WHILE the King’s steadfast decision by not declaring a state of emergency yesterday has brought about a major relief to Malaysia’s financial markets, investors from retailers to foreign fund managers would likely need more convincing that lightening wouldn’t strike twice.
This is considering the Cabinet would convened a special meeting to be chaired by Prime Minister Tan Sri Muhyiddin Yassin at 11.30am today (Oct 26), purportedly to discuss the decision by the Yang di-Pertuan Agong Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah not declare an Emergency in the country.
Pending a definite outcome from the meeting, market sentiment in the local bourse can best be described as “being in a sombre mood” with the FBM KLCI dipping over 10 points at the time of writing with losers thumping gainers by the ratio of 1:5.
Nevertheless, Mr DIY Group (M) Bhd which is touted as Bursa Malaysia’s largest listing in three years brought some cheer with its ability to stay above water after concerns over its overly high valuation initial offering price of RM1.60.
This, however, was not before the Main Market debutant falling to RM1.50 soon after the opening bell.
UOB Kay Hian research head Vincent Khoo expects market sentiment to remain cautious until Budget Day (Nov 6) and amid speculations that the opposition may still vote down the Budget 2021.
“We expect market focus to shift to the upcoming results season which could lift the FBM KLCI, driven by the stratospheric earnings of glove manufacturers (mainly Top Glove Corp Bhd) and vaccines for COVID-19 which would jumpstart the ‘economic reopening’ plays,” he wrote in a research note.
“That will benefit most listed companies, particularly the travel and tourism-related segments, commodities and retail REITs.”
According to head of CGS-CIMB Research, Ivy Ng Lee Fang, the King’s bold decision has averted a potential major sell-off in the market arising from concerns over the negative impact that an Emergency decree would have on the economy and corporate earnings.
“The King’s advice for MPs to not continue with any irresponsible action that could undermine the stability of the current administration could quiet political noise in the near term while his reminder of the importance of the Budget 2021 reduces the chances of the budget being voted down due to insufficient support,” noted Ng.
“Overall, this is a more favourable outcome for the Malaysian equity market than an Emergency decree but it may not be sufficient to reverse foreign investors’ net selling due to prevailing political uncertainty.” – Oct 26, 2020
