THE writing has been on the wall for some time now. After all, it wasn’t difficult for seasoned investors to second guess the timing that a consolidation is imminent for the local bourse – at least for the immediate term.
This is given the backdrop of a fragile domestic political landscape, Bank Negara Malaysia’s decision on the overnight policy rate, outcome of the US presidential election (both on Nov 3) and the tabling of the Budget 2021, to name a few key events.
With a bit of sarcasm, Friday’s wild downslide of the FBM KLCI by 28.31 points or 1.93% to 1,466.89 points – a figure last seen since May 28 – can be likened to the smoke signal emitted by volcanoes prior to their eruption.
Obviously, it is very unlikely for the benchmark index to re-test the 11-year low of 1,219.72 points posted on March 19 – a day after the movement control order (MCO) was declared – although such possibility cannot be entirely ruled out given the worsening COVID-19 infection rate both at local and global levels.
At the close of the morning session, the FBM KLCI was down 12.09 points or 0.82% at 1,454.80 with laggards made up of glove, healthcare and tech stocks. The benchmark index hit an intraday low of 1,452.13 with losers thumping gainers by 547 to 223.
At this juncture, it remains to be seen how much ‘ammunition’ both retail investors and local institutions have in their possession to continue sustaining the local bourse.
As per the MIDF Research’s latest weekly fund flow report, foreign investors had cumulatively net sold to the tune of RM669.52 mil in the month of October while on a year-to-date basis, their net selling has reached RM23 bil worth of equities in the local bourse.
On the contrary, retailers turned net buyer last week (Oct 26-30) with RM106.43 mil worth of equities while local institutions net bought RM83.61 mil during the same period.
This was the third week where there was stronger net buying from retailers after three consecutive weeks as net sellers previously. Thus far in 2020, net buying from retailers amounted to RM11.66 bil while institutions bought to the tune of RM10.96 bil.
Malacca Securities Research foresees the current spell of volatility to remain unabated owing to several factors, chiefly rising political tension domestically, the impending US election and rising number of COVID-19 cases globally.
“We reckon that the extended volatility may take place this week as investors’ sentiment remains cautious,” it said in a market review.
“The lower liners are expected to remain on a choppy mode as investors prefer to adopt the wait-and-see approach before taking further risks.”
With the FBM KLCI having sunk below the 1,475 support level, the research house noted that the next support level is located at 1,450 followed by 1,430, while the immediate resistances are now located at 1,500-1,515.
