The deep pocket factor beckons for retail investors

OF LATE, retail investors have been flexing their muscles, demonstrating their prowess of buying power at the local bourse.

Such is definitely a positive welcome to Bursa Malaysia Bhd where robust trading volume and value has culminated in the stock exchange operator posting a stellar 3Q FY2020 performance, where its net profit shot up 159% from the same period a year ago.

The key question to ask now is whether the buying power of retail investors is as sustainable as Bursa Malaysia’s.

Obviously, the depth of retail investors’ pockets cannot be compared to Bursa Malaysia’s coffers. After all, the stock exchange is reaping profits from the sheer stock trading activity regardless whether a stock is sold at a gain or loss so long as a buying/selling instruction has been made.

Also warrant a question is whether our retail investors are able to hold the fort in the event there is an exodus of foreign funds, bearing in mind both ongoing internal and external vulnerabilities in the likes of  Malaysia’s very own fragile political landscape or even the outcome of the US presidential election (Nov 3).

This follows revelation by CGS-CIMB Research that retail investors’ participation not only rose week-on-week (wow) but they were the sole net buyers in the market last week (Oct 19-23) despite rising political uncertainties.

The retail fraternity bought RM464.7 mil of equities last week which is a significant jump from RM127.4 mil from the previous week.

“This suggests retail investors may have higher risk appetites, as well as liquidity, compared to other groups of investors,” wrote CGS-CIMB research head Ivy Ng in a weekly fund flow report.

On the contrary, local institutional investors were net sellers of RM119.7 mil of equities last week as against a net buy of RM192.7 mil in the previous week.

Likewise, foreign investors, too, were net sellers with RM214.3 mil worth of equities last week, a decline from a net sell position of RM237.1 mil in the previous week.

Year-to-date (till Oct 23), foreign investors sold RM33.9 bil of Malaysian equities, but this was offset by net buys from local institutional investors (RM16.2 bil), local retail (RM14.6bn), and local nominees (RM3.1 bil).

Year-to-date, retail investors made up a 33.5% share of total trading value with institutional investors contributing 31.2%, proprietary investors (18.2%) and nominees (17.2%).



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