KUALA LUMPUR (July 14): Despite the short-term volatility as political and Covid-19 woes weigh on the sentiment, the local bourse's valuation looks appealing relative to its peers and will improve when the economy gains steam on the back of rising vaccination rate, said Bursa Malaysia.
Over the past month, the FBM KLCI has moved between the range of 1,508.71 and 1,589.05. It dropped close to 4% or 62.9 points to 1,519.56 on July 13 from 1,582.46 on June 14.
In comparison, for the first five months of 2021, the benchmark index fell 2.68% or 43.66 points to 1,583.55 on May 31, 2021 from 1,627.21 on Dec 31, 2020.
When contacted, Bursa Malaysia said the recent political development and the persistent rise in Covid-19 infections have caused some weakness in the FBM KLCI, which is a "short-term volatility".
"As the vaccination roll-out accelerates and targeted nationwide herd immunity [is] achieved towards the fourth quarter of 2021, the gradual reopening of the domestic and global economies should be favourable to the market.
"Recovery is expected as businesses rebound on pent-up demand post-pandemic, and the reopening of borders would encourage consumer spending," the local exchange regulator said in an email reply to theedgemarkets.com.
Moreover, Bursa Malaysia said the local stock market is well diversified with some public listed companies less impacted by Covid-19 given that these companies have seen significant earnings improvements especially for those in the healthcare, technology, plantation and non-bank financial sectors.
"We have also seen resiliency in the performance of sectors such as technology (up 13% year-to-date), transport and logistic (9%) and industrial products and services (5%)," it added.
According to the bourse regulator, Bursa Malaysia's forward price-earnings (ratio) of 13.3 times is currently the lowest in the region, with other neighbouring peers' ranging between 14.8 times and 19.2 times.
This makes Malaysia's market more attractive, especially as the economy recovers and improvements become more widespread across the broader market, it noted.
"Ongoing efforts to digitalise our services, liberalise the regulatory framework (where relevant) and widen our products and services have allowed us to capitalise on new opportunities and stimulate long-term interest in our markets," it said.
Additionally, Bursa Malaysia said it continuously works closely with regulators to ensure market efficiency, and improve market accessibility and liquidity to support participants during these challenging times.