By Ranjit Singh
SINCE the outbreak of Covid-19 in Malaysia in mid-January, the local bourse has lost some RM260 bil in market capitalisation. However, green shoots are beginning to appear, indicating that the market has reached its trough.
The barometer of the market, the FBM KLCI, has charted an upward trajectory for the last five trading days from April 14 to 20. Is this a sign that the market has bottomed and signalling an upward movement? Is this upward trend sustainable?
However, analysts believed the local bourse may not be out of the woods yet.
Philip Mutual Bhd chief strategist Phua Lee Kerk told FocusM that although the number of Covid-19 cases around the world seemed to be abating, there was always the fear of a second wave of infections.
“Around the world, Covid-19 cases seem to be coming down, and this could be a catalyst to equity markets, including Malaysia,” said Phua.
However, he cautioned that market volatility is still high with the Vix (Volatility Index) in the US trading above 38. A Vix reading of below 17 indicates that volatility in the markets had been reined in.
Phua added that his company does not have preferred sectors for investing rather it looks at individual valuations of stocks.
“The five-day winning streak at Bursa may prompt investors to take money from the table,” he said.
At the time of writing, the FBM KLCI was 27 points down to 1,385.95. Analysts had targeted 1,370 points as the next support level.
Meanwhile, Imran Yassin, senior analyst at MIDF Research told FocusM that investors should exercise caution when entering the market at this juncture.
He cited the heightened volatility as one of the reasons why investors should be extra careful when deciding on entering the market.
“The market is extremely volatile at the moment, and investors should exercise the right stock-picking strategy,” said Imran.
Among the sectors that he favours are utilities and healthcare for their defensive earnings qualities and their recession-proof business models.
He also said the ability to contain the virus outbreak would provide a boost to markets.
“The authorities have yet to contain Covid-19 and a vaccine has also not been discovered. I believe the market would be provided an impetus if we can rein in the virus,” said Imran.
At the time of writing, Malaysia’s biggest company by market capitalisation, Maybank Bhd, was trading at RM7.62, down seven sen from yesterday’s close with 1.3 million shares traded.
AirAsia Group Bhd which had been on an upward trajectory for the past five trading days declined three sen to 84 sen with heavy volume of 117 million shares. — April 21, 2020
