Vaccine for stock market

Local market jumps 50 points over vaccine excitement

by RAHIMI YUNUS & HARIZAH KAMEL / graphic by MZUKRI MOHAMAD

THE efficacy of Pfizer Inc’s Covid-19 vaccine could signal an inflection point in the fight against the pandemic and help boost financial markets as investors bet it would help with the broader global economic recovery and revive cyclical sectors that have suffered from the economic impact of the health crisis.

The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) rose 3.33% or 50 points yesterday to 1,575, a two-month high, as investors bought into major counters as market volume hit 12.3 billion securities traded worth RM8.45 billion.

The rise in the main index came at the expense of the FTSE ML ACE Market Index, which fell 328 points or 2.9%, as investors switched to big caps on anticipation the vaccine news could be the start to an upside for old economy sectors that are impacted by the Covid-19 pandemic since the early part of the year.

“The positive sentiment is good as investors are waiting for a catalyst to move forward. This could be a start although risks remain as the vaccine has not been finalised yet,” Maybank Investment Bank Bhd senior chartist Nik Ihsan Raja Abdullah told The Malaysian Reserve (TMR).

The broader sentiment on the market was good as gainers outnumbered losers 747 to 609, while 331 counters were unchanged and 449 untraded.

The three largest banks on Bursa Malaysia — Malayan Banking Bhd, Public Bank Bhd and Hong Leong Bank Bhd — ended higher by 7.58% to RM7.66, 12.42% to RM17.20 and 10.07% to RM16.80 respectively.

Similarly, CIMB Group Holdings Bhd and RHB Bank Bhd jumped by 10.46% to RM3.38 and 10.73% to RM4.85 respectively.

Airlines, travel and leisure-related stocks also did well. AirAsia Group Bhd’s share price finished 27.1% higher at 68 sen, while Malaysia Airports Holdings Bhd rose 20.55% or 89 sen to RM5.22.

Malaysia’s Consumer Products and Services Index rose sharply 18.52 points or 3.32% to close at 577.07 yesterday. The ringgit closed at RM4.118 yesterday after hitting an eight-month high against the US dollar on Monday at 4.1070.

Oanda Corp senior market analyst for the Asia Pacific Jeffrey Halley said Bursa Malaysia embraced the overnight pivot seen overseas, from technology and medical and into cyclical value stocks.

“The rotation into bombed-out legacy industries hints at the potential recovery possible in 2021 if the vaccines become widely available. However, the scale of some of the rallies in individual stocks today suggests the move is driven by short-term fast money.

“As such, any negative vaccine headlines could just as quickly unwind many of the moves seen yesterday,” Halley told TMR.

He added that with more vaccine players expected to conduct Stage-3 trials, the newsflow could be beneficial for those sectors if they prove to be positive.

“It is premature and naive to believe the world will magically reset itself to late 2019 in the space of a few months. However, stock markets globally have shown their ability to completely diverge from the reality of life in 2020,” Halley added.

Despite glove counters being pummelled yesterday, Halley said they remain among the year’s best performers globally on the big picture.

The top three biggest glove companies on Bursa by market capitalisation — Top Glove Corp Bhd, Hartalega Holdings Bhd and Supermax Corp Bhd — tumbled yesterday by 8.02% to RM7.80, 13.83% to RM15.70 and 8.31% to RM8.83 respectively.

The top seven glovemakers on Bursa lost some RM19 billion in market capitalisation yesterday.

Malacca Securities Sdn Bhd equity research analyst Kenneth Leong warned a pullback may take place on Bursa in subsequent days as the market has rallied by some 110 points since last week.

He said glove stocks are likely to remain under pressure in the coming days as investors continue to shift portfolio holdings.

“I think the momentum on gloves is likely to be weak as investors switch portfolios to other sectors and focus on recovery thematics like tourism and aviation,” he told TMR.

The latest development of Pfizer and BioNTech SE’s Covid-19 vaccine may prove to be a gamechanger in the fight against the pandemic, Universiti of Malaya research consultant Professor Datuk Dr Lam Sai Kit said.

Dr Lam, who is also a senior fellow of the Academy of Sciences Malaysia, said it has taken only 10 months for Pfizer to develop this vaccine, a feat never achieved.

“It is unlikely Malaysia will get access to the Pfizer vaccine any time soon because of global demand. In the meantime, it is important for us to continue to observe mitigation measures until we can get access to vaccines,” he said in a statement.

Dr Lam pointed out that the world needs vaccines for seven billion people to achieve adequate herd immunity globally in order to bring the pandemic to a close, which will prove very challenging.

As of mid-October, the World Health Organisation has identified 42 candidate vaccines at the stage of clinical trials and 10 of them are at the most advanced Phase 3 stage.


Read our earlier report here