Time flies. It was the month of March where most of us did not know what the Malaysia Moratorium means. But fast forward 6 months, it is now coming to an end.
The past 6 months were not an easy period for most of us. From individuals, enterprises and even listed businesses, it is a tough one. But, fortunately, we all can agree that as of now, the worst is definitely over. And that is why, the moratorium which was initiated to ease the financial burden, is also ending soon. So, what are the key points that you should know when the moratorium officially ends?
1. Loan repayments start to resume
If you are still unaware of what the moratorium is, basically it is a scheme where borrowers were given the choice to delay their monthly mortgage and car loans. This aid was critically required as most part of the world come into a complete shutdown. Some businesses even went under and had to retrench their workers.
With the people facing a financial squeeze, the Government of Malaysia decided to initiate the Moratorium to help the majority of us during the challenging 6 months. But as it is coming to an end soon, that means most of our salary and a company’s earnings will be channelled back to loan repayments.
2. Banks start to rebuild their capital buffers
Perhaps one of the parties taking the heaviest hit from the moratorium is none other than our banks. Banks give up the monthly loan repayment for 6 months during the moratorium period. Also, due to the economic standstill, share prices of banks also got a hammering due to the pessimism.
Of course, there are still people out there who might think banks should continue to extend the moratorium. But I beg to differ. Although banks are listed companies, their main function is to facilitate borrowings while keeping a depositors’ funds safe. For depositors to continue to ensure the money we leave with the bank is safe and secure, pushing the moratorium further would definitely diminish the interests of the banks and depositors.
3. Borrowings should slowly pick up
Of course, during the period of the moratorium, banks had to manage their capital prudently as a huge chunk of loans that were supposed to be due would be delayed. That means, banks could be more protective and strict when it comes to approving new loans.
Now that the moratorium is ending, banks will definitely breathe a huge sigh of relief as loan repayments will start trickling back. And as they slowly build back their capital buffer, they too can slowly provide financing as more and more people get back to work.
4. A slow but sure recovery across all sectors
Although an end to the moratorium means that most of us would have to start reservicing our loans, it should not be something pessimistic.
An end to the moratorium is a strong sign that we are slowly recovering from the economic standstill. That means people are slowly getting back to work, or have found a new job after experiencing retrenchment.
Any economy around the world hinges on the consumption of goods and purchasing. Only with the majority of us able to generate income, take on loans, purchase assets like houses and cars, then only it signifies a growing and prosperous country.
And with that in mind, the companies in lagging industries like auto sales, property and construction, could finally see some reasonable share uptick movements.
5. End of the moratorium, the start of a new beginning
As the world slowly reopens, we know that it is the new beginning. Mankind has passed through plenty of pandemics throughout the years. This too looks like a test that will soon be past.
That said, this is the new normal. Certain things have changed and evolved. Work-from-home culture still and will be the main form of arrangement. Thankfully during this pandemic, the world is more connected compared to the previous pandemics.
There will always be industries that are in a prime position when we slowly embrace the new normal. Conversely, some industries will face a challenge in this new norm.
Either way, as investors it could not be any better to look for the next opportunity and ensure our portfolio last through even the next pandemic.
What are the new possibilities that you can think of? Let us know in the comments section below!