FBM KLCI has gained over 20% since March’s low


THE Malaysian stock market rally could turn to a long-term bullish phase if the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) is able to close above the 1,520-point mark this week, ahead of fresh recovery measures to be announced by the government.

The liquidity driven market extended its gains from a low of 1,207 points on March 19 to more than 20% to close at 1,473 points last week driven by the rally in glovemakers like Hartalega Holdings Bhd and Top Glove Corp Bhd.

“From a technical perspective, the bullish move of the FBM KLCI over the past two months is merely a technical rebound as the broader trend is still down and below the long-term moving average lines.

“The rise in trading volumes is due to investors’ optimism that the global economy is starting to reopen and the Covid-19 pandemic is under control,” a chartist noted.

If the benchmark can break above the long-term moving average lines then the benchmark could make further gains, he said while warning that the real economy data could very likely disappoint in the months ahead and taper the expectations of many.

The blue chip index’s market cap also recorded an increase of RM195.26 billion from March’s RM1.38 trillion value to hit RM1.57 trillion as of May 29, 2020.

Trading value last Friday rose to a record high of RM9.308 billion as turnover was also high at 9.308 billion.

Foreign investors continued to remain net sellers last week, with a total net outflow of RM589.62 million versus a total net outflow of RM394.34 million recorded the week earlier.

The shortened trading week also saw the FBM KLCI Futures contract registered an all-time high in daily trading volume of 65,000 contracts on May 27.

The rally in Top Glove and Hartalega was due to rising demand for protective equipment during the Covid-19 pandemic.

Between the period of March 19 and May 29, Top Glove’s share price rose from RM5.85 a piece to RM13.30, on the back of a RM34.6 billion market capitalisation.

Hartalega’s share price has more than doubled since March 19 from RM6.33 to RM12.54. The company’s market cap as of last Friday is RM42.45 billion.

Other blue-chip stocks contributed to the index increase between 0.2% and 8.8%. Only two out of the 30 stocks recorded a decrease of 0.15% and 0.05% in the two months period. The two stocks were Hap Seng Consolidated Bhd and AMMB Holdings Bhd.

On a year-to-date (YTD) basis, the FBM KLCI is still down 7.27%.

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz last Friday said the government is formulating a short-term economic recovery plan that would be announced in early June.

He added that the upcoming plan would see some of the measures introduced earlier being extended and several new initiatives being introduced to boost the economy.