Infections and politics to drive investor sentiment


GLOVEMAKERS are expected to remain the focus of investors as Covid-19 infection numbers continue to grow amid ongoing economic and political concerns which could cap the market trajectory.

“With no respite in the number of Covid-19 cases worldwide, we view glove counters will remain the darling of investors,” Bank Islam Malaysia Bhd economist Adam Mohamed Rahim told The Malaysian Reserve on Sunday.

Adam said the continued increase of Covid-19 cases around the world specifically in countries like Japan and the Philippines has boosted buying interest in glovemakers like Top Glove Corp Bhd and Hartalega Holdings Bhd.

“Investors are always risk averse when it comes to political uncertainty. We believe the FTSE Bursa Malaysia KLCI (FBM KLCI) will remain rangebound between 1,590 and 1,610 points subject mainly to the trend of the Covid-19 infections and local political developments,” he said.

The benchmark FBM KLCI closed at 1,603.75 points for the week. Malacca Securities Sdn Bhd said the dovish tone set by the US Federal Reserve in regard to the low interest-rate environment implies that liquidity will remain within the stock markets and for assets that deliver higher yields.

“For now, the FBM KLCI is largely on track to deliver its biggest monthly gain since October 2011, while both the FBM Small Cap and FBM Fledgling are still on course for a V-shaped recovery,” it said in a note last Thursday.

The firm noted that the government’s move to extend the loan moratorium by additional three months to targeted groups could possibly reduce the non-performing loan rate and bodes well for the financial sector.

Affin Hwang Asset Management Bhd stated that the sentencing of former Prime Minister (PM) Datuk Seri Mohd Najib Razak basically weakened his political standing within Umno and would effectively prevent him from standing in the next general election.

“Politically, it also shifts the power balance in favour of PM Tan Sri Muhyiddin Yassin, as it reduces the strength of Umno.

“This triggered Umno’s decision to not join Perikatan Nasional formally as a coalition, but still crucially pledge its support to the federal government,” it said in a note last Thursday.

Affin Hwang expects Umno and PAS to reassert their strength as a bloc against its minority coalition partner, who has just prosecuted one of their own.

“This may cause weakness in certain segments of the market, as it does lead to uncertainty if the brinkmanship goes too far. Our base case is that the current coalition will stand, with such moves seen more as market noise as opposed to major changes in government or personnel,” it said

The political wrangling in Sabah has resulted in the dissolution of the state government with a state election to be decided within two months.

Affin Hwang continues to stay cautious with politics remaining an overhang on markets.

“Cash levels range between 10% and 20% for our domestic funds. Given the fluidity of the political situation, it is imperative we maintain a flexible view to quickly shift and adjust our position accordingly,” it said.