Friday, June 08, 2018

Ghost of past crisis to restrain market

Last night was the the night of the 23rd of Ramadhan. It is touted as possibly the night of a thousand night or Lailatul Qadr. 

It is the night one's prayers and wishes are fulfilled. There maybe Muslim investors or major shareholders of public-listed companies praying for a revival of the stock market.

According to a message viralling on social media and reports in the media, RM7 billion was taken out from Bursa by foreigners since GE14.

Despite the modest stock market gains on Bursa over the past 3 days, foreigners have pulled out money for 23 consecutive days - the longest streak since 2008.

Foreign dominance

Last Friday, they took out RM225.2mil while for the Monday to Wednesday they have taken out RM87.6mil, RM104.2mil and RM278.9mil respectively.

Added to the RM5.83 billion taken out in the month of May, a staggering RM6.997 billion has been taken out by foreigners from our stock market since PH's victory.

A private estimate placed a significantly bigger figure.

Foreigners' portion in trade was 27%. This significantly less than the percentage of more than 60% past two weeks.

Indication of smaller daily volume this week proves foreigners dominance.

Unless they turn net buyer, more local effort is needed to prop up market. The current size of the Malaysian market is beyond the means of local.

Local institutions and retail investors were net buyers at 49% and 24% of participation, respectively. Their presence are lower during the two weeks market was tumbling.

Had they not stepped in to endure the fallout, market would have been without buyers and it could easily surpassed composite index major support level of 1,700.

Local motivation could partly be driven by World Bank growth projection for Malaysia at 5.3%, which though reduced from last year's 5.9% growth, it is not a recessionary -1.9% growth as earlier projected by Moody's.

The figure does not differ from earlier governmemt projection of 5.4% before the fast and furious change to meet PH's 100 days manifesto and justified using conjured up RM1 trillion debt figure.

As one major stock market player privately confided, both views are based on data considered as "historical" in nature. It is neither forecast nor economic outlook.

Local buyers maybe temporarily encouraged to pick bottom from the contrarian view on Malaysia from a foreign fund manager. [Read TMI HERE.]

It was the breather local market was looking for.

Those investors that has trouble stomaching the zigzag market could reassess their risk tolerance level. [Read interesting CNBC article HERE]

The said stock market player cautioned such comment from a minor and lesser known fund manager of Malaysian shares.

The fund manager obviously took position on Malaysia thus he naturally wanted other fund manager to follow suit.

If he is buying on behalf of Malaysian interest, on non-discretionary basis, particularly Malaysian institutional clients, it could be a backdoor market intervention with a foreigner as cover.

Latest Friday: Foreign fund still flowing out!

Nevertheless, these outflows by foreigners are already reflected by the drop in BNM's foreign reserves which has decreased US$1 billion since GE14.

Ghost of past crisis

Has the bleeding ceased?

There is still Friday to go before a Raya shortened next week.

One earlier view was that foreign shortist could be covering their position before the long Raya holidays or resume their massive shorting.

The either way direction comes with volatility. It does not negate the fact that Malaysia's stock market is faced with a crisis of confidence.

It does not matter that there is revival in confidence following the aversion of a potential trade war.

[Read Asia Times HERE entitled "Could Mahathir clean-up spark a financial crisis?"]

It takes years and measures claimed by Tun Dr Mahathir as unconventional need be proven successful before foreign investors return.

Only the sudden end of Mahathir's second term as Prime Minister could revive interest.

In the meanwhile, foreign shortist may not attempt another market mark down to create another panic when market re-open for trading after Raya.

Mahathir was reported saying government is reviewing plan by the previous government to established trading link between the Malaysia and Singapore stock markets.

The ghost of the 1998 currency crisis remain to haunt him.

Though the general believe it is not applicable with the globalised financial market of today, there is the risk Mahathir could use his old Selective Capital Control playbook again.

He does play by any rule of law or any convention.

Do not be surprise that another innovation of the previous government to encourage market liquidity by creating market maker specialist be abolished.

That would truly be regressive.

Another flip flop coming from decisions made in haste like the attempt to cover-up the embarassment to rebrand SPAD as APAD.


Unknown said...

And the uturn havent stop..
Like the market share dropping havent stop..
Everything good deed by najib gov being rebrand..
Forever be..
Kerajaan uturn..

Unknown said...

YA...........Semuanya salah DAP!

Anonymous said...

If only the USD1 billion reduced reserve could have been chanelled to projects and programmes for the netizens and the country...hmmm! As it is, it has been lost into thin air. That's a lot to lose in less than 1 month. The government is answerable.

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