Investors start to nibble on beaten down stocks

  • Markets
  • Thursday, 06 Feb 2020

Bursa gallery

PETALING JAYA: Following 10 days of equities selloff sparked by the coronavirus, investors started nibbling on beaten down stocks as Bursa Malaysia showed signs of stabilising.

The biggest gainers of the day included KLK Kepong Bhd, Sarawak Oil Palms Bhd, F&N Bhd and Allianz Bhd. The FBM KLCI finished yesterday up 1 point to 1,536.79 on volume of 3.07 billion shares.

Even AirAsia Group Bhd, which briefly visited its three-year low of RM1.15 following setbacks of bribery allegations and coronavirus fears, saw its shares widely traded yesterday.

The counter, which closed one sen higher to RM1.16, was the most heavily traded stock of the day with volume of 192.53 million shares.

Between Jan 31 and Feb 4, nearly RM940mil was wiped out from AirAsia’s market capitalisation, rendering the stock down some 32% on a year-to-date basis.

“There is still interest in the market, especially in tech-related stocks which have continued to perform.

“There are pockets of buying opportunities and investors should take advantage of the current market fall to buy shares at cheaper valuations, ” said Rakuten Trade Sdn Bhd vice-president of research Vincent Lau.

He added that the coronavirus isn’t the first the market has seen.

“Using SARS, the Avian flu and the swine flu as a guide, the FBM KLCI and the markets in general will eventually recover.

“For SARS, it took six months but for the Avian and swine flu, the markets recovered and rebounded in less than two months, ” said Lau.

Yesterday, Asia-Pacific markets mostly traded higher, building on the momentum from Tuesday, after stocks were badly battered due to worries over the coronavirus outbreak.

Chinese shares led gains in the region, with the Shanghai Composite Index up 1.25% to around 2,818.09.

On Monday, stocks in mainland China had plummeted more than 7%, with a record US$720bil wiped out, after they returned to trade following an extended holiday as the fast spreading virus unnerved investors.

China has been proactively taking measures to support its economy in the wake of coronavirus. On Monday, the Chinese central bank lowered interest rates on reverse repurchase agreements to add money to the money supply.

The People’s Bank of China (PBoC) reduced the seven day reverse repo rate by 10 basis points from 2.5% to 2.4%, and the 14-day rate was slashed from 2.65% to 2.55%.

The PBoC injected 1.7 trillion yuan (about US$242bil) into money markets through reverse repurchase operations on Monday and Tuesday.

In a note, UBS Global Wealth Management said the massive sell-off in Chinese stocks amid concerns over the coronavirus is an opportunity for long-term investors to buy into the country’s equities.

UBS still sees double-digit earnings growth for emerging markets and Asia excluding Japan.

In a note, UBS Wealth global chief investment officer Mark Haefele said investors could consider using the recent decline to gain long-term exposure to emerging market equities, which remains its most preferred regional equity market, and the regional market which it expects to deliver the highest returns over the long term.

Fisher MarketMinder said in a note that in the grip of an epidemic, it could feel like the sky is falling – but most such viruses die down in a matter of months.

“We don’t know yet when this one will run its course – and we don’t understate the impact on human life – but history suggests the economic and stock market impact won’t be lasting, ” said Fisher MarketMinder.

It recalls the responses to the 2003 SARS outbreak, the 2008 financial crisis, and China’s overzealous economic rebalancing toward consumption in 2015. As on those occasions, fixed-asset investment (particularly by state-owned companies) is likely to surge to fuel fresh industrial activity.

“Given the government’s top priority remains preserving social stability, we doubt they would hesitate to draw on their US$3 trillion War Chest if necessary, ” said Fisher MarketMinder.

Using history as a guide, past contagious disease breakouts have been contained.

In an article in, Ed Yardeni of Yardeni Research said even if coronavirus turned out to be as contagious and deadly as really bad contagious diseases like Ebola, it would most likely be successfully curbed.

The Ebola outbreak a few years ago was effectively kept in check, and so were the SARS outbreak of 2003 to 2004, and the Middle East respiratory syndrome outbreak early last decade.

“All three outbreaks were contained before they could have a significant impact on the global economy or financial markets around the world. We expect the same outcome with the current outbreak.” said Yardeni.

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