PETALING JAYA: After flushing the stock market with huge liquidity since April this year, retail investors may take a back seat as the six-month loan moratorium draws to an end.
Market experts anticipate retailer participation in Bursa Malaysia to ease as loan commitment resumes from October 2020 onwards.
In fact, Hong Leong Investment Bank head of retail research Ng Jun Sheng (pic below) told StarBiz that the retail investor participation has already begun to normalise.
“Once the moratorium ends, people will have less spare cash in their pockets and it is not a surprise if retail investors begin to turn their attention away from the stock market.
“I foresee retail investor participation to normalise to below 40% and could hover over 30% in the coming months, ” said Ng.
Retail investor participation touched 40.3% in August, up from 35.29% in July. The retail share only ranged between 26% to 29% in the past before gradually rising above 30% from April.
“The easing of retail investor-driven liquidity will create a negative market sentiment, especially for the Ace Market and lower liner speculative stocks.
“However, over the longer term, this will be good for the market as it makes the overall market more fundamental-driven rather than on overspeculation, ” Ng said.
Ng pointed out that apart from the easing market liquidity, factors such as the US presidential election, domestic political conditions and the pace of economic recovery will affect market conditions in October.
“Typically, one month before the US presidential election, Wall Street is likely to be choppy. And considering that the month of October is generally a volatile month for stocks, investors must practise extra caution, ” he said.
Concurring with Ng, another analyst told StarBiz that retail investor participation is likely to ease in the coming months although it may not return to the “20% range”.
“The rise of stock- and tech-savvy investors, particularly among the Millennials, may keep the retail trade share at over 30%.
“While the glove stocks may lose its shine among investors, especially if a vaccine is introduced, the economic recovery will reignite interest in other stocks, particularly the banking stocks since they are considered cheap at the moment, ” he said.
Meanwhile, UOB Kay Hian Malaysia head of research Vincent Khoo expects “significantly reduced” retail investor participation when the blanket loan moratorium ends this month.
“However, overall market liquidity will remain high, given the central bank’s loose monetary policy. Thus, we are unlikely to see a major selldown, ” he said.
The bull run of Bursa Malaysia, which began in late-March, has been largely fuelled by the rally in glove stocks.
The strong surge in glove demand due to the Covid-19 pandemic and the expectation of a huge jump in earnings led glove stocks to rise by multiple folds over the past few months.
However, as hopes for a Covid-19 vaccine intensifies, there are concerns that glove stock prices could ease moving forward.
The fact that the United States’ Centers for Disease Control and Prevention has notified public health officials nationwide on Sept 2 to prepare to distribute a coronavirus vaccine as soon as late October or early November has further dampened sentiment on glove stocks.
The drop in both glove stocks, exacerbated by the decline in share prices among the FBM KLCI-linked blue chips, dragged down the bellwether index of Bursa Malaysia by 22.14 points or 1.44% to 1,515.4 points.
A total of 24 counters out of the 30-stock FBM KLCI closed in the red yesterday.–The Star