THE implementation of reduced board lot size for securities listed on the trading and services sector today may spark some buying interest in battered blue chips stocks, especially from retailers.
The smaller board lot size makes little difference to institutional buyers?it would benefit retailers the most (in terms of cheaper entry cost) for exposure in blue chip companies, a local fund manager said.
The fund manager said higher retail participation in heavyweight counters like Tenaga Nasional Bhd or Telekom Malaysia Bhd would contribute towards higher liquidity, but reckoned that the over-riding broader market sentiments would continue to dictate share price movements for the time being.
Investors would still make their decisions based on fundamentals and outlook for the stocks concerned. Take Genting as an example,the stock was traded on a smaller board lot size (of 200 shares per lot) prior to today. When concerns about Genting's earnings outlook was highlighted, its share price movement reflected those concerns rather than anything else, he said.
Of course, investing in large capitalised stocks has its advantages. These stocks are normally less prone to price volatility, given their healthy share spread and good quality.
And at current price levels, many expect these under-priced big caps to lead the market charge when sentiment recovers.
The first-phase implementation of trading in 100 shares per lot for main board companies would be interesting as these stocks have a direct influence on the performance of the KLSE Composite Index (CI).
Out of the top 20 component stocks that made up the main market barometer, nine are from the trading and services sector.
Tenaga and Telekom are the second and third highest capitalised stocks respectively on the KLSE and both counters will come under the introduction of 100 lots trading today.
Other big-cap stocks in the sector include Malaysia International Shipping Corp Bhd, conglomerate Sime Darby Bhd, Maxis Communications Bhd, Plus Expressways Bhd and independent power producer Malakoff Bhd.
With estimates of foreign portfolio investment at historical lows against the main board market capitalisation, analysts said these blue chips would easily attract strong buying once uncertainties in the market were removed.
And some bargain hunting activities may have already taken place in mid-April, based on JP Morgan's recent report saying that foreign investors were net buyers of local equities for the first time in 35 weeks of continuous net selling since August last year.
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