For KLCI, Q2 was a remarkable quarter
The FTSE Bursa Malaysia KL Composite Index (KLCI) ended the second quarter on Tuesday at 1,500 points, capping one of the most remarkable three-month periods for investors.
For the quarter ended June 30, the KLCI jumped 150 points, or 11%. The rebound from its mid-March low point was even more dramatic.
Three months ago, investors were lamenting the end of the bull market as the Covid-19 pandemic brought businesses around the world to a near standstill.
As the disease spreads, the KLCI slumped deep inside bear market territory to an 11-year low of 1,219 points on March 19, a day after the movement control order (MCO) came into force.
At that point, the KLCI was down 23% from where it was at the start of the year.
The tide, however, started to change in April.
While foreign fund managers continued to pull out in droves, local investors saw the opportunity to pick up battered stocks.
By mid-April, the buying turned into a frenzy with trading volume reaching a climax of 11.21 billion shares on May 18.
Data from the stock exchange showed that the monthly trading volume had been growing at an unprecedented rate from 64 billion shares in January to 90 billion shares in March.
A total of 115 billion shares changed hands in April, while 120 billion shares were transacted. June was another record month with 160 billion shares traded.
AmInvestment Bank, in its latest strategy report released on Wednesday, said the firm remained “mildly positive” on the stock market in the second half of 2020.
It said the robust domestic liquidity (from both institutional and retail investors) has effectively neutralised the persistent selling by foreign investors (net foreign outflow stood at RM16.3bil in 1H2020).
The firm said while domestic alone may not be enough to sustain the rally, “we believe the next driver could come from the return of appetite for risk assets.”
Worst may be over for Asian manufacturers
A series of business surveys released on Wednesday showed broad improvements in manufacturing across Asia in June as the region began to rebound from the depths hit in April and May.
Activity in some economies swung to growth while declines in other places slowed.
China’s Caixin/Markit purchasing manager’s index (PMI) rose to 51.2 in June from 50.7 in May, marking the highest reading since December 2019.
That followed a similarly upbeat reading from the Chinese government’s own PMI on Tuesday. Factory output in Malaysia and Vietnam grew for the first time this year.
Meanwhile, Japan’s PMI rose to a seasonally adjusted 40.1 in June, while South Korea’s PMI ticked up to 43.4.
Despite the improved readings, both remained far below the rise-or-fall threshold of 50. Analysts said the PMI data offered some reassuring signs that the worst may be over for the manufacturing sector, but they cautioned that any recovery would be slow.
Legal action against EU
The government has announced plans to file a legal action with the World Trade Organisation (WTO) against the European Union (EU) over its “anti-palm oil campaign” via a dispute settlement mechanism.
Plantation Industries and Commodities Minister Datuk Mohd Khairuddin Aman Razali said on Wednesday that the EU’s renewable energy directive “restricts free trade practices”.
He also said that Malaysia will join in as a third party in Indonesia’s WTO case against the EU filed in December last year.
The EU is planning to phase out and eventually ban the use of palm oil as biofuel by 2030.
Malaysia and Indonesia produce around 85% of the worldwide palm oil output estimated at around 72 million tonnes a year.
Electric vehicle exuberance
Tesla Inc overtook Toyota to claim the crown as the world’s most expensive carmaker as the value of its stocks soared to US$207bil on Wednesday.
As a carmaker, Tesla is expected to produce around 500,000 electric cars this year, while Toyota has the capacity produce more than 10 million vehicles.
Earlier this month, Toyota has forecast an 80% drop in operating profit for year ending March 31,2021 as the Covid-19 pandemic sapped demand for new cars.
If the Tesla makes a profit in the three month ended June 30, it would be the first time the electric car company has been in the black for four straight quarter.
At current prices, Tesla is trading at about 300 times its projected earnings, compared with Toyota at about 16 times.
The hype surrounding electric vehicle makers has also boosted the market value of Nikola Corp to US$24bil.
The aspiring battery-electric and hydrogen fuel-cell truck company has promised to roll out zero emission vehicles, but has yet to sell a single vehicle, or has the manufacturing facility to produce it.
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