PETALING JAYA: The local stock market has started the week in the red after a strong rally last week that saw the benchmark index, the FBM KLCI, surging more than 10% as the market anticipated the massive stimulus package by the government.
The weakness in the Malaysian equities was also in line with the regional markets that closed in the red after the United States’ stock market, the Dow Jones, fell more than 900 points last Friday.
Notably, major equity markets rebounded last week, with the Dow Jones entering into bull market territory, rising more than 21% over three days. The Dow Jones failed to maintain its winning streak and fell last Friday, however, after the US government announced its massive US$2 trillion stimulus package to combat the coronavirus pandemic.
Yesterday, the FBM KLCI closed 14.2 points or 1.06% lower to 1,328.88. On a year-to-date basis, the index has fallen more than 16%, which made it the best-performing market regionally compared to Singapore, Indonesia and the Philippines that have declined 21%, 28% and 32%, respectively.
Healthcare players, glove manufacturers, condom manufacturers and consumer product counters were among the gainers on Bursa Malaysia yesterday.
Interestingly, several local oil and gas stocks continued to be on the run despite global crude oil prices continuing to be under pressure.
The international benchmark Brent crude plunged 16% yesterday to US$23 per barrel, the lowest since 2002. Meanwhile, the West Texas Intermediate crude fell below US$20 per barrel, as more countries went into lockdown to curb the pandemic and the price war between Saudi Arabia and Russia.
Rakuten Trade Research expects the volatility in the stock market to heighten in the coming weeks, and envisages the FBM KLCI to be under a bit of selling pressure, retesting the 1,320-point support level.
It said the selling pressure came about after US president Donald Trump admitted that Covid-19 was more serious than expected and it was going to extend the US closure from April 12 to April 30.
Last week, the Malaysian government announced RM250bil worth of stimulus to help buffer the economic shock from its month-long movement control order.
Out of the sum, about RM25bil will be directly from government coffers.
CGS-CIMB Research pointed out that the stimulus package is unlikely to have an impact on corporate earnings.
“Overall, we are of the view that the stimulus package will not significantly cushion the corporate earnings risk from the Covid-19 economic fallout, ” it said in a report yesterday.
The research house has maintained its target of the FBM KLCI ending 2020 at 1,449 points (based on a forward price-earnings ratio of 14.6 times), pending earnings estimate reviews.
CGS-CIMB said that at the current level, the government has space to intervene further should the economic drag turn out to be more acute than it is currently projecting.
Despite the fresh lease of life for the local stock market - it rose more than 10% last week - MIDF Research has pointed out that foreign investors continue to be net sellers.
Last week, foreign investors sold RM631.9mil net of local equities, which brings total foreign net outflow to RM7.6bil year-to-date.
“In comparison to its other six Asian peers that we monitor, Malaysia remains as the nation with the third-least foreign net outflow on a year-to-date basis, ” MIDF said.
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