Friday, 29 May 2020

Stock Market Rebound: How Sectors Are Performing?

Two months ago, stock markets around the world were suffering severely. Our FBM KLCI too plunged below 1,300 points, its lowest in a decade. But in recent weeks, many of the stock markets have rebounded on optimism of an economic recovery. What about Malaysia’s stock market?

After hitting the bottom of 1,219.72 points on March 19, the second day of MCO, KLCI has rebounded more than 17% to 1,436.76 points on May 22. However, on a year-to-date basis, the KLCI is still “losing” 10.34%.

According to Bank Islam chief economist Mohd Afzanizam Abdul Rashid, the stock market has already priced in much of the negative news in mid-March. After weeks of being under MCO, we are now gradually reopening our economy. Let’s look at how various sectors have performed during this period:

The table above shows the performance of each sector’s index in 2020. As mentioned above, March 19 was the day when KLCI slipped to its lowest point during this Covid-19 period.  Healthcare was the least impacted sector, with only 8.8% loss from the beginning of 2020 to March 19. On the other hand, energy, with 59.1% loss, was the hardest hit.

Most of the sectors have outperformed KLCI during the recent recovery period, with KL Healthcare, Technology and Energy indices bouncing back the most (ranging from 53.1% to 76.7%). On a year-to-date basis, healthcare has surged 61.17% whereas technology has recovered to its January level. Telecommunications & media with 1.79% year-to-date loss is expected to be another sector to gain back to its pre-Covid index level.

Healthcare stocks, particularly the glove counters, have drawn attention especially after health experts expressed scepticism over Covid-19 vaccine developments. This was according to Maybank Investment Bank Bhd remisier Jeffry Azizi Jaafar.  Malaysia could benefit, as our rubber glove manufacturers are the largest suppliers with over 60 per cent of the global market share.

In the meantime, many of the technology stocks have made strong comebacks. Kenanga Research tech analyst Samuel Tan said the price-to-earnings and some price-to-book valuations for tech counters have fallen to 2015 and 2009 levels which has triggered some bottom fishing. Also, a net cash position has made many of them attractive during this cash-is-king period. With a new post-Covid normal, the demand for technology, including data centres, cloud storage and e-commerce may increase even with the idea of working remotely.

Some may claim that the stock markets are running ahead of the economy. We know businesses are restarting but the pandemic has not ended yet. Are investors underestimating the economic damage from the pandemic? Or, perhaps this is just a dead cat bounce? What do you think?

What do you think? free polls


1.     Is the stock market ignoring the economy? 2 May 2020, The Star
2.     KLCI breaches 1,435 points with glove stocks back in spotlight, 20 May 2020, Malay Mail
3.     Tech stocks still resilient during testing times, 30 April 2020, The Star

Thursday, 28 May 2020

Super-achievers: How They Do It So Well? (Part 2)

Welcome to part 2! In our previous article, we summarised five (5) qualities that shared by many super-achievers according to the book ‘The Art of Doing: How Superachievers Do What They Do and How They Do It So Well’. In this article, we are going to continue with the remaining five (5):

6. Testing Ideas in The Market

"Everybody has a bias to think their own idea is brilliant," says Gosfield. "[Achievers] roll it out in an environment that’s as close as possible to the market."

Bill Gross, serial entrepreneur and founder of Idealab, always tests before he invests. When he had an idea for an online car dealer, CarsDirect, no one was sure if people would actually buy a car from a Web site. He decided to put up a test site to see what would happen. Before they had any inventory, they’d sold four cars and had to shut down the site. On the upside, Gross then knew there was a market for the service.

7. Managing Emotions

“We found that managing emotions is a key element to success,” Sweeney says. “It’s so easy to be derailed by them, but these people are able to channel anger and frustration into their work.”

According to Psychology Today, emotional success people understand that among the good things in life, there are also tough times in life, but those experiences will not stop them or hold them back. These people are generally happy with their lives and satisfied with themselves and their decisions. If someone does something negative or says something unkind, they don’t allow their words to break them or ruin their day.

8. Constantly Evolving

Both business and people have to evolve from time to time. For business, it could be new technology, new system or new structure. For people, it could be new skill or new habit.

Successful people maintain success by consistently learning and adapting to the environment around them. Tennis champion Martina Navratilova realized this when her game suddenly started to slide. She decided to transform her training routine and diet, and soon was back on track to become an all-star athlete.

9. Practicing Patience

Inaction, or stillness, can sometimes be just as useful as action. The importance of patience was a primary theme among the super-achievers —— whether it's strategically waiting for the best time to make a move or continuing to pursue a larger vision without receiving immediate rewards. Jill Tarter, a director of the SETI Institute (Search for Extraterrestrial Intelligence), has been searching for life on other planets for the last 50 years without any guarantee of success.

Source: AZ Quotes

10. Pursuing Happiness

Success fuels happiness, and happiness in turn fuels greater success. Jennings, “the winningest game-show champion in history," said once he became a contestant on a game show, it filled his entire life with passion. That happiness helped him win, and winning ended up giving him the confidence he needed to pursue a career he loved: writing. Seeking happiness in your life and work turns out to be a win-win.

In fact, neuroscience and studies of positive psychology prove that happiness is a key driver and precursor of success, with two decades of research backing this up. Positive feelings make the brain work better and trigger the release of serotonin and dopamine, which significantly enhance motor control, motivation, memory, problem-solving, mental focus and the ability to process multiple concepts simultaneously. So, happiness can really make you more successful.


1.     Jenna Goudreau, How To Be A Super-Achiever: The 10 Qualities That Matter
2.     Ilene Strauss Cohen Ph.D., How to Achieve Emotional Success
3.     Nick Bennett, The Secret Of Success - Is It Happiness?

Wednesday, 27 May 2020

Quantitative Easing or Printing Money: What’s the Difference?

Quantitative easing (QE) is an indirect method of printing of money. In a narrow sense, “printing money” is increasing the volume of money in circulation i.e. now it is more of electronic money. In a wider sense, “printing money” is any type of expansionary monetary policy to stimulate an economy, increase inflation and employment. So, in that wider sense, reducing interest rates, decreasing liquidity or reserve requirements, easing collateral requirements and QE are all tools at the disposal of a central bank.

QE does increase money supply, but it takes time and may not help if borrowers are not keen to borrow. Why? Business outlook may look rather bleak or/and banks remain cautious in their lending.

 Where the central bank purchases financial assets from financial institutions, which is almost always government bonds, it is paid for by creating new central bank reserves. QE therefore simultaneously increases amount of central bank money and amount of commercial bank money (deposits in bank accounts). Only the deposits can be spent in the real economy.

Quantitative easing affects the economy in several ways:

·       Credit channel – providing liquidity;
·       Portfolio rebalancing – private investors turn to other securities;
·       Exchange rate – leads to weaker currency and improves exports;
·       Fiscal effect – cheaper for Government to borrow; and
·    Signalling effect – suggests the central bank will take extraordinary measures to facilitate recovery. 

The Federal Reserve (Fed) has been unstoppable in expanding its balance sheet. It has now reached USD7.04 trillion, because of Covid -19. The Fed has now announced plans to purchase corporate debts and high yield ETFs. Many corporates are therefore rushing to raise new capital, knowing that the Fed is there to provide a backstop. What about moral hazard? What if the companies do not survive the economic turmoil?

Why was QE not effective in boosting GDP?

The newly created money, as said earlier, goes into the financial markets— basically, bonds and stocks. The Bank of England (BoE) estimates that QE boosted bond and share prices by around 20%. In theory, people who are now wealthier should spend more. However, 40% of the stock market in the U.K. is owned by the wealthiest 5% of the population. While most families saw no benefit from QE, the richest 5% of households would have been better off.

Very little money created through QE in the U.K. has boosted the real (non-financial) economy. BoE estimates that the first £ 375 billion of new money created just £23-£28 billion of extra spending in the real economy (or 1.5-2.0 GDP growth). It is incredibly ineffective. And it relies on a “trickle down” theory of wealth.

A more effective way to boost the real economy is for BoE to create money and grant it to the Government and allow it to spend directly into the economy. This could be for infrastructure or sectors with high economic linkages that create employment and all the multiplier effects.

What’s stopping a government from doing so?

Fiscal prudence or prescribed debt ceilings imposed by various Parliaments. Then you have analysts and economists raising concerns on the ratio of debt to equity. Reinhart and Rogoff have found that debt to GDP above 90% impacts negatively growth rate of a country.

In this Covid situation, temporary or limited exemptions need to be provided where debt to GDP is well below 90%. Otherwise, there is negative growth and outlook. Private investment or consumption will be limited hence it is time for the public sector to play the more dynamic role or catalyst.

1.     How Quantitative Easing Works, Positive Money.
2.     The Market is Fed, Pankaj C. Kumar, Starbiz Week, Saturday 23 May 2020.

Tuesday, 26 May 2020

Selamat Hari Raya!

May your family be showered with health and prosperity. 
Wishing you a blessed and joyous Hari Raya!
Stay safe!

Monday, 25 May 2020

Selamat Hari Raya!

MPCA wishes all our Muslim readers Selamat Hari Raya Aidilfitri! 

Friday, 22 May 2020

If Oil Prices Rebound, Where Will Ringgit Be?

Nearly a month after one of the crude oil futures contracts fell below zero, it has rebounded. Now it is nearly USD 33 a barrel.

Oil prices fell with fears of a shortage in global oil storage capacity. The U.S. Energy Information Administration (EIA) is of the view that the rate of inventory builds peaked in April, and as oil demand begins to return and oil supply reduces, price will begin to rebound. According to EIA, global oil demand is expected to exceed supply beginning in the second half of 2020. Prices could then steadily rise.

The EIA forecasts that Brent crude oil prices will rise to an average of USD32/b during the second half of 2020. The average Brent oil price will be USD48/b in 2021, reaching USD54/b by the end of the year. This price forecast reflects an expected global oil consumption of 97.4 million barrel per day during the second half of 2020, along with relatively high compliance of announced OPEC+ production cuts, both of which are uncertain. Also, the response of U.S. shale industry to the current low prices will affect the oil price path in the coming quarters.

Considering weakening oil prices, the Ringgit could be weaker in the short term.

The above graph shows the regression plot of Brent Oil Price vs. Ringgit with monthly data retrieved from May 2010 to April 2020. The scattered blue dots plot out the historical exchange rate (USD/MYR) corresponding to respective Brent Oil Price. The fitted regression line (the blue line) on the other hand represents the relationship between exchange rate and oil price. In short, the graph shows that the Ringgit weakened when oil price declined.

Based on our regression model (R2 = 0.77), with average USD32/b Brent crude price in second half of 2020 as forecasted by EIA, Ringgit could slip to 4.4312 against the USD. But with oil price reaching USD48/b on average in 2021, the Ringgit could hit 4.1656 against the USD.

“The ringgit is more dependent on local conditions. It will likely weaken in the short term because of the knee-jerk sentiment, but should recover by the midterm,” said Alliance Bank chief economist Manokaran Mottain. His projections (22 April 2020) are for the ringgit to hit the RM4.30 to RM4.35 mark by year end.

Our forecast is based on a single dependent variable model where oil price change is the only explanatory variable for any exchange rate change. However according to Manokaran, the ringgit used to track oil prices very closely but not in recent weeks. He pointed out that another factor providing some stability for the ringgit is the foreign fund flow into the bond market. Carry trades are happening out there with foreign fund managers taking advantage of Malaysia’s interest rates. Thus, Manokaran expects the ringgit to be relatively stable due to the influence of the bond market. What do you think?

Where do you think exchange rate will be by year end? 1 USD = free polls

1.     Short-Term Energy Outlook, 12 May 2020, EIA
2.     Tom Kool, The Relentless Oil Price Rally, 15 May 2020
3.     Ringgit could face weakness before picking up, 22 April 2020, The Star

Thursday, 21 May 2020

Super-achievers: How They Do It So Well? (Part 1)

In the book ‘The Art of Doing: How Superachievers Do What They Do and How They Do It So Well’, Camille Sweeney and Josh Gosfield, the authors had interviewed 36 star performers that climbed to the top of their fields. The couple didn’t want to theorize about success, instead, they went straight to the source by asking the super-achievers, “How do you do what you do?”

No matter how diverse their goals or crafts, these super-achievers shared many of the same habits. How can you follow in their footsteps? Jenna Goudreau from Forbes has summarised 10 qualities that will set you apart:

1. Dedication to A Vision

Glossy magazine success stories often don’t show the dark moments, the daily grind or flagging energy that super-achievers endure to realize their goals. However, that dedication is essential to their success.

One super-achiever’s story is that of four times Formula One World Champion Lewis Hamilton, who won his first ever Grand Prix as a rookie back in 2007. In the Canadian Grand Prix, he said ‘I, always knew I was going to win; it was just a question of when and where.’

If you have that level of certainty and belief, not only mindset but your whole being, what’s going to happen? You’re going to win!

2. Intelligent Persistence

When failure is never an option, you don't give up. You find another contact, another way, another point of entry, and you keep trying until you accomplish what you have set out to do.

One thing successful people know: Dedication and blind persistence are two very different things. “You can work hard but not smart,” says Sweeney. “When something’s not working, you’ve got to tweak it. Some people just keep banging their heads against the wall.”

3. Fostering A Community

Star performers know they can’t achieve success on their own. Instead, they must galvanize a group of people around their idea or goal. When an entrepreneur has large professional networks, he increases his access to knowledge, which can spur innovation within his own company.

A community doesn’t just include partners and coworkers. It might also mean employees, customers, investors, mentors, fans and social media followers. Teamwork, or having an ecosystem of supporters, turns out to be critically vital for success.

4. Listening and Remaining Open

“You don’t normally think of hard-charging, action-oriented leaders as being good listeners,” says Sweeney. “These people’s ability to practice the art of listening helped them learn what they needed to know about the world around them.”

Active listening requires an open mind. Often in conversation we make decisions and judgements about what we are hearing, and we think about how are we going to respond. When we stay active in listening, we suspend judgement and allow our minds to stay curious and open to possibilities.

5. Good Storytelling

Stories have the ability to transport people to your world. They then are more likely to invest in you and your brand. Philippe Petit, famous for his high-wire walk between the Twin Towers of New York City's World Trade Center in the 1970s, believed other wire-walkers were trying to make it look hard. “But he wanted to be a poet in the sky and seem effortless,” Sweeney says. “His narrative wasn’t in words, but it was a story he was communicating.”

Another successful business with good brand stories is Nike. Nike has always excelled at brand storytelling. One of their best campaigns is Equality. It made a strong statement about the company as a force for positive social change, offering something more to today’s athletes than just a pair of sneakers and branded workout gear. This is an example of using brand storytelling to connect with the audience, inviting them to become a part of a collective movement by wearing Nike products.

We will continue with another five (5) qualities next week! Stay tuned!


1.     Jenna Goudreau, How To Be A Super-Achiever: The 10 Qualities That Matter
2.     Royston Guest, 7 key traits of high achievers
3.     Michael Brenner, 6 Examples Of Genius Brand Storytelling You Have To See

Wednesday, 20 May 2020

Revenge Spending to Lift Retail Sales?

Recovery in the retail sector may accelerate in the coming weeks fuelled by “revenge spending”. That’s the view of some. The term was coined by Amrita Banta, managing director at Agility Research, to describe pent-up consumer demand. Then there is, of course Hari Raya, which may lend weight to that view!

Source: gfycat

The retail scene has been impacted by the Covid-19 pandemic. According to Retail Group Malaysia’s preliminary report on the retail scene, a decline of 9.3% is expected in Q2,2020. Malaysia’s retail sector crashed 18.8% during Q1,2020. For the 3rd and 4th quarters, retail sales in Malaysia are projected to grow by 2.5% and 3.3% respectively.

Retailers are preparing aggressive marketing promotions to draw back customers. That’s according to Datuk Seri Gary Chua of Malaysia Retail Chain Association (“MRCA”). The constraint is social distancing. Capacity is then going to be limited to 40-50%, especially for dine-in outlets. Others feel growth is not likely anytime soon and recovery in sales will take at least eight months.

Regardless, it is not just Covid-19 and MCO but also trade wars and oil price slump. Other sectors that may benefit from revenge pending include health, safety and cleanliness.

Deloitte Southeast Asia’s consumer industry leader, Pua Wee Meng believes crowded places like malls, cinemas and sporting events will be frequented less. Many will opt for online services. Even eateries will need to revamp cleanliness and food content. Online education services may see a surge. New skill sets are required for those in tourism and e-commerce.

Households may increase spending on health supplements, herbal products and medical devices to prepare for future lockdowns.

Many consumers may flock to gyms and fitness centres to get back in shape.

Overseas travel will be restricted, delaying recovery in the aviation, hotel and tourism sectors.

The reality, however on revenge spending is that it may not surface. Why? There is deferred spending to be expected because of the lockdown but revenge consumption suggests it is going to be a binge! The fact is consumers are going to be more conservative, when they are faced with a deep recession. It is not a “Black Friday” event.

Retail sales in China fell 20.5% in January and February compared to same period in 2019. Car sales in China for February, plunged 79% from a year earlier. That does not bode well.

With incomes lower (or none), binge spending is not likely to arise in China, U.S. or Malaysia. But Governments need to invest massively in infrastructure and encourage exports in goods and services to recover from this recession.


1.     Focus Malaysia, Sharina Ahmad, 5 May 2020.
2.     Marketing, Janice Tan, 16 April 2020.
3., 8 April 2020.

Tuesday, 19 May 2020

Is the Aviation Industry Flying Without Wings?

It's only when the tide goes out that you discover who's been swimming naked.
                                                                                                -Warren Buffet-

 Source: GIPHY

Amidst the doom and gloom that comes with the pandemic, Warren Buffet must have discovered he was swimming naked. In recent news, his firm, Berkshire Hathaway had pulled out stock ownership from four major airlines in the United States, namely, Delta Airlines, American Airlines, Southwest Airlines and United Airlines. Does that mean the tide has left the aviation industry, globally? What does that mean for MAS, Air Asia and the rest?

According to Brian Pearce, Chief Economist at the International Air Transport Association (IATA), the aviation industry has lost approximately $252billion in revenue, as compared to the same period in 2019.

Source: Economics Team at IATA.

Based on this table, it can be said that the Asia-Pacific region took a hit with a loss of $88billion dollars. The IATA economics team has also forecasted that the global (revenue passenger kilometre) or RPK is set to plummet to -8% as the global GDP growth is on a decline.

Source: Economics Team at IATA and Oxford Economics.

The Malaysian aviation industry looks fairly similar to the global outlook. Based on a report from the International Law Office, Malaysian Aviation Group (MAG) which includes Malaysian Airlines Berhad, MASwings, MAB Engineering and Firefly, had offered its 13,000 employees two unpaid leave options, commencing the start of April 2020. The first option being, taking 3 months of unpaid leave or the second, 5 days of unpaid leave per month for a period of 3 months.

Besides MAG, AirAsia Group has its management team and senior employees sacrificing from 15% to 100%, of their salaries. It also has also grounded most of its fleet and encouraged affected passengers by the movement control order, to accept credit instead of flight ticket refunds. According to CGS-CIMB research, AirAsia Group only has a current cash balance to last for a period of less than 5 months.

So, what now?

Source: Post Covid-19 Flight Plan for Airlines, by BCG.

According to Boston Consulting Group’s report on the impact of the aviation industry post COVID-19, there is a glimmer of hope. Distinctions have been made between travel for business and leisure travels. Once international borders reopen, the demand for business travels will increase quickly. Nevertheless, this spike is dependent on the state of the economy and the long-term effect of remote working practices.

Leisure travel, on the other hand, is distance dependent. As lockdowns are being slowly lifted in various countries, many would like to escape the confines of home with a short vacation. This, of course, is subject to the assurance from the airlines that the health of passengers is prioritised. After all, until a vaccine is discovered, the danger of COVID-19 is still very potent.  Long-haul leisure travel would have a longer rebound as this has to take into account both, planning time and money.

The report also illustrates five demand recovery scenarios, based on current events and previous data from the SARS outbreak and the 9/11 attacks. It is believed that the middle scenario (prolonged U-shape) is the most likely. This would mean a very slow yet steady recovery, of 12-18 months.

What can Malaysia do in the meantime?

IATA has written to 18 governments in Asia-Pacific, including Japan, South Korea, Malaysia and Thailand to provide emergency relief to their respective carriers. This includes direct financial support, loans, loan guarantees and tax relief.

The Malaysian Aviation Commission (MAVCOM) is suggesting that the government should only bailout the airlines industry when necessary. This route is very similar to the United Kingdom’s approach -- a bailout can only happen when the airline has exhausted all financial resources and sources of private borrowings. Instead of a financial bailout, MAVCOM suggested some non-fiscal policy and regulatory responses. These include policy changes in allowing the airline to obtain sources of funding from domestic and international capital markets and the possibility of airline mergers. MAVCOM has also suggested targeted measures of funding, as listed below:

i)               Funds allocated to combat the spread of Covid-19 (the purchase of flight disinfection, medical and hygiene equipment);
ii)              Incentives and subsidies for airline employee payroll retention;
iii)             Waiving government-imposed charges such as air traffic control charges, airport levies and industry development levies, for a brief period;
iv)             Subsidizing interest rates for public or private loans; and
v)              Tax subsidies and exemptions for transportations services of goods and aviation personnel.

In a nutshell, the sun has not set on the aviation industry, just yet. However, as a captain would say “Ladies and gentlemen, please return to your seats and fasten your seatbelts. We are currently experiencing turbulence. Thank you.” That may sum up the present predicament!

1.     Berkshire Sells Entire Stakes in U.S. Airlines, Focus Malaysia, 5th May 2020. (Link:
2.     Covid-19: Updated Impact Assessment, by Brian Pearce, Chief Economist, International Air Transport Association, 14th April 2020.
3.     Airline Metrics Revenue Passenger Kilometers, by Airline Geeks. (Link:

4.     The Post COVID-19 Flight Plan for Airlines, by Boston Consulting Group, 31 March 2020.(Link:
5.     Staying airborne during the Covid-19 pandemic, by Sharon Chong, SKRINE, International Law Office, 6th May 2020. (Link:
6.     Asia-Pacific Governments Urged to Provide Emergency Support to Airlines, Press Release, International Air Transport Association, 26th March 2020.(Link:
7.     Commentary on Government Assistance To The Aviation Industry Amidst The Covid-19 Pandemic, by the Malaysian Aviation Commission, March 2020.

Monday, 18 May 2020

Post Pandemic: The Next Normal


As Ian Davis, a previous partner at McKinsey, wrote in 2009 in the midst of the global financial crisis:

‘For some organizations, near-term survival is the only agenda item. Others are peering
through the fog of uncertainty, thinking about how to position themselves once the crisis has passed and things return to normal. The question is, ‘What will normal look like?’ While no one can say how long the crisis will last, what we find on the other side will not look like the normal of recent years.’

The coronavirus crisis is shaping a new normal. McKinsey (April 2020) has listed seven (7) elements for business leaders to consider as they plan for the next normal:

1. More Distance

Even before Covid-19 hit, there were signs of unease, expressed in calls for protectionism and more restrictive immigration and visa policies. More distances were created from those unlike themselves.

Governments around the world have imposed severe restrictions on people and to deal with the pandemic. More than three billion people live in countries whose borders are now totally closed to non-residents.

Indeed, for businesses, the prospect of more border restrictions, a greater preference for local over global products and services, the need for resilience across supply chains driving a move to bring sourcing closer to end markets, and perhaps renewed resistance to globalization are all possible second-order consequences of the actions being taken now to cope with the coronavirus. Technology continues to shrink physical distance, but in other ways, it could be set for a return.

2. Resilience and Efficiency

Resiliency—the ability to absorb a shock, and to come out of it better than the competition—will be the key to survival and long-term prosperity. McKinsey research on the 2008 financial crisis found that a small group of companies in each sector outperformed their peers. They did get hurt, but recovered much faster. By 2009, the earnings of the resilient companies had risen 10 percent, while that of the non-resilient had gone down almost 15 percent. What characterized the resilient companies was preparation before the crisis—they typically had stronger balance sheets—and effective action during it—specifically, their ability to cut operating costs.

Indeed, in the wake of recent natural disasters, the impact of climate change was recognized increasingly by business leaders and investors, with consequent effects on decision making and valuations. Many companies will rebalance their priorities, so that resiliency—in all its manifestations—becomes just as important to their strategic thinking as cost and efficiency.

3. The Rise of the Contact-Free Economy

In three areas in particular—digital commerce, telemedicine, and automation—the Covid-19 pandemic could prove to be a decisive turning point.

Coronavirus is accelerating the change to online shopping habits. The figures for telemedicine and virtual health are just as striking. Teladoc Health, the largest US stand-alone telemedicine service, reported a 50 percent increase in service in the week ending March 20. The Federal Communications Commission is spending $200 million to improve connectivity between patients and virtual-healthcare providers.

Greater automation was already occurring before Covid-19. It is becoming possible to imagine a world of business—from the factory floor to the individual consumer—in which human contact is minimal.

4. More Government Intervention in the Economy

As of April 10, governments across the globe had announced stimulus plans amounting to $10.6 trillion—the equivalent of eight Marshall Plans. Most spending is directed to three areas—supporting citizens’ basic needs, preserving jobs, and helping businesses to survive another day. (What is Malaysia doing? Read more here)

At some point, governments may decide to get out of the business of business; how they do so will be complicated and differentiated. How much, how fast, and in what ways governments reduce their economic role will be one of the most important questions of the next decade.

5. More Scrutiny for Business

Now citizens all over the world could face higher taxes and/or fewer services in order to pay
for the $10.6 trillion committed so far. The public will expect—indeed, demand—that their money be used for the benefit of society at large.

And with many businesses likely to be operating to some extent with public money, the scrutiny will be intense. There will be real effects on the relations between government and business, and between business and society.

6. Changing Industry Structures, Consumer Behaviour, Market Positions, and Sector Attractiveness

As mentioned above, being more resilient and efficient are the keys for businesses to sustain. The changes to consumer attitudes toward physical distance, health, and privacy could last. Concern over the possibility of other “black swan” events could change how consumers approach financial security—saving more and spending less. Given the intensity of these pressures, it is reasonable to question whether existing market positions will be retained. It is possible that institutions may find new and enduring ways to collaborate to address the current crisis.

7. Finding the Silver Linings

If necessity is the mother of invention—and often it is—there could be some positive outcomes of the coronavirus crisis.

 For businesses, the consequences are profound. Many have learned how to operate remotely. The urgency of addressing Covid-19 has also led to innovations in biotech, vaccine development, and the regulatory regimes that govern drug development, so that treatments can be approved and tried faster. In many countries, health systems have been hard to reform; this crisis has made the difficult much easier to achieve. The result should be more resilient, responsive, and effective health systems.

One possible next normal is that decisions made during and after the crisis could lead to less prosperity, slower growth, widening inequality, bloated government bureaucracies, and rigid borders.

 Or it could be that the decisions made during this crisis lead to a burst of innovation and productivity, more resilient industries, smarter government at all levels, and the emergence of a reconnected world.

 Where the world lands, is a matter of choice—of countless decisions to be made by individuals, companies, governments, and institutions in the days ahead.


1.     The future is not what it used to be: Thoughts on the shape of the next normal, McKinsey, April 2020
2.     After Covid-19, a new normal, Free Malaysia Today, 28 April 2020