PETALING JAYA: After a brutal trading day on Monday that wiped out RM44bil from the Main and ACE markets, Bursa Malaysia staged a technical rebound on Tuesday amid the country’s continuing political stalemate.
The FBM Kuala Lumpur Composite Index (KLCI), the benchmark index of Bursa Malaysia, rose by 0.73% or 10.82 points to 1,500.88 points yesterday.
Investors took to picking up bargain stocks in anticipation that the ongoing political uncertainty would soon pass.
A total of 20 counters under the 30-stock FBM KLCI witnessed an increase in share price yesterday, while nine counters declined.
A day earlier on Feb 24, the FBM KLCI fell by 2.69% or 41.14 points to 1,490.06 points yesterday.
It is worth noting that the index had also posted its worst sell-off in a single day since May 30,2018.
Experts have mixed views on whether the rebound would be short-lived or sustained, considering that the Malaysian political scenario remains in a limbo.
Meanwhile, the coronavirus (Covid-19) outbreak threat continues to be a key risk for the market. Within Asia, Japan’s Nikkei 225 and China’s Shanghai Composite Index witnessed continued sell-off yesterday, while the US’ Dow Jones Industrial Average declined by 1,032 points a day earlier on coronavirus fears.
Wong Wai Ken, a former investment banker and StashAway Malaysia Sdn Bhd country manager, told StarBiz that the rebound may be short-lived or limited on the upside, as long as political uncertainties exist.
“There seems to be some bottom fishing from yesterday’s knee-jerk reaction, where we entered bear-market territory, albeit briefly. With a new successor to the Prime Ministership we would see new political appointees and policies, which takes time and will keep the market subdued, ” he said.
Rakuten Trade Sdn Bhd vice-president of research Vincent Lau attributed the technical rebound to the fact that the Malaysian equities have been deeply oversold, coupled with the rebound in the Dow Jones futures.
“I foresee FBM KLCI to be sustained above the 1,500 points level, considering that it has been confirmed that the government’s economic stimulus package will be continued, ” he said.
Yesterday, former Finance Minister Lim Guan Eng said that the economic stimulus package, targeted towards minimising the impact of Covid-19 on the economy, will be announced by interim Prime Minister Tun Dr Mahathir Mohamad “at a date which will be decided later.”
Bursa Malaysia’s overall market breadth yesterday was positive, with 531 gainers against 380 decliners. A total of 407 counters were unchanged. Turnover was 3.13 billion shares valued at RM2.76bil.
The Technology and Healthcare Indices were the top performers by index, up by 1.66% and 1.52% respectively.
Stocks-wise, the biggest gainers were CARLSBERG BREWERY MALAYSIA BHD (up RM2.24 to RM37.20), FRASER AND NEAVE HOLDINGS BHD (up RM1.06 to RM31.36) and BRITISH AMERICAN TOBACCO (M) BHD (up 68 sen to RM14.64).
In a statement yesterday, S&P Global Ratings warned that Malaysia’s heightened political uncertainty due to the collapse of the Pakatan Harapan government is likely to give rise to higher volatility in the country’s financial markets and potentially spur some capital outflows.
“However, we do not yet believe there is a strong likelihood for major changes to medium-term factors such as fiscal and economic policies.
“Still, the government’s collapse coincides with an already difficult period for the Malaysian and regional economies amid the Covid-19 outbreak; there is a risk that this development could delay implementation of measures aimed at mitigating the economic impact.
“Although the abrupt resignation of Dr.Mahathir and the subsequent collapse of the Pakatan Harapan government augurs fresh uncertainty in the political landscape, S&P Global Ratings believes there is no material impact on Malaysia’s key credit factors at this point, ” the ratings agency.
Commenting on the ongoing political uncertainties, Wong of StashAway said that foreign investors may not buy into Malaysia’s growth story while political instability persists.
“This is compounded by the fact that the FBM KLCI has ended negatively five out of the last six years.
“Local investors should take these events as a catalyst to look to diversify their holdings abroad. Gold for instance has risen 9.5% year-to-date while US inflation-linked bonds have risen 3% year-to-date.
“These protective assets would support your portfolio in volatile times, ” he said.
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