Retail investors less bullish on stock market this year

by ASILA JALIL / pic by MUHD AMIN NAHARUL

RETAIL investors’ interest in the stock market is losing steam as many shift to less volatile investment products and expect lesser returns in the coming months, according to a survey.

The 2021 CGS-CIMB Retail Investors’ Sentiment Survey found retail investors were less bullish compared to last year, with 51% of them expecting a return of between 0% and 10% over the next three months compared to 42% a year ago.

“Only 28% of the respondents were bullish (defined as stock market returning more than 10%) compared to 41% a year ago.

“Twenty-one percent of respondents projected a negative return from the stock market (2020: 17%),” the brokerage firm noted in the survey report.

The survey was carried out for 41 days from April to May 31, involving 1,044 Malaysian retail investors.

CGS-CIMB Securities Sdn Bhd noted that investors could hold a more conservative outlook on the stock market due to concerns over surging new Covid-19 cases in May, the Movement Control Order enforcement, the state of Emergency and political instability.

For the first five months of the year, retail investors were the largest participants of the stock market, accounting for 37% share of trades, and the largest net buyers of the local equities market worth RM6.4 billion.

The survey revealed their daily trade shares dropped to 38.2% in May 2021 from 39.8% in April 2021 due to a lower proportion of participants opting to invest directly in the domestic stock market compared to last year.

“This could also be due to the reopening of the economy and/or retail investors are shifting to less volatile investment products for exposure to the stock market via the Employees Provident Fund and Amanah Saham Nasional Bhd where the downside risks are better protected,” CGS-CIMB stated in the report.

The survey found the US, Singapore and Hong Kong/China are the most preferred markets for exposure in equities as investors seek to diversify and obtain better returns from their investments.

For the expected rate of return, 43% (2020: 46%) of the respondents indicated their target rate of return was between 11% and 20%, while 32% (2020: 35%) of them expected a return of more than 20% from the market.

The remaining 24% (2020: 19%) expected it to be between 0% and 10%.

CGS-CIMB said it could be because the FTSE Bursa Malaysia KLCI appeared to have priced in a recovery from the Covid-19 pandemic as it is now trading at only 2.4%, below the pre-Covid level at end-2019 when the index was 1,611 points.

The survey noted that the four biggest concerns among retail investors that could prompt them to take profit on their stock holdings include the health of Malaysia’s economy and political situation, external factors such as global stock market performances, sharp decline in stocks or markets, and withdrawal of government stimulus.

CGS-CIMB head of research Ivy Ng told The Malaysian Reserve yesterday that Bursa Malaysia will sustain robust earnings despite lower interest from retail investors.

“Bursa’s robust earnings are driven partially by strong growth in average daily trading value for the equity market,” she said, citing the firm’s recent report that expects Bursa Malaysia Securities Bhd’s net profit growth in the second quarter ended June 30, 2021 (2Q21), would be between 30% and 40% year-on-year (YoY).

The firm also upped its financial year 2021 (FY21) net profit forecast for the exchange by 15.8% due to the 18.9% rise in its projected equity income as the firm increased the assumed FY21 clearing fee rate from 0.03% to 0.037%, closer to the 0.042% in 1Q21.

Bursa Malaysia’s net profit for 1Q21 rose 87.5% YoY to RM121.3 million from RM64.73 million a year prior driven by higher operating revenue which increased 56.7% YoY to RM228 million from 1Q20.