Stigma of bear market may be injurious to investors’ psychology — MIDF Research

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KUALA LUMPUR (Feb 26): The FBM KLCI is now in bear market territory and the stigma of a bear market may be injurious to investors’ psychology, said MIDF Amanah Investor bank Bhd Research.

In a note today, MIDF Research strategy head Syed Muhammed Kifni Syed Kamaruddin said this in turn could propagate the rise in ‘stale-bulls’ which would negatively impact the short- to medium-term price momentum of the equity market.

Syed Kifni said the FBM KLCI ended the world’s longest bull run on Feb 24, when it dropped 2.69% to close at 1,490.06 points.

He said the equity market selloff was precipitated by heightened political uncertainties, which were engendered by a number of political events and followed by the resignation of Prime Minister Tun Dr Mahathir Mohamad.

“Technically speaking, a bull market ended when the price fell by more than -20% from its high. In the case of FBM KLCI, the threshold level was at 1,516 points,” he said.

Syed Kifni said under the circumstances, the FBM KLCI may see its valuation tapering further towards the lower end of its historical range.

“Hence our year-end 2020 baseline PER valuation target for the FBM KLCI is lowered from 16.5x to 16.0x, which now equates to -1.5SD (standard deviation) of its five-year (2014-18) historical average.

“As the prevailing consensus EPS estimate for 2020 is approximately 100, we revised our year-end 2020 baseline target for the FBM KLCI from 1,680 points to 1,600 points,” he said.