This article first appeared in The Edge Financial Daily on April 9, 2020
KUALA LUMPUR: Action seems to be picking up in the local market judging by the unusually high participation rate in the last few days. Total daily trading volume exceeded the five billion mark for five consecutive trading days
Since April 2, the FBM KLCI has gone up by 2.91% or 30.49 points to 1361.39. However, the FBM Small Cap Index has made a bigger leap. The index, which tracks all stocks except for the top-100 big-cap counters, soared 9.82% to 10,101.77.
Sector-wise, the Bursa Energy Index soared an outstanding 17.32% or 20.15 points to 719.71 in the last five trading days, wherein the Bursa Construction Index jumped 10.07 points or 9.72% to 152.44, portraying immense buying pressure across the two sectors.
However, it is worth noting that the trading participation rate measured in total traded value terms does not appear to synchronise with the traded volume. This may indicate that the brisk trading volume were mainly concentrated on the lower liners.
This also implies the cautious market undertone given the uncertainties on the economic front and the outbreak of Covid-19.
For example, total traded volume recorded on March 12 was 3.79 billion shares with a total of RM3.06 billion traded values, whereas yesterday’s participation rate hit 5.36 billion shares but the trade value stood at only RM2.66 billion.
Yesterday, stocks that topped the volume list were Ekovest Bhd, Hibiscus Petroleum Bhd, Mlabs Systems Bhd, Sapura Energy Bhd and Bumi Armada Bhd.
In terms of trade value, among the highest were Ekovest, Hibiscus, Tenaga Nasional Bhd, JAKS Resources Bhd and Malayan Banking Bhd (Maybank).
It is worth noting that Ekovest was the only counter whose traded value crossed the RM100 million mark yesterday.
Usually, the total traded value of the big-cap blue chips can easily breach the RM100 million mark in a brisk trading day.
Rakuten Trade Sdn Bhd research vice-president Vincent Lau highlighted to The Edge Financial Daily that net buyers in the market lately were mainly retail investors.
In particular, retail investors have been buying up shares in tandem with the surge in trading volume.
Lau noted that there could be a sector rotation playing out, in which investors were switching out from the oil and gas sector into the construction sector, probably due to optimism about the prospects of kick-starting infrastructure projects hinted by the government lately.
Meanwhile, Sean Tan, a dealer in a bank-backed brokering house, was surprised by the extraordinarily high participation rate as he observed that foreign selling of both Malaysian bonds and equities had not dried up yet.
Tan said he had gotten queries from clients on the entry point not wanting to miss the pronounced bargain-hunting opportunities. However, the dealer does not expect a sustainable rebound to take place in the near term.
“I couldn’t understand any reason for optimism. The economic outlook and pandemic recovery were both still shrouded by negativity, [and] I think at best it will be a dead-cat bounce, pending the development in major economies, especially the US, which is quite grim.”
In terms of technical analysis of the share market, Public Investment Bank Bhd technical analyst Lee Siao Ping said it is encouraging that the local index has broken out from a congestion phase. However, he pointed out that the KLCI is currently facing a large resistive gap down window of between 1,360 and 1,430 points.
This means that the KLCI could need to break through major hindrances to continue its positive momentum.
Likewise, Lee noted that the small cap index is currently reaching large resistive levels of 10,250 and 10,700 points.
He agreed with the notion put forward by Lau that market participation so far had been market-driven, as starting from April 2 retail investors were the net buyers, noting doubts about the sustainability of the market momentum.
Nevertheless, he expects the local share market to trend sideways at best as he anticipates more short term profit-taking.