The retail market has been boosted by institutional money moving into cyclical counters like banks, industrial and services

by RAHIMI YUNUS / pic by MUHD AMIN NAHARUL

RETAIL investors appear to have staged a comeback on Bursa Malaysia helped by the work-from-home new normal due to the fresh spike in Covid-19 infections and despite the absence of loan moratorium since last month.

The market has been boosted by institutional money moving into cyclical counters like banks, industrial and services.

Participation by retail investors generated between 36% and 43% of the daily trading value on Bursa Malaysia for the past five days compared to an average of 35% for the year and 25% in 2019, according to Malacca Securities Sdn Bhd head of research Loui Low.

“At the moment, I think the idea behind the jump in numbers is people are switching fund portfolios from healthcare stocks such as gloves to counters that look set to enjoy a recovery. Volatility has come back, as well as trading interests.

“Smaller and lower liners under the ACE Market contribute to trading volume for now,” Low told The Malaysian Reserve (TMR).

Low said retail investors’ portion to the daily trading value may sustain between 30% and 35% in the near term as many are expected to be tempted into recovery thematics such as aviation, leisure, banking and real estate investment trusts.

The local bourse has been more active since Monday this week, with market volume reaching above 10 million securities traded on average this week helped by institutional buying of cyclical stocks due to expectations of a recovery in their fortunes on the back of positive news flow on potential vaccine to combat the Covid-19 infections worldwide.

Pfizer Inc’s announcement on its vaccine trials provided a shot in the arm both in volume and value on global markets.

Trading on Bursa Malaysia hit 12.3 billion securities worth RM8.45 billion following the announcement as the benchmark FTSE Bursa Malaysia KLCI rose by 3.33%, or 50 points, to 1,575 — a two-month high due to heavy buying of big cap stocks like banks and utilities.

Retailers have also been switching from small caps to big caps due to the cyclical thematic triggered by the vaccine promise.

A substantial portion of the market volumes has been provided by penny stocks like AT Systematization Bhd, AT Systematization Bhd-Warrants C, Xidelang Holdings Ltd, DGB Asia Bhd and Fintec Global Bhd, which on certain trading days have accounted for up to 35% of the volumes.

Rakuten Trade Sdn Bhd VP of research Vincent Lau said trading volumes on Bursa Malaysia did slow down a bit post-moratorium, but it appears now to be coming back amid the Conditional Movement Control Order (CMCO) and optimism that follows Budget 2021 that includes initiatives to add disposable cash to the people.

“There is ample liquidity in the market plus a low interest-rate environment. Some people may seek a higher interest rate than in fixed deposits and invest in others,” Lau told TMR.

He said hot stocks such as gloves, technology, plantations and small caps are the themes at present.

Reports in April said Rakuten Trade saw a spike in account opening during the MCO with over 11,000 new accounts being activated, a 100% month-on-month increase, whereby more than 64% was registered during the first phase of the MCO.

The online brokerage firm currently has more than 110,000 active accounts.

Since May 2017, the brokerage has contributed to more than RM20 billion in total trading value on Bursa.

It has a retail market share of almost 7%, while clients’ assets under trust totalled more than RM2 billion as at July 14.

In a recent financial results announcement, Bursa Malaysia Bhd said the securities market continued to register an uptrend in investor participation, with average daily trading value (ADTV) for on-market trades (OMT) growing by 52% to RM5.7 billion in the third quarter ended Sept 30, 2020 (3Q20), compared to RM3.8 billion in 2Q20, largely driven by heightened activity in the month of August 2020 which registered a record monthly ADV-OMT.

In October 2020, local retail constituted 35.8% of RM90.4 billion traded in the local bourse and 46.3% of RM138.7 billion, according to Bursa data.

Retail investors supported the broader market in the first half of 2020, with retail participation recording the highest trading in Bursa’s history of 12.5 billion on July 20, 2020, according to a statement.

Inter-Pacific Securities Sdn Bhd head of research Victor Wan said investors are coming from the traditional fixed deposits to stock markets to generate higher returns despite higher risks.

“Plummeting stock prices during the first round of MCO combined with low interest rates more or less create the perfect recipes for retail investors,” Wan told TMR.