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KUALA LUMPUR: Forced to stay home when Malaysia deployed its military to ensure strict compliance with a virus-induced lockdown earlier this year, Victor Yap sat in his living room, listening intently to a March 27 speech of the first minister of the nation.
When Prime Minister Muhyiddin Yassin 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 meant to leave him with extra cash given his two mortgages, Yap decided he would put the funds into stocks.
“At first, I thought the extra money would barely help me survive these tough times, but then I saw everyone jump into the stock market and make 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 benchmark equity index rally from March lows and could further weaken trading volumes. , which reached 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 virus outbreak 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.
Glove manufacturers
Yap said it used a portion of its leftover funds “to take advantage of” the rally in glove makers. 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 makers have added around RM100 billion ($ 24 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 turns the Southeast Asian nation into a global hygiene 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 paying off their loans,” said Tee Sze Chiah, head of retail research for Malaysia at Maybank Investment Bank Bhd, referring to individual investors. yes, but I don’t think so, ”he said, when asked if the recovery in Malaysian shares would hold.
He expects trading volumes, which hit an all-time high of 27.8 billion shares on August 11, to fall in the coming months.
Keep cash
That said, Yip Kit Weng, deputy general manager of the Affin Hwang Investment Bank group, which is home to Malaysia’s largest brokerage house, expects many of the amateur investors to stay in the market.
“As the market offers an attractive and positive return, it will continue to be an investment option,” he said.
But recent trends suggest that the frenzy in Malaysian equities is losing momentum, with volumes declining sharply in recent weeks.
While the benchmark FTSE Bursa Malaysia KLCI index continues to rise nearly 23% from its March low, the indicator has fallen more than 7% since it reached its 2020 high on July 29. It slid 1.6% amid a broad regional selloff on Wednesday, more than the 1.3% decline seen in the MSCI Asia index.
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, chief executive of Areca Capital Sdn Bhd. – Bloomberg
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