By AFIQ AZIZ / Pic By MUHD AMIN NAHARUL
PROFIT seeking retail investors are expected to continue driving volumes on Bursa Malaysia this year albeit the uncertainty due to the Covid-19 pandemic, said Bursa Malaysia Bhd securities markets division director Azhar Mohd Zabidi.
Azhar said there is growing interest among companies to raise funds, either through IPOs or secondary issues, which offer bargain-hunting opportunities for investors and act as a catalyst for retail involvement in 2021.
A secular recovery in various sectors as the virus is brought under control with vaccines will also attract investors to recover thematic stocks in the hospitality, airline and banking sectors, he added.
In the immediate term, Bank Negara Malaysia (BNM) would likely cut the Overnight Policy Rate (OPR) by 25 basis points (bps) this week, which would bring the interest rate to a new low of 1.5% from 1.75% now, and help add more liquidity in the equity market as investors look for higher returns.
Azhar added that banking stocks like Public Bank Bhd, CIMB Group Holdings Bhd and Malayan Banking Bhd could attract fresh inflows upon the availability of the Covid-19 vaccines in the country. These will be followed by stocks which rely on travellers like hotels, travel agencies and healthcare tourism.
“We have seen the banking stocks jump upon the announcement of the vaccine distribution plan last year,” he said.
However, Azhar is still pessimistic on airlines’ related stock to recover this year.
Retail investor participation in Bursa Malaysia was at a 10-year high of 35% in 2020. Average daily value of stocks traded jumped by 260% from RM400 million to RM1.44 billion year-on-year (YoY).
“We believe the low interest-rate environment, coupled with the fiscal stimulus initiative of a six-month moratorium on loan repayment (last year) encouraged retail investors to explore investment opportunities in the stock market.
“In addition, improved sophistication among retail investors helped sustain the momentum,” Azhar said in a virtual Invest360 forum titled “Overview of Bursa Malaysia Outlook for 2021” last Friday.
Brokers told The Malaysian Reserve retail participation is easing gradually as the return to work of many and servicing of loans upon the end of the moratorium period has drained liquidity from households and the equity market in the past two to three months.
They said volumes of securities traded on the local exchange have gradually eased from the high double-digit billion units in the second half of last year to average about seven billion units traded daily at present.
Azhar said while retail transactions may be at decade highs, the institutional investment would remain stagnant for 2021.
“But in terms of value, institutional funds remain a very large chunk of the pie, and not shrunk in terms of size,” he added.
Bursa Malaysia ended 2020 marginally higher YoY at 1,627 points (versus 1588 points in 2019), recovering from the Covid- 19 pandemic measures introduced last year and the heightened political risk and volatility.
The benchmark FTSE Bursa Malaysia KLCI fell 17 points to close at 1,609 yesterday with 7.16 securities exchanging hands.