[ad_1]
KUALA LUMPUR (Nov 11): The knee-jerk reaction to the ray of hope that the Covid-19 vaccine will be available sooner rather than later has led investors, particularly institutional funds, to reconsider forgotten stocks, including stocks. banks that have been hammered to a low historical valuation.
However, equity strategists do not expect a widespread recovery to take off sustainably in the short term. Most of them believe that the market will be choppy given the limited details about the vaccine developed by Pfizer, for example, how long the protection period of the vaccine will last plus logistical and administrative problems.
The intense buying of large cap (cap) stocks yesterday added a market capitalization of RM34.76 billion to the local market in a single day. Over the past week, the local exchange collectively gained a market capitalization of RM 101.18 billion since November 4.
This also lifted the FBM KLCI by 3.3% or 50.75 points to close at a more than two-month high of 1,575.07 points yesterday, the biggest percentage gain in a single day. Yesterday also saw the fifth consecutive day of earnings for the FBM KLCI.
The news about the large-scale trial of a vaccine developed by Pfizer and its German partner BioNTech, which shows that it is more than 90% effective in preventing Covid-19, serves as a reminder to many investors that they need to hedge their positions in case the economic recovery improves. pace soon.
As a result, this year’s investor favorites such as glove makers and semiconductor-related companies, however, came under selling pressure as a result of profit taking.
Regarding industry indices, the Bursa Malaysia Financial Services Index was the biggest winner, closing 8.32% or 1,020.23 points higher at 13,287.5 yesterday, followed by the Bursa Malaysia Energy Index which it was up 7.15% or 47.67 points to 714.57 points.
Bursa Malaysia recorded 12.31 billion shares, also the highest in two months, worth RM 8.45 billion. There were 747 winners against 609 losers, while 331 counters were unchanged.
RHB Investment Bank Bhd’s head of regional equity research Alexander Chia said the news of the vaccine was a “hugely positive” factor for markets and generated optimism about an economic recovery.
“The attitude has changed a bit … the market is more convinced that things will improve. So there is a gradual shift to cyclical counters,” Chia said, but noted that investors are still in trade-oriented mode today.
Chia said the 90% success rate could mean as good as eradicating Covid-19. For comparison, the measles vaccine is 97%, while those for smallpox and chickenpox are 95% and 92%, respectively. The seasonal flu vaccine is 40% -50%.
“The news is very positive because nobody thought it would be better than the seasonal flu,” Chia said.
In terms of downside risks, internal political uncertainties persist, as well as the third wave of Covid-19 that is occurring now.
On the performance of corporate earnings, Chia expects the third quarter (3Q) to be better compared to 2Q. He noted that attention should be drawn to the comments of the banks about their future prospects, as they will give an indication about the economic prospects of the country.
TA Securities Holdings Bhd Senior Technical Analyst Stephen Soo agreed that the market optimism is fueled by hopes for an earlier than expected economic recovery thanks to a vaccine.
However, as the recovery game seems overdone probably due to pent-up demand, he opined that there is a potential pullback as early as today.
Resistance levels for the KLCI FBM are at 1,590, 1,600 and 1,618 points (the most recent high being in July), while the support level is at 1,534, which Soo noted that “the pullback could be quite substantial.” The research firm’s goal for the end of 2020 remains at 1,550 points, with potential for upgrade, Soo said.
On a positive note, Soo said some foreign purchases fell back in part when Joe Biden was declared the winner of the US presidential election, given that there should be potential for more stimulus from Biden, who is considered more growth-friendly.
Meanwhile, MIDF Amanah Investment Bank Bhd’s head of research Imran Yassin Yusof expects the positive sentiment to continue in the near term, but said it could be tempered by downside risks.
“We have to keep in mind that the vaccine requires more data collection and would also need approvals. After the approval stage, it will take time to increase production to make it widely available,” Imran said.
Therefore, he anticipates that the vaccine will be widely available in Q3 2021, the first.
Imran pointed to the sale of tech counters and gloves as a knee-jerk reaction, saying these sectors were ready for profit-taking after strong gains. However, he said the fundamentals of both sectors remain intact.
As the availability of the vaccine will not be immediate, these sectors will continue to see continuous demand. So there could be some opportunities for investors to pile on weakness, Imran said.
[ad_2]
