Political drama erases RM43.4b market cap from Bursa
Wong Ee Lin/The Edge Financial Daily
February 25, 2020 08:36 am +08
This article first appeared in The Edge Financial Daily, on February 25, 2020.
KUALA LUMPUR: The political drama since Sunday triggered panic selling on Bursa Malaysia yesterday. Many stocks were “gap down” at the opening bell in the absence of equity bulls on the local bourse.
The selling wiped out RM43.4 billion in market capitalisation from Bursa in a single day. There were 1,015 losers and 138 gainers, while 222 counters traded unchanged.
All indices on Bursa were also in negative territory; the worst hit was Bursa Malaysia Construction Index, down 6.07% or 12.6 points to 194.81. Bursa Malaysia saw 4.03 billion shares, worth RM3.91 billion, traded yesterday.
The ringgit also ended sharply lower against the US dollar yesterday in tandem with the local equity market, amid a domestic political realignment and the ongoing Covid-19 outbreak, said an analyst.
At 6pm yesterday, the local currency had depreciated to 4.2240/2270 against the greenback from last Friday’s close of 4.1900/1940.
Some fund managers and equity strategists said mounting political uncertainties caused by the Pakatan Harapan coalition breaking up further dampened an already weak market sentiment after the Covid-19 outbreak clouding global economic growth prospects.
The FBM KLCI benchmark index sank below the 1,500-level, skidding to an intraday low of 1,486.71 points — the lowest level since December 2011. It closed at 1,490.06 yesterday, down 41.14 points or 2.69%. The KLCI has shed 13.6% over the past one year.
On the political scene, Tun Dr Mahathir Mohamad dropped a bombshell yesterday announcing his resignation as prime minister and Bersatu chairman.
Parti Pribumi Bersatu Malaysia (Bersatu), led by president Tan Sri Muhyiddin Yassin, also announced it had exited Pakatan, formed in September 2015.
The news broke shortly after PKR deputy president Datuk Seri Mohamed Azmin Ali announced that he and 10 members had exited PKR and the Pakatan coalition to form an independent bloc.
Back on financial markets, Bank Negara Malaysia (BNM) said yesterday it is closely monitoring conditions of financial markets, in light of developments currently unfolding.
“While the ringgit’s movements will continue to be market determined, BNM’s market operations will ensure sufficient liquidity and orderly financial market conditions,” the central bank noted.
Among the 30 KLCI components, only four counters, led by Top Glove Corp Bhd and Hartalega Holdings Bhd, were in positive territory, and the other 26 in the red.
Across the board, the biggest losers were Carlsberg Brewery Malaysia Bhd and Heineken Malaysia Bhd. The two brewery counters recording all-time highs recently.
Phillip Capital Management Sdn Bhd chief investment officer Ang Kok Heng told The Edge Financial Daily that “investors don’t like uncertainties”, and whether Dr Mahathir will be reappointed as the next prime minister or Anwar Ibrahim taking over remain unknown for now.
This is on top of concerns that parties, especially those from Sabah and Sarawak, may swing the balance, said Ang.
Ang noted a weaker ringgit has caused the selling among foreign investors as well.
“Market conditions are now rather fluid. There is so much political uncertainty that at this point, we do not know who is the prime minister,” said TA Investment Management Bhd chief investment officer Choo Swee Kee, adding that the market could swing either way and possibly fall lower, if there is a stalemate politically.
He noted the stimulus package is the only major catalyst to boost the local market.
“This uncertainty is affecting sentiments locally. However, fundamentally it should not affect companies that are competitive internationally and export-oriented,” said Choo.
“I believe glove, technology and plantation companies should not be affected by this domestic uncertainty and their depressed share prices could be a temporary effect,” he added.
RHB Investment Bank Bhd regional equity research head Alexander Chia concurred, saying “politics affects us all in one way or another”. He added that no counters will be spared, but investors would likely seek refuge in “defensive” and resilient high-yield stocks.
“Offsetting factors include positive news on the Covid-19 virus front, better-than-expected results and ... not much else,” said Chia, on catalysts to support the market now.
Despite political uncertainties clouding the local market, the KLCI still fared slightly better than some regional indices as fears of the Covid-19 outbreak continue to spread outside China.
Elsewhere in Asia, regional indices were in the red too. South Korea’s Kospi was down 3.87%, while Thailand’s SET fell 3.
