KUALA LUMPUR (July 28): Bursa Malaysia Bhd says the recent rush in retail participation that helped drive the strong rally in the local market, is largely due to a reallocation of cash by investors due to the current low-interest environment, and not fuelled by debt.
Chairman Tan Sri Abdul Wahid Omar (pix), during a briefing on the group’s latest quarterly earnings today, said share margin financing levels seen across retail investors are not at elevated levels, as investors were merely switching their investments from term deposit into the share market in search of better yields.
“The difference between previous bull runs and this bull run is, we have not seen growth in margin financing for shares, [and the trading is] mainly funded by cash, meaning mere reallocation of cash by investors,” said Bursa chief executive officer Datuk Muhamad Umar Swift.
As for the heavy churning of deep out-of-the money put warrants that has been seen in the local stock market recently, Muhamad Umar said he is keeping a close watch on the phenomenon.
During the briefing, Muhamad Umar also said Bursa is very mindful about any inappropriate market practices.
“We do [live] market surveillance, [so] we do know who is trading and how the market is behaving. We are aware and watching the trade,” he said.
At present, Muhamad Umar said his primary concern is investors’ underlying knowledge of the financial instruments available, versus their investing strategies. “What motivates investors [to partake in certain instruments]? Is it short-term, medium-term or long-term investing? Or is it momentum trading that is in play?” he asked by way of example.
As such, he said Bursa is engaging with its business partners to increase awareness and instill education about more innovative financial instruments.
Touching on the technical glitch that caused a Bursa-wide halt in trading on July 16, Muhamad Umar said the issue was due to “unanticipated and unforeseen circumstances”. While he did not detail what they were, he nevertheless assured that the issues have been resolved and that trading is expected to be smooth, going forward.
Meanwhile, Muhamad Umar expects market behaviour to continue to respond to value, with main trading themes such as palm oil, rubber gloves and infrastructure.
Abdul Wahid, meanwhile, thinks the financials and property sectors are worth a look, as they are trading below their respective net asset values.
Bursa shares closed 38 sen or 3.6% lower at RM10.04 today, giving it a market capitalisation of RM8.12 billion. Year-to-date, the stock is up 64.8%.