Muted sentiment on first trading day

PETALING JAYA: With over 900 stocks down and the main index sliding back closer to the 1,600 level, the first trading day of 2021 was not a day to remember for investors on Bursa Malaysia.

Analysts said short-sellers could be blamed as a key factor for the sharp decline in the share prices of the component glove stocks.

Glove counters were the biggest losers on the FBM KLCI, with Top Glove Corp Bhd declining 10.13%, Hartalega Holdings Bhd falling 13.67% and Supermax Corp Bhd slipping 8.32%.

The FBM KLCI, which has been on retreat mode since mid-December, dropped by 24.64 points or 1.51% to 1,602.57, as glove stocks weighed down market sentiment.

Regulated short selling (RSS) was allowed from yesterday, following the move by Bursa Malaysia and the Securities Commission (SC) to lift the temporary suspension on RSS activities.

Speaking with StarBiz, MIDF Research head Imran Yassin Mohd Yusof pointed out that the three FBM KLCI-linked glove stocks were part of the approved securities list released by Bursa Malaysia for RSS activities.

StarBiz had reported earlier that the glove companies could be among the targets for short-selling activities that have been partially allowed again. This was due to the fact that glove makers had recorded the highest net short positions in the market.

Imran, however, said that the resumption of RSS activities was only one of the factors that had caused the decline of glove stocks and the FBM KLCI.

Other factors would be the ongoing development of the vaccine news and profit-taking activities, especially by retailers.

“These could have affected sentiment, but according to our glove analyst, the fundamentals of the glove stocks remain at least for this year, given that demand for gloves still exceeds supply, ” he said.

Concurring with Imran, another analyst said RSS activities may not be the only reason for the glove stocks’ decline yesterday.

“I believe the RSS activities, especially for the glove counters, will stabilise soon.

“We should note that the ban on short selling has only been partially lifted, so the pressure from such activities may be contained for now, ” he said.

The SC and Bursa Malaysia re-introduced RSS activities from Jan 1, with the enhanced control measures to ensure stability and maintain investor confidence. First, the daily gross short position limit for approved securities will be temporarily reduced from 3% to 2%, and second, a new cap of 4% on RSS aggregated net short position will be introduced.

However, the temporary suspension on the intraday short selling (IDSS) and intraday short selling by proprietary day traders (PDT short sale) which had been due to expire on Dec 31,2020, will be extended to Feb 28 this year.

The capital market regulators first introduced the temporary suspension of short-selling activities on March 24 last year, barely one week after the FBM KLCI slumped by over 200 points in the March 11-19 period.

Commenting on the market outlook, Malacca Securities Research said in a note yesterday that the FBM KLCI had formed a bearish candle to retreat below the 20-day exponential moving average, which suggests that the pullback is still in place.

However, it expects bargain-hunting activities to emerge as investors nibble on beaten-down stocks.

Meanwhile, MIDF Research’s Imran said he remains positive on the overall stock market prospects, moving into 2021.

He targets the FBM KLCI to hit 1,700 points by year-end.

“This is due to the fact that the economy is expected to improve, and with it corporate earnings. Also, we expect that the current situation may start to normalise once the vaccine becomes widely available.

“The sector to look at with these expectations would be the cyclical sectors, especially those that have a close relationship with the performance of the economy such as banking, ” he said.

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Top Glove , Imran Yassin , MIDF , short selling


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