This article first appeared in The Edge Financial Daily on February 5, 2020

KUALA LUMPUR: After hitting a nine-year low on Monday, the FBM KLCI rebounded yesterday for the first time in more than two weeks.

Some RM49 billion was wiped off from Bursa Malaysia-listed companies’ market capitalisation between Jan 17 and Feb 3 amid investor anxiety about the Wuhan virus outbreak.

Bursa’s recovery was mainly due to bargain hunting after a heavy selldown over the last 10 days when the KLCI fell more than 70 points or 4% following the virus outbreak, said market observers contacted by The Edge Financial Daily.

The KLCI closed the day up 13.85 points or 0.91% at 1,535.8. Year to date, the benchmark index is down 3.3%.

Others stock markets in Asia also rose, as sentiments were buoyed by a rebound on Wall Street after sharp falls resulting in the biggest weekly decline in almost six months.

Japan’s Nikkei 225 index closed 0.49% higher, South Korea’s Kospi rose 1.84%, Hong Kong’s Hang Seng index climbed 1.23% and the Shanghai Composite index rose 1.34%.

Fortress Capital Asset Management (M) Sdn Bhd investment adviser and director Geoffrey Ng said “the worst may be over” for the local market.

“The market is oversold and the rate of selling was intense over the last couple of weeks,” he told The Edge Financial Daily.

He added that yesterday’s rebound also came about as investors noted the Chinese government’s fresh efforts to contain the virus, including locking down more cities in the country.

Hangzhou and Taizhou were among the new cities in China’s eastern province of Zhejiang imposed by restrictions yesterday. The government had previously locked down Wuhan, the capital of Hubei province and epicentre of the virus outbreak, in a bid to stop it from spreading.

Ng expects Bursa to continue recovering. He added, however, that if the virus outbreak turns out to be worse than expected, it could push the stock market into a sell mode again.

“I think interest in the market will return. This year, the market is down more than 3% so far. It may be able to pass some of those losses in the next few weeks,” he said.

“The fundamentals we saw from the fourth quarter of last year (4Q19) have been more positive. We are seeing a tepid recovery in economic activities and corporate earnings. Hopefully, fears of the [virus] outbreak are very short-lived and do not damage the recovery momentum.”

Concurring that the market is “oversold”, Inter-Pacific Securities Sdn Bhd head of research Victor Wan said uncertainties from the virus outbreak will still weigh on the market’s direction.

“Market conditions remain fluid and the sentiment is still cautious, meaning it can go either way at this point, depending on the virus situation,” Wan added.

Elaborating on the near-term outlook for the KLCI, Wan said corporate earnings for 4Q19 will be investors’ main focus. The downside, he said, is the Wuhan virus’ impact being reflected in financial results for 1Q and subsequent quarters of this year.

From a technical viewpoint, Public Investment Bank Bhd technical analyst Lee Siao Ping expects a range-bound KLCI at between 1,515 and 1,551 points in the near term following yesterday’s technical rebound.

Lee said the candlestick has formed a “morning star” chart or a so-called “bullish reversal” pattern, suggesting the index will reverse its previous downtrend and start moving upwards.