KUALA LUMPUR (Sept 2): Is Bursa Malaysia in a bull market? The rally of the FBM ACE Market Index probably explains it all.
The FBM ACE Market Index has rocketed 243% from the trough in mid-March, outshining all other indexes on the local stock exchange. In the same period, the FBM Small Cap Index rose 78.2%, while the benchmark FBM KLCI gained 25%.
Since March 19, the total market capitalisation of the 126 companies on the FBM ACE Market index have expanded by RM25.6 billion to RM35.04 billion as of last Friday.
Year to date, the FBM ACE Market Index has surged 114.4% — a record year-to-date gain — as the local market was enveloped by a penny stock fever that was fuelled by the influx of retail interest that had largely been absent since the burst of the DotCom bubble on the previous Mesdaq board in the early 2000s.
The FBM ACE Market Index recorded its best monthly gain in July, when it shot up 38.4%, followed by August when it climbed 28.64% to end the month at 10,979.27 points on Aug 28 — slightly lower from the all-time high of 11,206.94 points seen on Aug 27.
In August, 102 of the 126 counters listed on the ACE Market registered gains, while just 10 were unchanged and 14 were in the negative territory.
The rally resulted in five ACE-Market companies' market capitalisation (market cap) surpassing the RM1 billion mark.
Among them was Focus Dynamics Group Bhd, which stood out as the food and beverage company’s market cap ballooned to RM4.76 billion, slightly more than the combined market cap of oil rig operator Velesto Energy Bhd (RM1.19 billion) and oil and gas giant Sapura Energy Bhd (RM1.99 billion).
Another was Greatech Technology Bhd, which made its listing debut in June last year. Its share price has soared more than 10 times against its initial public offer price of 61 sen. The stock hit a new high of RM6.87 on Tuesday.
Phillip Capital Management Sdn Bhd chief investment officer Ang Kok Heng said retail investors are interested in these low liners, because they are seen as “more exciting” and “more affordable”, compared with the low-beta, low-risk blue chips.
“Any stock that is going to move, they are going to buy... And any stock that is cheap, they will buy,” Ang said.
Given the thematic play now, which revolves around the technology, rubber gloves and healthcare sectors, Ang said retail investors have been tempted by companies’ announcements about venturing into producing rubber gloves or vaccine-related businesses.
TA Investment Management chief investment officer Choo Swee Kee concurred that investors in the ACE Market are usually not institutional funds but retail investors, due to the relatively low value of the stocks and the small number of shares issued.
Choo highlighted that since April this year, average daily volumes traded on Bursa Malaysia had been on the rise, with August's volume being 14.2 billion units compared with 9.6 billion units in July, while the average in the preceding 12 months was 4.3 billion units. He attributed the surge in trading volume to retail investors' participation.
"ACE stocks excited retail investors due to numerous speculative rumours or announcements of corporate developments, especially those linked to the healthcare sector, for example ventures into the manufacturing of gloves, masks (and) PPE (personal protective equipment), following the rally in glove stocks. Retail participation was active not only in ACE Market stocks, but also in low value stocks in the Small Cap index and in call warrants," Choo said.
Malacca Securities Sdn Bhd head of research Loui Low said the rally on FBM ACE stocks has been helped by ample liquidity, given the loan moratorium granted and the low interest rate environment.
“It is possible for the trend to sustain in the near term, considering the market did not really fall much after the recent concluded earnings season,” he said.
Despite the lower earnings across the board, share prices of these low liners remained “sturdy” as investors anticipate a V-shaped recovery in the second half of 2020 to further boost the market, Low said.
The short selling ban that is in effect till the end of 2020 may also continue to provide decent support to the stock market, he added.
Edited by Kathy Fong