between the UK and EU, Britain now enters a transition period until the end of 2020 where the Prime Minister must achieve a trade deal with EU.

US Air Strike on Iran

• In early January this year, the Middle East crisis sparked again when the United States killed Iranian Major General Qassem Soleimani, the Head of the Elite Quds Force, in an air strike at Baghdad airport.
• The killing of the top Iranian guard has caused Iran to respond a few days later by firing a volley of rockets at US targets in Iraq.
• As a result, global oil prices had soared by more than 4% in the wake of the attack.

Malaysia’ New Government

• The political landscape in Malaysia entered into one of its most turbulent time in its history when Malaysia’s Pakatan Harapan (PH) coalition, which won the 14th general election in 2018, collapsed amid a series of political upheavel.
• The political plot began when eleven member of parliaments from Parti Keadlian Rakyat (PKR), which was one of the component parties in PH coalition, announced their decision to quit from the party to form an independent bloc, followed by the departure of Parti Pribumi Bersatu Malaysia (Bersatu) from the PH coaltion.
• Following the crisis, Prime Minister Tun Mahathir Mohamad has tendered his shocking resignation to the palace.
• The Agong decided to dissolve the Cabinet and later decided to appoint Tan Sri Muhyiddin Yassin from Bersatu as the eighth Malaysian Prime Minister.
• With the appointment, the new cabinet was formed from new ruling coalition of Perikatan Nasional that is made up of Bersatu, United Malay National Organisation (UMNO), Parti Islam Semalaysia (PAS) and several other supporting parties.

The Enforcement of Movement Control Order

• With the continuous rise in COVID-19 cases in Malaysia, the local government has declared the movement control order for the entire nation in order to curb the spread of the virus from 18 March until 28 April 2020.
• Under this order, the public is prohibitied to move about within their vicinity unless it is for special purposed or essential activities such as buying food or seeking healthcare.
• As most of the business premises are required to shut down except for those in essential services, many economists foresee that Malaysia’s economy could be severely hurt this year.
• The World Bank and International Monetary Fund (IMF) expects Malaysia’ GDP to shrink to -0.10% and -1.70% respectively this year, due to large-scale disruption of economic activities that can extend to the most of the year.

Economic Stimulus Package

• Malaysian government announced its economic stimulus package to counteract the adverse economic impact from the COVID-19 pandemic.
• The first economic package was announced by the former Prime Minister Tun Dr Mahathir Mohamad in 27 February 2020 which amounted to RM20 billion where the package was targeted more on businesses and individuals in the tourism and travel industries.
• On 27 March 2020, the new Prime Minister Tan Sri Muhyiddin Yasin announced an additional stimulus package of RM230 billion, making the total packages worth RM250 billion.
• The new package , known as Pakej Ransangan Ekonomi Prihatin Rakyat or Prihatin,comprises RM128 billion to protect the welfare of the people, RM100 billion to protect the welfare of SMEs and RM2 billion to strengthen the country’s economy.

Measures Introduced by Bank Negara Malaysia and Securities Commission Malaysia

• Apart from the fiscal measure announced by the Federal government, Malaysia, Bank Negara Malaysia (BNM) had also introduced several monetary measures to cushion the impact of disruptions caused by COVID-19 outbreak.
• Among the highlight from BNM’s interventions is the automatic moratorium on loan repayments that will be granted to SMEs and individuals that are affected by the COVID-19 outbreak.
• Meanwhile, to ease the burden of the capital market participants, the SC announced several relief measures that will immediately benefit 231 licensed entities, 30 registered audit firms and 9663 license individuals.
• One of these measures is margin financing flexibilities for broker and investors (For more details, see the Bursa Malaysia Highlights on Page 18)

No of Trading Days

Q1 2020 : 64

Q4 2019 : 64

Q1 2019 : 59

QoQ Performance

YoY Performance

No of Trading Days

Q1 2020 : 64

Q4 2019 : 64

Q1 2019 : 59

QoQ Performance

YoY Performance

Snapshot of FCPO Performance

Price as at 31/03/2020 (Last trading day)
: 2,402

Quarter High
: 3,134
(10/01/2020)

Quarter Low
: 2,216
(19/03/2020)

Q1 2020 Performance
(% Change)
: -23.26

No of Trading Days

Q1 2020 : 64

Q4 2019 : 64

Q1 2019 : 59

QoQ Performance

YoY Performance

Spread between FKLI and FBMKLCI

Snapshot of FKLI Performance

Price as at 31/03/2020 (Last trading day)
: 1,347.50

Quarter High
: 1,614.50
(07/01/2020)

Quarter Low
: 1,211.50
(19/03/2020)

Q1 2020 Performance
(% Change)
: -16.25

FPOL QoQ Performance

FPOL YoY Performance

FM70 QoQ Performance

FM70 YoY Performance

Introduction of New Contract : Options on United States Dollar Denominated Refined, Bleached and Deodorised Palm Olein Futures (OPOL)

• In early January this year, Bursa Malaysia Derivatives (BMD) launched the options contract on US dollar denominated refined, bleached and deodorised (RBD) palm olein futures (OPOL).
• The contract, which is the world’s first options contract on palm olein, would complement the existing US dollar denominated RBD palm olein futures contract (FPOL).
• All market participants will be entitled to an exchange fee and clearing fee waiver on OPOL trnasactions until 30 June 2020.

Announcement on the Launching of the Physical Settlement of MGS Futures in September

• On 3 March 2020, BMD announced an initiative to enhance the delivery mechanisms of Malaysian Government Securities (MGS) futures by targeting the launch of the physical settlement in September 2020.
• According to BMD, the iniative, which is the collaboration between Securities Commission Malaysia (SC), Bank Negara Malaysia (BNM) and key market stakeholders, will undergo a series of industry-wide testing that is expected to take place beginning June 2020 to ensure the system and market readiness before the launch.

Suspension of Trading in the contracts of Mini FTSE Bursa Malaysia Mid 70 Index Futures

• BMD announced its decision on the suspension of trading in the contracts of Mini FTSE Bursa Malaysia Mid 70 Index Futures, or better known as FM70.
• On its circular dated 5 March 2020, BMD said the decision was made in view of its current exercise in reviewing the contract specification of the FM70 contracts.
• According to BMD, the suspension was came into effect on 6 March 2020 for the April 2020 contract onwards, and the suspension will be in place until further notice.

Another Historical Daily High Record on Bursa Malaysia Derivatives (BMD)

• Bursa Malaysia Derivatives (“BMD”) achieved another two new historical high milestones on 17 March 2020.
• The total Exchange daily trading volume registered a new all-time high of 161,236 contracts traded, surpassing the previous record of 140,945 contracts achieved on 28th January 2020.
• Similarly, the Crude Palm Oil Futures (“FCPO”) contracts recorded its new highest daily trading volume with 126,755 contracts traded, surpassing the previous record of 113,668 contracts traded set on 12th February 2020.
• This persistent increase in participation interest showed the continued confidence among market participants to hedge price volatility against market uncertainties through BMD’s FCPO.

A New Set of COVID-19 Relief Measures by Bursa Malaysia

• As one of the essential services under the Movement Control Order (MCO), Bursa Malaysia remains open to ensure the stability of the Malaysian capital market.
• On top of that, the regulator has announced several measures to help lessen the financial burden and provide greater flexibility in navigating the challenging period posed by the COVID-19 pandemic.
• Some of the measures that related to market participants are :
  1. The provision of more flexibility and discretion to securities brokers by removing the requirement to automatically liquidate their client’s margin account if the equity in the margin account falls below 130% of the outstanding balance.
  2. Securities brokers will also not be required to make additional margin calls or impose haircuts on any collateral and securities purchased and carried in margin accounts due to an unusually volatile market.
  3. The Exchange will allow brokers to accept other collaterals, such as bonds, collective investment schemes, unit trusts, gold and immovable properties for purposes of maintaining their clients’ margin account if such collaterals are valued as per the broker’s credit policy.