Stock market likely to remain volatile

Foreign shareholdings

PETALING JAYA: The stock market has been tumultuous since the start of the year and investors should brace for the volatility to continue in the near-term.

Over the past few weeks, the local stock market has been on a decline, taking a cue from the heightened volatility in the global stock markets especially in the United States, as investors are concerned if the US Federal Reserve (Fed) will raise interest rates faster and more aggressively than expected.

“We expect the market to remain volatile in the coming weeks, especially for technology stocks that take cue from Wall Street,” Rakuten Trade head of equity sales Vincent Lau to StarBiz.

Despite the recent selldown, Lau has remained bullish on local technology stocks as well as banking stocks driven by the economic recovery for this year.

“Technology sector is expected to remain the main theme in the next two to three years. There is higher growth potential in this sector compared with other sectors,” he added.

Local technology stocks have been on a tear since the beginning of this year.

On a year-to-date (y-t-d) basis, the Bursa Malaysia technology index has declined more than 17%.

The FBM KLCI had fallen almost 2.5% y-t-d.

The 30 companies index closed 0.8% or 12.59 points to 1,530.33 yesterday.

The broader market was negative as losers overpowered the gainers on a ratio of 780-to-258 stocks.

This was in line with the regional market, where Asian stock markets were trading mostly lower yesterday.

Japan’s Nikkei 225 closed 2.8% lower to 27,467.23 while South Korea’s Kospi closed down 21.96 points, or 0.77%, at 2,842.28.

Hong Kong’s Hang Seng index, however, was up 15.07 points or 0.06% at 24,127.85.

Former chief investment officer Pankaj C. Kumar expected the stock market to remain “choppy”, and noted that all eyes would be on the next Fed meeting.

“The global stock markets were affected by the selling pressure due to concerns that the Fed may raise interest rates faster than expected.

“Last week, the JP Morgan CEO Jamie Dimon expected that the Fed may raise interest rates as many as six or seven times, more than expected,” he said.

The Fed had signalled its plan to raise interest rates by three to four times this year in a bid to fight inflation.

Pankaj added that the recent spike in the US treasury yield of five-year and 10-year is something to be concerned about as investors are wary about the Fed tightening monetary policy.

Despite the weakness in the local stock market, foreign investors were the largest net buyers last week.

According to CGS-CIMB Research, foreign investors turned net buyers of RM398mil in Malaysian stocks from net sellers of RM62.1mil two weeks ago.

“They were net buyers of the financial services and industrial products sectors. Their top three net buy stocks were Public Bank Bhd, Press Metal Aluminium Holdings Bhd and Inari Amertron Bhd,” it said in a report.

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