Yesterday, Bursa Malaysia’s main index the FBM KLCI ended in the red. The 30-company index closed 20.62 points lower or 1.33% to 1527.89 points, in line with the weakness in the regional market led by Hong Kong’s Hang Seng.
The Hang Seng index dropped more than 3%, while Hong Kong-listed Evergrande plummetted almost 18% yesterday.
Exchanges in mainland China were closed for a public holiday.
Rakuten Trade Sdn Bhd head of equity sales Vincent Lau said that the selldown on Bursa Malaysia was mainly driven by regional market uncertainties that included the Evergrande debt woes, China’s regulatory crackdown and a potential correction in the United States market as the Federal Reserve may want to reduce its billion-dollar bond purchasing programme.
“Many investors could be taking a wait-and-see approach due to external issues.
“In addition, the local index was dragged by glove stocks as investors are shifting their portfolio into sectors that could benefit from the recovery post-Covid-19,” Lau told StarBiz.He said local stocks appeared attractive and there were more opportunities emerging, especially since the market has been underperforming since the beginning of the year.
“The short-term weakness is an opportunity to select quality stocks as the Malaysian economy is on a recovery path with stable political outlook,” Lau said.
Former investment banker Ian Yoong believes that the local market would be trading sideways in the coming weeks due to a lack of confidence in the China market led by the Evergrande issues.
“Investment is confidence and perception. Evergrande caused a major earthquake in Hong Kong and China. The aftershock is felt in Malaysia and other regional bourses,” he added.
Overall, he expects the impact to be minimal in Malaysia, as the local stock market has been underperforming since the beginning of this year, compared with other regional markets.
Notably, foreign funds continued to be net buyers of Malaysian stocks for the sixth consecutive week, albeit at a slower pace of RM125.97mil, according to MIDF Research.
MIDF said last Monday foreign investors were net buyers amounting to RM58.39mil, followed by retailers with net buying of RM63.50mil.
Meanwhile, local institutions were net sellers to the tune of RM121.89mil, it added.
“Foreign investors were net buyers for every day of the week except on Friday.
“As for the retailers, they were net buyers for every day.
“Cumulatively, for the week, retailers net bought RM211.55mil worth of equities on Bursa,” MIDF said in its weekly fund flow report
Meanwhile, MIDF said local institutions were net sellers every day last week and recorded cumulative weekly net selling to the tune of RM337.92mil.
Areca Capital CEO Danny Wong said the strong flow of foreign investors into Malaysian stocks were mainly driven by the country’s inoculation rate.
“The successful vaccination programme could see Malaysia as one of the first countries in the region to recover from the Covid-19 pandemic.
“The regional issues such as Evergrande’s debt woes are unlikely to cause a major selldown in the local stock market.
“Our market has been down since last week because of several announcements such as a potential new tax regime and the Finance Ministry asking banks to work on waiving interest fees for loan moratorium. This was followed by the Evergrande issue over the weekend,” he said.
Wong pointed out that it is incorrect to suggest that the Evergrande issue could turn into “China’s Lehman Brothers”, as there is ample liquidity in China and that the government may step in.
“In comparison to the 2008 crisis led by Lehman Brothers, it is likely that the systemic risk from Evergrande could be minimal as there are no other layers involved in their loans,” he said.
Last week, China injected US$14bil (RM58.4bil) of short-term cash into its financial system.