Malaysian stocks tumbled to a seven-month low, leading a selloff across much of southeast Asia’s equities markets, after the local government extended a nationwide lockdown due to elevated Covid-19 infections.

The FTSE Bursa Malaysia KLCI Index dropped as much as 1.2% on Monday, while Indonesia’s stock benchmark headed for its lowest level this month. In Thailand, the benchmark index fell by as much as 1.1% to the weakest since late May.

The Thai baht weakened 0.3% versus the dollar, the worst performer in Southeast Asia, followed by the Philippine peso and Indonesia’s rupiah.

Nations from Malaysia to Thailand are struggling to contain the pandemic, clouding recoveries in their economies. Indonesia reported fresh records in daily cases while Thailand 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 0.8% to the lowest level since May 21. The measure is down almost 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%.

The movement restrictions will stay in place until daily cases falls below 4,000, Malaysian Prime Minister Muhyiddin Yassin said. The government will announce more comprehensive assistance programs 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 ($241 million) 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. – (Bloomberg)


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