Frankly Speaking:  Irrational exuberance?

This article first appeared in The Edge Malaysia Weekly, on May 18, 2020 - May 24, 2020.
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Last Wednesday, the local bourse posted a record 9.59 billion shares traded, driven by interest in glovemakers, healthcare and medical-related stocks on worries of a resurgence in Covid-19 cases globally.

The value of the trades came to RM5.1 billion.

It is worth noting that there has been keen retail interest in local equities of late.

Online broker Rakuten Trade saw more than 11,000 new accounts activated in March, a 100% increase from February. More than half, or 64%, of the new accounts opened in March were during the first phase of the Movement Control Order period alone.

Rakuten Trade attributed the high volume of interest to the fact that many are now working from home while other brokers still require some form of face-to-face contact.

Market watchers note that the renewed interest comes mostly from young and new investors who could be bored during the MCO period, which began on March 18. Restrictions on movement eased on May 4 under the conditional MCO.

Another point worth highlighting is that, with the overnight policy rate cut a third time this year to 2%, fixed deposit rates have fallen in tandem — a disincentive for savers, while lower interest rates encourage risk-taking. 

Some savvy investors may even have taken advantage of loan moratoriums and invested funds that would have been used to pay off loans.

Lately, however, there have been concerns that the rise in the prices of some counters has become excessive and overdone.

While opportunities exist in a volatile market, investors should also exercise a degree of caution as uncertainties abound on various fronts, chiefly, whether the pandemic can be successfully contained so that economies around the world can embark on the path to recovery.

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