CLICK TO ENLARGE
PETALING JAYA: The exacerbation of uncertainties over extended movement restrictions in Malaysia ravaged the local stock market as the FBM KLCI hit close to an eight-month low.
The benchmark index of Bursa Malaysia tanked 14.97 points or 0.96% to 1, 544.71 points yesterday, extending its decline from last Friday.
This is the lowest point recorded by the index since Nov 9 last year at 1, 524.32 points.
Nov 9, 2020 was the day touted as the turning point for equities globally when Pfizer and BioNTech announced their vaccines to fight Covid-19.
It sent major indices and recovery stocks on a sweet ride to the top, including the FBM KLCI that added 50.75 points the next day.
Rakuten Trade head of equity sales Vincent Lau said the selldown yesterday was expected due to the extension of the movement restrictions, but he does not deny the fact that an economic recovery is still intact, albeit a prolonged one.
But eight months on, with vaccines being administered as countries rush to achieve herd immunity against Covid-19, it seems that negative sentiments are starting to weigh on investors as new cases remain high, with no end to the restrictions in sight.
Rakuten Trade head of equity sales Vincent Lau said the selldown yesterday was expected due to the extension of the movement restrictions, but he does not deny the fact that an economic recovery is still intact, albeit a prolonged one.
“The first half of 2021 is definitely a whitewash and we are a bit more optimistic for the second half because fundamentally, we should be able to do better.
“The Covid-19 cases which are still high and the extended recovery phase will prolong the economic recovery for sure but things could only get better from here as we continue to ramp up vaccinations, ” he told StarBiz, adding that investors could have sold ahead of the expected announcement of the Pemulih economic package by the Prime Minister.
Lau believes that the negative sentiments in the market would be mitigated by the government’s additional aids and as the National Covid-19 Immunisation Programme picks up pace.
He added that investors may also look at doing some bottom fishing as some counters have dropped to more palatable levels.
Across the broader market, decliners trumped gainers 976 to 133 while 342 remained unchanged. Market volume stood at 4.73 billion shares, valued at RM2.41bil.
Bank Islam Malaysia Bhd economist Adam Mohamed Rahim said the FBM KLCI is expected to breach the resistance of 1, 600 points in the second half of 2021, should the plans to accelerate vaccination rates materialise and be sustained, enabling the gradual relaxation of movement restrictions.
“Apart from that, external demand for developed markets and trading partners such as China should cushion the slowdown in domestic demand, ” he said.
Adam added that the latest RM150bil stimulus package warrants investors to question how the additional government spending would affect the country’s sovereign ratings and in turn, hurt investor sentiment.
“Henceforth, it would be a tough balancing act as Malaysia could not afford a rating downgrade, considering the potential impact on fund flows, ” he said.
Foreign investors were net sellers for the week ended June 25 with an outflow of RM469.52mil.
MIDF Research, in its fund flow report, said since the beginning of 2021, cumulatively, retailers have been the only net buyers of Malaysia’s equity market to the tune of RM7.90bil while local institutions and foreign investors were net sellers at RM4.08bil and RM3.81bil respectively.
It said most major equity markets worldwide saw positive performance last week, except Thai SET and FBM KLCI. The FBM KLCI was the second biggest loser last week at -1.85% while the worst performer, Thai SET, decreased by 1.88%.
Adam said the heavy foreign net selling last Monday and Tuesday at RM185mil and RM142mil respectively was due to the anxiousness among investors, following hints by the United States Federal Reserve that rate hike may occur sooner-than-expected, which brought back fears of heightened inflation.