The effect of lockdown, economic stimulus package and national recovery plan announcements on the Malaysian stock market

• Main Authors: Tan, Kok Jun, Abd Sukor, Mohd Edil
• Format: Conference or Workshop Item
• Language: English
• Published: 2022
• Subjects: HC Economic History and Conditions; Business
• Online Access: http://eprints.um.edu.my/38197/1/Profesor%20Madya%20Dr.%20Mohd%20Edil%20Abd%20Sukor%20The%20Effect%20of%20Lockdown%2C%20Economic%20Stimulus%20Package%20and%20National%20Recovery%20Plan%20Announcements%20on%20the%20Malaysian%20Stock%20Market.pdf; http://eprints.um.edu.my/38197/

This research aims to investigate the effect of lockdown, economic stimulus package and national recovery plan announcements during the Covid-19 pandemic on the Malaysian stock market. The study employs an event study methodology. A sample of 13 sectorial indexes are selected. The sample period taken for the study is from January 2, 2019 to October 29, 2021. The results of the study suggest that all events i.e., lockdown, economic stimulus packages and recovery plan announcements have significantly affect the stock market. Nevertheless, the impact varies across time periods. For example, the first three Movement Control Order (MCO) 1.0, 2.0 and 3.0 announcements have significantly affect the indexes negatively, while the Total Lockdown (TL) announcement at a later period lead to a positive impact. Similarly, in the early stage of economic stimulus package (ESP) announcements, a positive reaction is reported, while the opposite results are found for the later ESP announcements. Finally, this study reports that most indexes respond positively to the National Recovery Plan (NRP) 2, 3 and 4 announcements, but negatively to the first NRP announcement. This is because during the first NRP announcement, no clear plan was highlighted and at the same time the confirmed cases are still high. However, after the announcement of NRP2, investors realized that the Malaysian government is serious in battling the unanticipated financial market impacts due to the pandemic. Hence, their actions had regained investor confidence. Findings of this study have important implications for policymakers and investors. Handling and managing stock market during the pandemic requires a sensible strategy, in which officials should quickly notify publics of their intended plan without causing panic or any feeling of insecurity. For investors, these results are useful for them to manage their investment portfolio and risk.