By Ranjit Singh
PUTRAJAYA has to send a strong signal to investors that it has a game plan to deal with the Covid-19 outbreak, a market participant says.
Philip Mutual Bhd chief strategist Phua Lee Kerk told FocusM that the capital market was awaiting such signs, especially after a spike of 190 new cases was reported yesterday.
“The market needs reassurance that the government is doing all it can to quell the spread of Covid-19,” said Phua.
The FBM KLCI had been in freefall following the coronavirus outbreak. As at 10am today, the market barometer dipped below the key psychological level of 1,300 points.
The index was at 1,299.4 points for a short period of time before staging a pullback. At 11am, the FBM KLCI was at 1,306 points which translated into a decline of 2.85% or 38.3 points from the opening bell.
Banking stocks which represent around 30% of the index bore the brunt of the selling. This came on the back of the possibility of another cut in the Overnight Policy Rate (OPR) by Bank Negara Malaysia (BNM) as part of its additional measures to mitigate the economic impact from the Covid-19 pandemic.
This morning the US Federal Reserve slashed rates by 100 basis points to almost 0%, signalling that central banks around the world may follow suit. This had sent banking stocks on a downward spiral.
Public Bank Bhd was one of the hardest-hit when it lost 44 sen or 2.88% from its opening to RM14.86 at 11am while the biggest bank in the country in terms of market capitalisation, Maybank Bhd, shed 29 sen or 3.68% to RM7.59. Both stocks were trading at their 52-week lows.
Aside from Covid-19, two other factors would contribute to persistent selling with no bottom in sight. Firstly, the oil price crash. As Malaysia is a net exporter of oil, the country is expected to take a hit after prices dropped by more than 30%.
At the time of writing, Brent oil prices were hovering around the US$32 per barrel level and there are concerns that Budget 2020 may have to be recalibrated as it was drawn up using the assumption of oil prices at US$62 per parrel.
Secondly, the Malaysian political scene has not assuaged the fears of investors since the Perikatan Nasional (PN) government came into power through political manoeuvrings. Investors are expected to adopt a “wait and see” stance to gauge the economic direction of the new government.
MIDF, in a research report today, said foreign investors had sold RM1.9 bil worth of Malaysian equities for the week ended March 13. On a year-to-date basis, foreigners have sold RM5.21 bil of Malaysian stocks. – March 16, 2020
