Coronavirus fears hit Bursa Malaysia


  • Corporate News
  • Wednesday, 29 Jan 2020

UOB Research senior economist Julia Goh(pic) told StarBiz that further sell offs may be more muted in the local market compared with other regional markets, given that foreign holdings of Malaysia’s stocks and bonds are already relatively low.

PETALING JAYA: Malaysia’s first trading day in the Year of the Rat saw the local market taking a hit, in line with a global selloff, as investors scurried away over fears of the economic impact from the coronavirus outbreak.

Stocks on Bursa Malaysia tumbled across the board, with decliners outnumbering winners by four-to-one.

Glovemakers and healthcare-related stocks bucked the trend and dominated the thin top-gainers list in otherwise a gloomy day for investors.

Global commodities, including crude oil and palm oil, saw a broad-based sell off amid concerns of an economic slowdown.

The FBM KLCI tracked the overnight fall on Wall Street and key Asian markets, briefly falling below the 1,550 level, before ending the day down 21.17 points or 1.35% to 1,551.64 – its lowest since October last year.

In the region, South Korea and Singapore were among the biggest decliners, losing 3.09% and 1.84%, respectively.

Fears about the impact of the new coronavirus (2019-nCoV), or Wuhan coronavirus, which is believed to have originated in the Chinese city of Wuhan, have intensified in the region as the number of people infected and deaths continue to rise.

The deadly virus has reportedly already claimed 106 lives and infected over 4,400 people in China, and has spread to more than 10 countries.

On Monday, key indexes for British, French and German equity markets had slid more than 2%, along with pan-European markets, on worries about the potential economic impact from the deadly virus. Stocks on Wall Street fell more than 1%.

UOB Research senior economist Julia Goh told StarBiz that further sell offs may be more muted in the local market compared with other regional markets, given that foreign holdings of Malaysia’s stocks and bonds are already relatively low.

She said uncertainties would persist and market participants would be more cautious as the virus continued to spread.

“Risk may heighten with more travel restrictions, evacuation of workers, theme park closures and restrict operations of restaurants and retail outlets.

“Anecdotal reports suggest this is already happening in China and Hong Kong, ” she noted.

For Malaysia, she said the fallout could come in the form of weaker tourist arrivals, dampened consumer sentiment and greater business uncertainty, resulting in delays to investment and export recovery.

“It is also worth noting that China is a larger source of global demand and growth today than it was back in 2003 during the severe acute respiratory syndrome (SARS) outbreak.

“If the virus can be contained soon enough, then there is opportunity for markets to rebound, ” she said.

On the local stock exchange, tourism-related counters slumped – presenting a negative start to Visit Malaysia Year 2020 – with counters like Malaysia Airports Holdings Bhd falling as much as 6.73% to RM6.37, its lowest since January 2017.

Local glove makers, however, were the top gainers of the day, in anticipation of a surge in demand for medical gloves ahead.

The Malaysian Rubber Glove Manufacturers Association (MARGMA) said local glove makers had received an urgent request from China for more medical gloves.

“In particular, China is now requesting for more urgent shipments and we believe our members have already obliged and are ramping up production to meet the request from China, ” its president Denis Low said.

Last week, MARGMA said if the coronavirus outbreak became a pandemic, demand could be “Astronomical”, noting that medical glove consumption had grown by 17% during the period of H1N1 virus.

Top Glove Corp Bhd rose 8.3% to close at RM6 yesterday, while nitrile glovemaker Hartalega Holdings Bhd rose 3.65% to RM6.25.

Among healthcare-related stocks, IHH Healthcare Bhd recorded gains, rising 1.73% to close at RM5.89, while Pharmaniaga Bhd was up 5.29% to RM2.19, and KPJ Healthcare Bhd rose 5.15% to RM1.02.

TA Securities head of research Kaladher Govindan said the decline seen in the local market was within the range experienced by most regional markets.

Moving forward, he said, the impact of the coronavirus on Bursa Malaysia and the region would depend on how fast the authorities are able to contain the outbreak and signs of recovery are seen.

He noted that during the previous SARS outbreak, it had lasted about six months from November 2002 to April 2003 before there were signs of cooling off.

SARS was a viral respiratory disease caused by the SARS coronavirus (SARS-CoV).

The FBM KLCI, he noted, had started recovering from June 2003 onwards although China was free from it only in May 2004.

Kaladher told StarBiz that he believed investors had overreacted on fears of the new coronavirus, as fatality rate is much lower at 3% compared with SARS, which was around 10%.

“I believe governments have learned to better handle this based on previous experiences.

“We may see the number of infections increasing in the current early stages but better awareness and precautionary measures could see the number dwindling in the next few months, ” he said.

He added that the rally in glove sector was overdone as it was driven more by sentiment.

“I believe the demand for sanitiser and face masks should outstrip demand for gloves, ” he said.

Meanwhile, JPMorgan Chase & Co strategists noted that the current market turmoil could present a buying opportunity for investors.

While the sell-off in stocks could continue before the situation surrounding the infection improves, major outbreaks in the past have only led to a drop in share values of about 4.7% on average, the strategists said, according to a Bloomberg report.

The Malaysian Rubber Glove Manufacturers Association (MARGMA) said local glove makers had received an urgent request from China for more medical gloves.

“In particular, China is now requesting for more urgent shipments and we believe our members have already obliged and are ramping up production to meet the request from China, ” its president Denis Low said.

Last week, MARGMA said if the coronavirus outbreak became a pandemic, demand could be “astronomical”, noting that medical glove consumption had grown by 17% during the period of H1N1 virus.

Top Glove Corp Bhd rose 8.3% to close at RM6 yesterday, while nitrile glovemaker Hartalega Holdings Bhd rose 3.65% to RM6.25.

Among healthcare-related stocks, IHH Healthcare Bhd recorded gains, rising 1.73% to close at RM5.89, while Pharmaniaga Bhd was up 5.29% to RM2.19, and KPJ Healthcare Bhd rose 5.15% to RM1.02.

TA Securities head of research Kaladher Govindan said the decline seen in the local market was within the range experienced by most regional markets.

Moving forward, he said, the impact of the coronavirus on Bursa Malaysia and the region would depend on how fast the authorities are able to contain the outbreak and signs of recovery are seen.

He noted that during the previous SARS outbreak, it had lasted about six months from November 2002 to April 2003 before there were signs of cooling off.

SARS was a viral respiratory disease caused by the SARS coronavirus (SARS-CoV).

The FBM KLCI, he noted, had started recovering from June 2003 onwards although China was free from it only in May 2004.

Kaladher told StarBiz that he believed investors had overreacted on fears of the new coronavirus, as fatality rate is much lower at 3% compared with SARS, which was around 10%.

“I believe governments have learned to better handle this based on previous experiences.

“We may see the number of infections increasing in the current early stages but better awareness and precautionary measures could see the number dwindling in the next few months, ” he said.

He added that the rally in glove sector was overdone as it was driven more by sentiment.

“I believe the demand for sanitiser and face masks should outstrip demand for gloves, ” he said.

Meanwhile, JPMorgan Chase & Co strategists noted that the current market turmoil could present a buying opportunity for investors.

While the sell-off in stocks could continue before the situation surrounding the infection improves, major outbreaks in the past have only led to a drop in share values of about 4.7% on average, the strategists said, according to a Bloomberg report.

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