'Zero-sum game' for Malaysian equities amid COVID-19 fears

Malaysia’s equity market experienced a ‘zero-sum game’ last week as the outflow and inflow of funds were equal despite mounting fears over the COVID-19 pandemic that had triggered panic in the overseas markets.

The local market was well supported by buying activities from both local institutions and the retail sector, dominating 74.18 per cent of average participation during the first four days of the week.

Bank Islam Malaysia Bhd chief economist, Dr Mohd Afzanizam Abdul Rashid said local institutions remained as net buyers at RM967.3 million during the March 9-12 period, compared with RM650.67 million registered a week earlier.

He said the inflow of funds from local retailers doubled to RM461.8 million from RM228.9 million previously.

“I believe that major funds such as the Employees Provident Fund, Permodalan Nasional Bhd and the Retirement Fund (Incorporated) are the major supporters of the Malaysian stock market,” he told Bernama.

As for foreign investors, the local equity market saw a strong outflow of RM1.43 billion during the March 9-12 period against RM879.57 million recorded a week earlier, as market sentiments were affected by the COVID-19 outbreak which has since been declared as a pandemic by the World Health Organisation (WHO).

Mohd Afzanizam said major global stock markets were in bearish territory, plunging by more than 20 per cent, and the FTSE Bursa Malaysia KLCI (FBM KLCI) was no exception.

“As a result, risk aversion has become more rampant as investors are seeking shelter against volatility, leading to lower government bond yields.

“Foreign investors were still net sellers, while Malaysian local institutions remained as net purchasers,” he said.

Regional equity markets, including Malaysia, were gravely affected on Friday the 13th as selling pressure intensified amid uncertainties due to the COVID-19 pandemic which had triggered travel bans and recession fears, coupled with lower oil prices.

Benchmark indices in Japan and India sank by as much as 10 per cent as investors reacted to WHO’s pandemic declaration.

Trading on the Stock Exchange of Thailand (SET) was halted temporarily on Friday after it hit the 10 per cent circuit breaker limit for the second consecutive day.

It ended the day 10.8 per cent lower at 1,114.91, its worst performance since 2006.

Meanwhile, trading on the Indonesia Stock Exchange was halted on Thursday, 30 minutes before the market was officially closed, after the Jakarta Composite Index fell by more than five per cent to 4,895.75.

The last time its trading was suspended was on Oct 8, 2008 after the barometer index dropped 10.38 per cent to 1,451.67 during the global financial crisis.

On a Friday-to-Friday basis, the benchmark index FBM KLCI erased 138.35 points or 9.33 per cent to 1,344.75, the lowest level since 2010, from 1,483.10 previously.

Weekly turnover expanded to 25.02 billion units worth RM17.67 billion from 15.85 billion units worth RM12.51 billion a week earlier.

Going forward, Mohd Afzanizam expects Malaysian investors to remain guarded next week and that the impact from COVID-19 outbreak would continue to be closely monitored by all investors.

He added that investors would also be waiting for more details on possible adjustments to the existing economic stimulus package. - BERNAMA