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KUALA LUMPUR: Forced to stay home when Malaysia imposed the Covid-19 motion control (MCO) order, Victor Yap sat in his living room, intently listening to a March 27 speech by Prime Minister Muhyiddin Yassin.
When Muhyiddin presented the details of the government’s stimulus package, one thing in particular caught the eye of the 35-year-old Kuala Lumpur property appraiser: a six-month moratorium on loan repayments. Realizing that the relief measure was put in place to leave her with cash to spare due to her two mortgages, Yap decided that she would put the funds into stocks.
“At first, I thought that the extra money would hardly help me survive these tough times, but then I saw that everyone was jumping into the stock market and making a lot of money,” he said by phone. “I also jumped and did well. It was better than just surviving. “
Now, with the moratorium set to expire at the end of September, the father of two is one of the hordes of individual investors looking to exit the market, a move that threatens the rally in the benchmark equity index from March lows and could further weaken trading volumes, which soared to a record in August.
“The only way was with everything, but now I have to do everything I can to get back to normal life” and prepare to resume loan payments, Yap said.
While stimulus measures and stay-at-home orders due to the pandemic have seen amateur investors storm equity markets around the world, the retail frenzy has been particularly prominent in Malaysia. The rookie investment boom has also been a factor behind the meteoric rise in glove maker stocks and the recent surge in little-known Malaysian jewelers, with several of these stocks rising more than 400% since the early 1990s. year.
Yap said it used a portion of its leftover funds “to participate” in the glove makers’ rally. Some stocks in this space are among the best performers in the world this year, and their staggering gains have changed the contours of the broader Malaysian market.
The top three glove manufacturers have added approximately RM100 billion in combined market value in 2020, and Top Glove Corp remains the biggest winner in the MSCI Asia Pacific index. About $ 1 out of every $ 10 invested in the Malaysian stock market is a gamble on gloves, a feat that makes global hygiene a game, much like South Korea and Taiwan are for semiconductors.
“Cash on hand will be substantially reduced by the time the moratorium ends and they have to start repaying their loans,” said Tee Sze Chiah, head of Malaysian retail research at Maybank Investment Bank Bhd, referring to individual investors.
“I hope so, but I don’t think so,” he said, when asked whether the recovery in Malaysian shares would hold.
Expect trading volumes. It hit an all-time high of 27.8 billion shares on August 11, to fall in the coming months.
Keep cash
In fact, volumes have already declined dramatically in recent weeks, and price trends also suggest that the frenzy in Malaysian stocks is losing momentum. While the benchmark FTSE Bursa Malaysia KLCI index continues to rise nearly 25% from its March low, the indicator has fallen nearly 6% since it reached its 2020 high on July 29.
Brokerage houses are becoming cautious as well as the Malaysian stock exchange is preparing further measures to curb excessive speculation on share prices and ensure orderly trading after increased trading.
Investors would be in a better position if they had a large chunk of cash, as well as dividend stocks and those in the consumer staples sector, said Danny Wong, CEO of Areca Capital Sdn.
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