File image. Traders monitor stock price movements. - Photo: NSTP / ASYRAF HAMZAH
The extraordinary increase in profits involving glove stocks, which benefited from the health crisis has put the Malaysian stock market in a strong position, prompting it to emerge as one of the strongest exchanges in Asia.
However, the pressure can be felt and creep in from various angles.
The stock market has been declining in recent weeks due to growing concerns in the local market environment.
Bloomberg data shows that foreign sales of Malaysian stocks increased last week, with outflows reaching US $ 5 billion so far this year, the fastest rate since 2015.
While healthcare-related stocks continue to be a favorite of local and foreign retail investors, financial counters on the other hand are under pressure with a week-on-week decline.
Retail investors are looking for profit
There are two types of investors in the equity market, namely institutional investors (government-linked, pension funds, trust funds) and retail investors or individual investors.
While institutional investors tend to provide support to the local market during the downturn for long-term profits, retail investors are more likely to invest for short-term profits.
According to data during the period from Monday to Thursday, a total of RM217.9 million retail outflows were recorded while outflows of foreign funds amounted to RM225.6 million.
Massive sales could be seen at the counters in Ace Market on Thursdays and Fridays after the country was shocked by announcements related to the local political situation.
However, on Friday, some selected counters bounced back with the FTSE Bursa Malaysia KLCI key indicator index ending higher trading at 1,509.14, up 8.34 points. The upgrade was driven mainly by Hartalega and Top Glove although 19 other counters were in the red zone.
An analyst said in the coming weeks, some important aspects need to be monitored as the local bourse is expected to be in a constant volatile situation.
"With the end of the moratorium on September 30, banking stocks are expected to decline due to fears of an increase in non-performing loans in line with the performance of global banks.
"This could lead to selling activities for profit among retail investors especially on small and medium capital stocks," he said.
He added that local political stability also played an important role in boosting investor confidence, especially MGS bonds.
"Stability in the local market is important because any unpleasant news can limit profits in the capital market," he explained.
Overall market performance
On the FBM KLCI, the local bourse is currently facing the immediate resistance level at 1,520 with support at 1,480.
"The Relative Strength Index (RSI) has shown that KLCI shares are over-selling even though the glove counter is the main driver of the index," he said.
He added that banking shares, led by local banking giant Maybank, had seen its market capitalization decline to RM79.58 billion after a series of continuous declines since COVID-19 rocked the global market, much like foreign banking stocks.
"However, when compared to foreign banks, local financial institutions are protected from severe shock due to its strong financial position," he said.
For healthcare-related counters, these counters continue to attract strong interest from domestic and foreign investors as concerns over COVID-19 remain high while confidence in getting the vaccine back is neutral as it is still in the trial phase.
As for energy-related counters, it remains volatile as oil prices are still weak due to bland demand.
"Prospects for the transport and aviation sectors are still vague as they are now placed under an unknown timeline, subject to the reopening of global borders after the end of COVID-19," he said.
The Brent crude oil benchmark was priced at US $ 41.90 a barrel when it closed on Friday.
Just as the global market will continue to be influenced by the development of COVID-19 from infection cases to vaccine development - so will the local bourse.
In addition to COVID-19, the ongoing technology war between Washington-Beijing will continue to put pressure on technology stocks as the local indicator index constantly monitors NASDAQ movements.
The upcoming US elections also make investors more sensitive. The new market that is in focus is also looking forward to seeing the next economic direction that the White House will take.
From a local point of view, FTSE Russel's decision to keep Malaysia on its list has provided short-term "relief" space to attract investors.
However, the market is likely to remain in a volatile situation until after the 2021 Budget is tabled on November 6 and after the resolution of all political uncertainties in the country.