Watershed week wiped RM72b in market capitalisation


THE growing impact of the Covid-19 outbreak and the paradigm shift in the Malaysian political scene, saw some RM71.85 billion wiped out from Bursa Malaysia in just a week, according to data from Bursa Malaysia.

The economic stimulus package of RM20 billion announced last Thursday failed to lift the investors’ confidence as political instability in the country and more Covid-19 positive cases intensified selling pressure.

Total market capitalisation stood at RM1.59 trillion on Feb 28, 2020, compared to RM1.66 trillion on Feb 21, 2020.

Based on data from Bursa Malaysia, international investors took out a whopping RM1.26 billion net of local equities last week, the largest weekly foreign net outflow in 88 weeks, according to MIDF Research weekly fund flow report.

February saw a foreign net outflow of RM1.97 billion, the largest monthly foreign net outflow since August 2019, which saw international funds taking out RM2.6 billion.

“To add to this political uncertainty, we opine our markets are also affected by external events such as the selloff in the global equity markets. This follows from the fears of a prolonged impact of Covid-19 as new cases begin to crop up elsewhere in the world. We believe the FTSE Bursa Malaysia KLCI (FBM KLCI) have entered the bear market territory,” MIDF Amanah Investment Bank Bhd senior analyst Imran Yassin Yusof told The Malaysian Reserve recently.

He added that the stigma of a bear market may be injurious to investors’ psychology. In turn, it could propagate the rise in “stale-bulls” which would negatively impact the short- to medium-term price momentum of the equity market.

“Nevertheless, we reiterate our fundamental premise that past observations of both price and earnings trends are conclusive with regard to their long-term direct relationship. Whereas, the short- to medium-term price movements may be more susceptible to valuation-related factors as well as myriads of situational ‘noise’,” he said.

Under such circumstances, the FBM KLCI may see its valuation tapering further towards the lower end of its historical range.

The ringgit, he added, will likely be under pressure until there is more clarity in the political scene, while the Covid-19 epidemic has disrupted the global supply chain. Another downside factor will be the decision of FTSE Russell on whether to retain Malaysia on its FTSE World Government Bond Index watch list in its upcoming interim review this month, he added.

The local unit closed at RM4.20 against the dollar yesterday.

Oanda Corp Asia-Pacific senior market analyst Jeffrey Halley said the benchmark FBM KLCI has fared less badly than its regional peers such as Singapore and Jakarta.

He added that the timing of this political schism could not be worse, against the backdrop of the international Covid-19 outbreak and its effects on global financial markets.

“Ringgit has been surprisingly resilient and is likely due to the dollar weakening and offsetting negative currency factors domestically. Should yields stop falling in the US, selling pressure will likely return to both the ringgit and local currencies. A move up through 4.2500, potentially signals further losses to 4.3000 in the nearer term,” he said.

Bank Negara Malaysia (BNM) has given an assurance that it is closely monitoring the conditions of the financial markets.

While ringgit movements will continue to be market-determined, BNM’s market operations will ensure sufficient liquidity and orderly financial market conditions, BNM said in a statement last week.