A whisker away from erasing losses

FBM KLCI close to recouping RM228bil in market cap

PETALING JAYA: The FBM KLCI is hair’s breadth away from recouping the RM228bil in market capitalisation it lost from the start of the year, exacerbated by the Covid-19-induced rout.

This makes the bellwether index of Bursa Malaysia one of the few key Asian indices inching closer to turning positive on a year-to-date basis, aside from Japan’s Nikkei 225 and South Korea’s Kospi.

Meanwhile, China’s Shanghai Composite Index and Taiwan’s TAIEX have recovered completely from the Covid-19 rout, rising by 9.27% and 1% year-to-date respectively.

The FBM KLCI continued its winning streak for the sixth consecutive trading day, extending its gain by 1.56% yesterday to 1,576.9 points.

This added to the 4.33% gain in the previous week.

The index will effectively regain its lost market value this year once it touches the 1,588.76 points, which was the close on Dec 31,2019.

Buying interest in Bursa Malaysia picked up from the previous week after it eased throughout June, following the easing in the liquidity-driven retail buying.

Market data indicated that the buying interest is strengthening across retail, institutional and foreign investors - although retail and foreign investors were net sellers in the week ended July 3.

However, it is worth noting that net selling by foreign funds in the week ended July 3 had reduced to the lowest in nine weeks,

suggesting that foreign funds are returning to the Malaysian equities as the economic outlook gradually improves.

“Offshore investors lessen the pace of net selling on Bursa Malaysia as it was almost halved to a tune of RM339.4mil last week compared with RM624.7mil in the preceding week. This was the 20th consecutive week of foreign net selling.

“So far, foreign investors have sold a net RM16.7bil (worth of shares) on Bursa. In comparison with the other six Asian markets we track, Malaysia has the fourth smallest foreign net outflow on a year-to-date basis, ” MIDF Research said in its weekly fund flow report.

A fund manager who spoke to StarBiz pointed out that the buying interest in Bursa Malaysia remained retail investor-driven, given the focus in small and mid-cap stocks.

“The average daily volume since April was 6.6 billion shares and went to 11.3 billion on May 18. On the other hand, the average daily trading value only averaged RM3.76bil over the same period.

“Looking at the numbers, the average share price is only 56.4 sen, indicating clear interest in small and mid-cap stocks, ” he said.

Based on the trading volume, he said the percentages among investor participation in the market were largely unchanged between the three different categories. As trading volume surged, investors in all three categories are buying more stocks but their share of participation has not changed.

A broad-based look at the local listed stocks revealed that investor interest is substantially centred on glove-related stocks as well as the counters in the technology sector, such as the semiconductor players.

Yesterday, the healthcare Index was the top performer as it rose by 5.6%, lifted by the glovemakers such as Top Glove Corp Bhd and Hartalega Holdings Bhd that rose by 8.13% and 3.13% respectively.

The technology Index was the second best performer, up by 3.29%.

Across the broader Bursa Malaysia, turnover was robust with 8.73 billion shares valued at RM5.07bil.

There were 744 gainers, 333 losers and 407 counters unchanged.

The optimism in the local bourse may likely be related to Bank Negara’s much-awaited decision today on whether the overnight policy rate (OPR) will be further slashed to stimulate the economy.

A Bloomberg poll shows that 18 out of 25 economists expect the OPR to be cut by 25 or 50 basis points (bps), with the median forecast at 1.75%. Currently, the benchmark interest rate stands at 2%, following the 100-basis point cut so far in 2020.

Bursa Malaysia tracked the positive sentiment seen in the US capital markets as the futures of Dow Jones, Nasdaq and S&P500 which rose by 1.41%, 1.15% and 1.14% respectively as at press time.

Similarly, almost all key indices in Asia closed higher, except for Thailand’s SET Index. China’s Shanghai Composite Index was the top performer among the key regional indices as it rose by 5.71%.

Reuters reported Asian shares were near four-month highs as investors counted on super-cheap liquidity and fiscal stimuli to sustain the global economic recovery even as surging coronavirus cases delayed reopenings across the United States.

According to Swissquote Bank senior analyst Ipek Ozkardeskaya, hopes for more policy support could be an explanation to the current optimism among Asian stocks.

“It appears that global investors are less sensitive to rising Covid cases, but as enthusiastic about the extra stimulus measures. But the ugly truth is the second half of the year starts under the shadow of second-wave fears (in the US) and dashed hopes of a swift economic rebound.

“Whether we would see the economic reality reflected in asset prices is another question. The massive injection of cheap liquidity will likely continue inflating asset prices.

“The ultra-low sovereign yield environment should continue supporting the equity prices. The Federal Reserve’s liquidity supply soared by near 20% this year to US$18.4 trillion and more is to come, ” said Ozkardeskaya.

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