PETALING JAYA: The announcement on the easing of movement restrictions has given the stock market a temporary boost but it will be some time before longer-term optimism can set in.
A confluence of factors, including the lack of clarity on Malaysia’s political front, coupled with the ongoing Covid-19 pandemic, will continue to plague market sentiment over the near term, observers said.
At the close yesterday, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) was up 6.93 points to 1,496.73 and stocks deemed as immediate beneficiaries of looser restrictions such as Genting Malaysia and Malaysia Airports Holdings Bhd also finished higher.
Nevertheless, year-to-date, the index has lost around 8%.
Prime Minister Tan Sri Muhyiddin Yassin said on Sunday that Covid-19 restrictions will be eased starting today for individuals who have been fully vaccinated.
Among the restrictions that will be lifted include inter-district and interstate travel and the ban on dine-ins.
However, these only apply to states under phase two and above of the National Recovery Plan.
In its strategy note released yesterday, PublicInvest Research voiced its concerns on the stock market, noting that the local bourse was “sliding down a slippery slope, seemingly unable to break its fall.”
“Investor interest is waning while foreign investors continue to be net sellers,” it told clients in the note.
It said: “Malaysia was running the risk of being very late to, and possibly missing out on the party, where global markets have been breaking new highs.”
“While market participation continues to be dominated by retail investors, the average daily traded value has been on a decline since March this year.
“Additionally, foreign investors have sold a cumulative RM5.3bil in equities (on a net basis) year-to-date until July,” the research house added.
In its note, PublicInvest also said it was lowering its FBM KLCI year-end target to 1,590 points from 1,690 points previously due to “higher risk premiums”.
“Given the seemingly twin positives of economic re-opening and political resolution only occurring in the later stages of third-quarter 2021, the country’s current state of flux and notable change in market dynamics make it unlikely that the local bourse will trade anywhere near its long-term price-earnings average as initially anticipated,” it said.
However, earnings growth momentum, albeit affected slightly by recent lockdown measures, remains largely intact, it added.
Most industry observers agree that once some semblance of normalcy returns, the one sector that will probably make the fastest comeback is the consumer sector.
This means restaurants, alongside retail, tourism, hospitality-related sectors and aviation will be among the first beneficiaries of a “near normal” environment.
These sectors have been hit badly since last March, impacted by the numerous and prolonged movement restriction orders, implemented to curb the rise in Covid-19 cases across the nation.