Healthcare counters unwind on vaccine newsflow

Investors trimmed stakes on news of a possible Covid-19 vaccine announced in Russia amid various ongoing trials in a number of countries

by FARA AISYAH/ pic by AFP

THE price rally in wider healthcare sector counters is speculatively and highly unsustainable with a correction underway amid heightened volatility.

Counters including Karex Bhd, Adventa Bhd, Notion Vtec Bhd, HLT Global Bhd, ES Ceramics Technology Bhd (Esceram) and LKL International Bhd saw their shares jump last week, but have undergone a sharp reversal this week.

Notion Vtec’s share price jumped from 75 sen at the end of July 2020 to a high of RM2.34 last Friday before a retracement saw it close lower at RM1.10 yesterday, down 27 sen for the day, as selling pressure hit the market. Counters like HLT Global, LKL International and Esceram suffered the same fate.

Malacca Securities Sdn Bhd equity research analyst Kenneth Leong said the gains in many of the counters were difficult to sustain over the long run as valuations shot up above their fundamentals.

“Signs of profit-taking emerged last Friday as investors and traders were quick to lock in their gains. If their share prices could pullback to more attractive levels, we may see trading interests shifting back into the healthcare thematic space again,” he told The Malaysian Reserve.

Leong said speculative herd behaviour came into play, fanned by several unlicensed investment advisors capitalising on the vibrant trading activities through online posts that trigger trading interests in several companies.

The influx of fresh funds — mainly from retail traders — have given legs to the run-up in many counters in the sector’s thematic, he added.

“For now, we have not seen regulators tightening their grip yet. Bursa Malaysia has also yet to issue more ‘unusual market activity’ to the recent limit up counters, only to certain companies as of late,” Leong said.

Price action yesterday saw Karex close 5.5 sen lower at 73.5 sen, while Adventa fell 73 sen to RM2.63. HLT Global tumbled 51 sen or 24.8% to RM1.55, Esceram dipped 27.5 sen or 24.8% to 83.5 sen, while LKL International fell 26.5 sen or 23.5% to 86.5 sen.

Volume of securities traded on the exchange remained high at 19.15 billion, but well below Tuesday’s record of 27.8 billion units.

The fall in the shares was triggered in part by the softer prices of major glovemakers as investors trimmed stakes on news of a possible Covid-19 vaccine announced in Russia amid various ongoing trials in a number of countries.

Top Glove Corp Bhd fell RM2.80 or 10.3% to RM24.50, while Hartalega Holdings Bhd fell RM2.18 or 11.9% to RM16.12. Supermax Corp Bhd shares fell RM2.78 or 12.8% to RM18.88, while Kossan Rubber Industries Bhd fell RM2.50 or 14% to RM15.10 on the vaccine news despite Covid-19 infection numbers ticking up across the world.

Aberdeen Standard Investments (M) Sdn Bhd country head Gerald Ambrose said it is inevitable for the healthcare sector to be in focus in light of Covid-19 pandemic and now greater emphasis is on its prevention and cure.

“The recent surge in retail participation has led the price movement to become irrational in many cases. I love all this speculation, but I fear a lot of investors will get burnt,” he said.