THE IMPACT OF MCO ON THE STOCK MARKET AND MORATORIUM ON BANKING SECTOR’S PERFORMANCE IN MALAYSIA: THE CASE OF COVID-19

This study examines the influence of COVID-19 on the KLCI and also the stock price of banks in Malaysia. We use the event study methodology to examine the impact of COVID-19 in the pre-and post-10 days of the event dates. Data on stock prices of are obtained from Bursa Malaysia. The findings show that the cumulative abnormal return (CAR) of the overall stock market decreased significantly after the announcement of the first Movement Control Order (MCO) in the country. This indicates that the economic and financial instability caused by COVID-19 has reduced investor confidence. The study also shows that blanket loan moratorium has resulted in a decrease of CAR for three major local banks. The MCO which was enforced to reduce the number of widespread cases was followed by the implementation of bank moratorium to assist the people due to their income reduction. Hence, our study empirically shows that banks were negatively affected by the implementation of moratorium.