The Malaysian Insight

THERE is unlikely going to be drastic changes in trading trends on Bursa Malaysia despite the current political uncertainty, said stock market analysts.

However, they said some investors may see opportunities in the situation to buy cheaply, while others may choose to sell their holdings.

Malaysia’s political situation took a turn for the worse last week, after a faction in Umno led by president Ahmad Zahid Hamidi announced that it will be withdrawing support for Prime Minister Muhyiddin Yassin.

Yet, barely a day later, Muhyiddin announced he would not resign and would instead face a confidence vote in Parliament in September.

Analysts said this political uncertainty could evoke both positive and negative sentiments among traders.

Rakuten Trade Research vice president Thong Pak Leng told The Malaysian Insight that the stock market could see a sideways drift with huge volatility in the short term.

A sideway drift refers to the securities prices trading within a fairly stable range without forming any distinct trends over some period of time.

“With the volatility in the market, traders (who see this as an opportunity) can buy (securities) at lower prices and sell at higher prices,” Thong said.

“People who are taken in by the political uncertainty will sell their holdings. Then there will be people who will buy (securities) at a lower price after the sellers have sold.”

The FBM KLCI fell by 4.8 points to end the week at 1,489.8 points from 1,494.6 in the week prior.

However, Thong said he is maintaining his 1,700-point year-end target for the index.

“For longer term, when the political matters are solved, the market should be positive. Also due to the recovery post Covid-19, economic recovery and people will have better confidence in the market,” he said.

Areca Capital Sdn Bhd CEO Danny Wong said apart from the political uncertainty, the increase in Covid-19 cases have also impacted investors’ sentiments.

“The FBM KLCI is the worst performing market in the region with foreign investors exiting, but on a smaller scale,” Wong said.

“The market has largely priced-in the factor. Despite the poor sentiment, I remain positive on the mid, long-term outlook.”

He said this is based on the decent valuation of the KLCI with less volatility and low foreign holdings.

Wong added the political uncertainty will abate once the confidence vote is moved in Parliament. – August 9, 2021.