This article first appeared in The Edge Financial Daily on February 8, 2018
KUALA LUMPUR: While the local stock market regained some lost ground yesterday after the two-day fall, investment analysts and equity strategists do not think Bursa Malaysia is in calmer waters now.
Volatility could be the norm this year, according to Maybank Kim Eng head of research and global investment strategist Sadiq Currimbhoy.
Currimbhoy expects that the bond yield is going to climb further due to concerns about inflation particularly in the US. “I think that is going to create market volatility for equities ... at least for the first part of the year,” he told the press on the sidelines of the Fifth World Capital Markets Symposium 2018 yesterday.
“It’s very difficult to say [if the market upturn will continue to be sustainable] as any market can now go any direction,” he said.
Noting that Asean markets as a whole are actually “quite cheap” compared with other markets, Currimbhoy said the relative valuation of Asean compared with China is very low.
After losing nearly 60 points in the course of two days, the FBM KLCI opened 15.09 points higher at 1,827.11 points in what analysts referred to as a “relief rebound”, as investors bargain-hunted for beaten-down Malaysian shares after the global equity market selldown.
The benchmark index swung to close in the positive territory at 1,836.68 points yesterday, up by 24.23 points or 1.34% — it was indeed among top performers in the region. Some major regional bourses, such as Hong Kong and South Korea, continued to head south.
The gains on component stocks, like Press Metal Aluminium Holdings Bhd and banking stocks CIMB Group Holdings Bhd, Hong Leong Financial Group Bhd and Public Bank Bhd, fuelled the rebound.
However, the upward trend was not across the board. There were 540 gainers versus 527 losers on Bursa yesterday. The FBM Small Cap Index was almost flat, only up 2.29 points or 0.01% at 16,285 points.
This indicates that market sentiment remained cautious following the fierce selldown.
“The rebound in the US markets [on Tuesday] is not yet a strong indication of the bottom,” AmBank Retail Research vice-president Lim Sae Wai told The Edge Financial Daily.
Lim said although bullish signals such as a piercing line pattern was identified in the Dow Jones Industrial Average, he is still waiting for more confirmation signals.
“Similarly, I think it is still uncertain in Malaysia and it may be too early to call it a bottom. We should expect more volatility, yo-yo, or zigzag pattern this week, and probably the next too,” Lim said.
For the past two days, global equity markets, including that of Malaysia’s, were jolted following the plunge in US stocks amid rising concerns that the latest US jobs report and inflationary pressures would force the US Federal Reserve to raise its benchmark interest rates faster than expected.
The Dow tumbled in consecutive days of frenzied selldown, resulting in a decline of over 1,840 points since last Friday, before it turned in a 567-point gain to close at 24,912.77 points on Tuesday.
On the technical front, Lim said support levels for the benchmark index are expected at 1,813, then at 1,795 points.
But while the FBM KLCI stayed relatively resilient throughout the day, the broader market lost some footing as many stocks gradually turned negative.
Lim said this suggests that Asian markets were still concerned about further selling in the US.
Echoing Lim’s more cautious stance, TA Securities technical analyst Stephen Soo said Malaysian stocks are not oversold and may continue to see a selldown, if external sentiment takes a turn for the worse.
Regional bourses closed mixed elsewhere yesterday: Japan’s Nikkei 225 closed 0.16% higher, while Hong Kong’s Hang Seng Index fell 0.89%, and South Korea’s Kospi retreated 2.31%.