PETALING JAYA: The escalating conflict in Ukraine has cast a pall over emerging markets, including Bursa Malaysia.
But fund managers and analysts say this has less to do with geopolitical tensions in Ukraine than a healthy correction after a good run for local stocks last month.
Some are even advising investors, especially those with a longer-term view, to buy on weakness if markets retreat further.
Trading on Bursa Malaysia yesterday saw losers outnumber gainers 672 to 222, even as foreign funds turned net buyers of Malaysian equities for the first time in seven weeks. Turnover hit 2.1 billion shares, valued at RM2.05bil.
The local bourse’s key FTSE Bursa Malaysia KL Composite Index (FBM KLCI) fell 10.97 points, or 0.6%, to close at 1,824.69 points, off its early low of 1,813.
Regional markets saw a moderate pullback as well, with Japan’s Nikkei 225 dipping 1.27% to 14,652.23, Hong Kong’s Hang Seng Index 1.47% to 22,500.67, South Korea’s Kospi 0.77% to 1,964.69, and Singapore’s Straits Times Index 0.86% to 3,083.90.
Shanghai’s Composite Index bucked the trend, climbing 0.92% to 2,075.23.
Russia’s benchmark Micex Index, meanwhile, shed up to 10% as investors offloaded risk assets.
Said a veteran market observer: “Wars and rumours of wars tend to be a trigger for short-term selling, but history has proven that markets will recover and head even higher once the conflict eases. This was the case with Sept 11 and other crises.”
Areca Capital chief executive officer Danny Wong told StarBiz that the geopolitical tension currently playing out in Ukraine did not weigh heavily on local stocks.
“We have seen this before. It is a short-term issue unless it changes things on a fundamental level, which it hasn’t. Still, some investors will use the opportunity to take profit, hence the selldown.
“For long-term portfolios, this is just a blip. In fact, it is a healthy correction that our market needs in order for it to scale new highs,” Wong said.
According to the head of PublicInvest Research, investors were looking for a reason to take some money off the table after February’s rally.
“It is not really a reflection of the situation in Ukraine. Forward valuations for the FBM KLCI remain fair at 15 times earnings,” he said.
Newswires reported that Russia was in the midst of lining up armoured vehicles on its side near the Ukrainian region of Crimea after President Vladimir Putin said he had the right to invade his neighbour.
Ukraine’s Crimea region has become a focal point for clashes between pro-Europe and pro-Russia supporters following last month’s overthrow of former president Viktor Yanukovych.
Putin’s threat to invade raised the likelihood of one of the most tense standoffs between Russia and the West since the end of the Cold War, Bloomberg reported.
That led Brent and crude oil prices to hit multi-month highs, while safe-haven assets such as gold rose.
As at 6pm, US light crude oil was quoted at US$104.08 per barrel and Brent, US$118.19. Spot gold jumped to over a four-month high of US$1,344.55 an ounce.
Meanwhile, MIDF Research said in its weekly fund flow report that after selling in 19 of the past 20 weeks, foreign investors turned net buyers of Malaysian stocks.
Foreign portfolio investors made a net purchase last week of local shares in the open market totalling some RM296.2mil, versus an average net sale of RM565.3mil in the preceding 20 weeks.
The foreign participation rate was still below the RM1bil mark, but retail investor optimism spiked, given their net purchase of RM164.9mil, the best since mid-November, MIDF said.
“Going by history, we can expect a stronger month in March. The FBM KLCI had performed well during the month in the last four years, gaining ground each year averaging 2.8%,” the brokerage added.
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