Concern only over impact on retail investors
PETALING JAYA: Analysts are still largely positive on Bursa Malaysia despite yesterday’s 36-point plunge in tandem with the fall in Asian and European markets but have expressed concern over its impact on retail investors.
Citigroup Investment Research head Choong Wai Kee believes the decline over the past two days was due to “healthy profit-taking” but conceded that negative sentiment could permeate the local stock market after such a heavy decline.
“Institutional investors and fund managers might take this opportunity to step back and see if there are any stocks worth investing in now at a lower price.
“However, retail investors could be affected by the negative feel after the massive sell-down and this could create a ‘redemption’ sentiment,” he told StarBiz yesterday.
OSK Securities head of research Kenny Yee said yesterday’s drop, although sharp, was a healthy one.
“Our only concern is that the huge plunge could have an effect on retail investors. Some of them entered the market just last week and it is not good to be ‘hit’ like this.
“However, we believe institutions and fund managers could be looking to get back in,” he added.
A number of reasons were cited for the slump in the Asian and European markets, including concerns that the Chinese government could come up with measures to crack down on illegal investments that have driven that country’s bourses to record highs recently.
Some dealers attributed the selling to renewed fears of a slowing US economy, higher oil prices and increasing tension in the Middle East after Iran defied a UN deadline on its nuclear programme.
MIMB Investment Bank head of research Pong Teng Siew said the sell-down in Asia could also be due to the Bank of Japan’s recent move to increase interest rates.
Citigroup’s Choong said with Malaysia having been Asia’s best performing market year-to-date, what happened yesterday could prove to be just a blip on the horizon, adding that such volatility was typical of a “real market”.
“The market reached 1,300 points in 1993 when the ringgit was at 2.50 to the US dollar. Right now, the ringgit is trading at 3.49, so in dollar terms, it is favourable for foreign investors to keep coming in,” he said.
OSK’s Yee said a combination of several factors involving China as well as concerns in the Middle East, could have caused the fall in the markets.
JP Morgan Securities head of broking Clement Chew does not expect yesterday’s fall to derail the market’s uptrend, saying that positive market drivers like the reform of government-linked companies, strong earnings momentum and better capital management were intact. He said with the KLCI having gone up 15% since the start of the year, a correction was “inevitable” but healthy, although it was probably “overdone”.
Chew added that the market weakness in the Shanghai and Shenzhen exchanges had spilled over to the Singapore, Malaysia and Hong Kong markets. The bearish sentiment on China’s markets also spilled over to The European and US markets.
At 10.45pm Malaysian time, the FTSE 100 Index slid 146.7 points or 2.3% to 6,288 points, while Dow Jones Industrial Index fell 132 points or 1% to 12,500 points.