How long can Malaysian healthcare thematic rally on Bursa Malaysia last?

Popular stocks in the healthcare and glove sectors continue to attract interest as cure for the virus is still nowhere to be seen, says expert

by SHAZNI ONG/ pic by MUHD AMIN NAHARUL

RETAIL investors are expected to continue pursuing Malaysian equities, such as gloves and technology stocks, which are trending or based on thematic investing, once the market retracement ends.

“We expect the outlook for the third quarter (3Q) to be similar as the previous quarter, with trading activities continuing to be dominated by glovemaking companies as earnings performances improve, spearheaded by local retail investors.

“In addition, there is still ample interest in local tech companies which are still small by nature to whet retail investors’ appetites,” Rakuten Trade Sdn Bhd head of research Kenny Yee told The Malaysian Reserve recently.

Popular stocks in the healthcare and glove sectors continue to attract investors’ interest as the success in formulating a cure for the virus is still nowhere to be seen, he added.

“When there was a surge, there was also the availability of good value stocks due to the state of the capital market at the time. Many shares were below their historical prices, creating an opportunity for new investors to enter the market,” Yee said.

Rakuten, a fully online broker, is cautiously optimistic retail investors will continue to be active on digital platforms for the near future.

Financial literacy among millennials is on the rise, with information more readily accessible through social networks and the Internet.

“With this, trading in shares has become more appealing,” Yee said.

Hong Leong Investment Bank Bhd (HLIB Research), which recently held a virtual meeting with Bursa Malaysia Bhd to better understand retail investor demographics and trading trends, said new CDS (central depository system) account openings totalled 218,000 year-to-date (YTD).

This is compared to some 97,000 in the same period last year, with July openings alone standing at 53,000, HLIB analyst Jeremy Goh said, citing Bursa senior VP of retail marketing Patrick Ng.

“Given the unprecedented surge, we gather that there is still some degree of backlog in pending new accounts. Some 65% of these new accounts comprise millennials (those aged 25-40),” he said in a note last week.

Despite the strong increase in retail participation, Ng shared that their level of margin usage has not increased.

“In fact, the margin balance as of end-July was 13% lower than the end-2019 sum, a healthy sign we might add. Retailers are, however, doing more intraday trades at 34% of retail traded value YTD (July 2020) versus 2019’s 28%.

Sectors based on Bursa Malaysia’s classification with the highest share of retailers (by average daily trading value (ADV); YTD as at end-July) are industrial products and services (21.6%), healthcare (19.5%), technology (16.2%), consumer (12.5%) and energy (7.3%).

The top 10 retail counters (by ADV; YTD end-July) are (starting from the highest): Supermax Corp Bhd, Top Glove Corp Bhd, Comfort Gloves Bhd, Careplus Group Bhd, Hartalega Holdings Bhd, AirAsia Group Bhd, MyEG Services Bhd, Hibiscus Petroleum Bhd, Rubberex Corp (M) Bhd and Datasonic Group Bhd, he said.

While there is no clear answer as to why retailer participation surged in the market, Ng said it could be due to the low interest-rate environment causing retailers to seek higher returns in beaten-down equities, namely during the February to March Covid-19 crash.

Investors could also have had more time to trade as many were working from home during the Movement Control Order (MCO).

Yet, this “retail liquidity” has not shown signs of abating post-MCO, HLIB noted.

Nonetheless, there may be a downward normalisation in the 4Q of this year, once the blanket loan moratorium ends on Sept 30.

It also sees institutional investors’ interest in gloves staying strong, given the possibility of the sector’s heavier weighting (via the inclusion of Supermax and Kossan Rubber Industries Bhd) in the FTSE Bursa Malaysia KLCI (FBM KLCI) November review.

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