Market consolidation tapers volume


“The impact of the end of loan moratorium is already priced in. Yesterday, the market fell after the World Bank lowered its 2020 economic growth forecast for Malaysia, which has dampened the sentiment, ” Rakuten Trade Research vice-president Vincent Lau told StarBiz.

PETALING JAYA: The trading volume on Bursa Malaysia has ebbed from its record high with the end of the automatic loan moratorium.

The local stock market is in a consolidation phase led by the end of the six-month loan moratorium today as well as the fear of a second wave of coronavirus (Covid-19) cases and contraction in the country’s economic growth for this year.

The drop in trading volume and selling pressure on Bursa could be attributed to a decline in the number of retailers that had heavily invested in stocks right after the loan moratorium started in April, as part of the government’s effort to cushion the impact of the Covid-19 fallout.

It was reported that the value of loan repayment moratorium by financial institutions since April 1 was estimated at RM85.8bil as at Sept 4.

However, market observers reckoned that the negative impact of the end of the blanket loan moratorium could be overplayed.

“The impact of the end of loan moratorium is already priced in. Yesterday, the market fell after the World Bank lowered its 2020 economic growth forecast for Malaysia, which has dampened the sentiment, ” Rakuten Trade Research vice-president Vincent Lau told StarBiz.

He pointed out that the market has been in consolidation mode as some investors were booking their profits after its rally in mid-March, as well as fears of second wave Covid-19 infections.

Meanwhile, former investment banker Ian Yoong said that many investors are waiting on the sidelines since the beginning of this month and that the frenzy in the penny stocks has subsided.

“Large market players, proprietary traders and seasoned retail investors have been on the sidelines since the beginning of this month. “The smart money is waiting for the unseasoned and less experienced retail players to unwind their positions, ” he said.

He sees the record volume of 18 billion units on Bursa in early-August as unlikely to be broken in the short term.

“There will be sporadic interest in certain penny stocks but the tsunami of frenzied trading has subsided, ” Yoong said.

Yesterday, the FBM KLCI closed 7.76 points or 0.51% lower to 1,503.90 points led by glove stocks namely Hartalega Holdings Bhd and Top Glove Corp Bhd as well as consumer-related sectors including Nestle (M) Bhd and Petronas Dagangan Bhd.

Trading volume on Bursa has ebbed to 5.15 billion units, the lowest since end-June.

The small cap and Ace Market stocks, which have been performing well, supported by buying interest from retail investors over the past months, saw some selling pressure of late.FBM Small Cap fell by 7.5% since the beginning of this month.

“The end of the loan moratorium is indeed the popular perception, ” Yoong said.

“But what are the other underlying reasons for the selldown? The working population is short of cash.

“Many used their savings to speculate, not invest. When the music stopped, many speculators were left with holdings of overvalued securities, ” he added.

Lau said that historically September has been the worst month of the year for stocks.

He expected a better performance in October for stocks driven by the upcoming Budget 2021.

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