When the Glove Sector was killed off by certain Local Funds since the start of last week, coupled with some incompetent reports from select "professionals", you might be asking, since the funds have left Gloves. Where would they go next? What is the next thematic / rotation play?
I can with great certainty share with you, regardless of which sector they move to, it wont move up and these Local Funds wont be able to make money from that sector. The Glove Sector is the one supporting the KLCI index, it is also the one that is supporting the other ancillary sector (be it healthcare or indirectly linked such as Bursa due to high volume). Gosh, even the water, electricity, natural gas consumption by these Glove Manufacturers are supporting the utilities sector for the government when other industries have slowed down as a result of the pandemic. I like this message by Principal Asset:
Her views were echoed by Principal Asset chief investment officer Patrick Chang, who said that the FBM KLCI has largely been driven by the healthcare sector, which has seen medical glove manufacturers, in particular, raking in bumper profits amid the Covid-19 pandemic.
Compared with its regional peers, he said the KLCI has been the biggest outperformer in ASEAN year-to-date, having only been down by about 6% compared with Thailand (down 22%), Singapore (down 22%) and Indonesia (down 25%).
These countries, he noted, do not have a massive glove sector like Malaysia does.
"Glove makers are making historic amount of profits as we speak - this tells you at the end of the day that it is backed by fundamentals.
Hence when select Local Funds try to kill the KLCI market's only bright spot, you effectively kill other sectors. Simply because, if a company with strong fundamental earnings are ignored and dismissed with such impunity, what does it make of other sectors which are loss making or delivering only a fraction of the Glove's sectors earnings?
- Tech ? Down
- Banking ? Down
- Plantation ? Down
- Wood? Down
- Consumer? Down
- Utilities ? Down
- Telco ? Down
The list goes on. Banks don't even give Local Funds the yield anymore. So where are the Funds going to park your funds in search of yields? Your best bet is for the Glove players to be generous with their dividend this year and fill in the gap left by other Blue Chip stocks. Hence, if Funds continue selling down and creating nonsense justifications to play down the sector, trust me, even the Glove Sector cant save the Fund's performance this year. Why? Glove Players would probably need to use their cash holdings to support their share price.
So, now where else do you turn to? Sure, one can artificially prop up some of these sectors last minute to try to beautify your Index. However, the market will not respond to your nonsense. In fact, the market always punishes greed, pride & laziness. You may want to rotate out and switch to other sectors, but no one is following you. So you are just playing with yourself. And if you are playing with yourself, the share price will not go up. This is because all market participants need to be on the same page for a company share price to rise. Its as simple as that.
This is my message to Macquarie's unbelievably incompetent and questionable Research Report Downgrade of Top Glove yesterday. This has caused such a reputation dent to your Bank that if I am senior management or the CEO of the Bank, I would summon the head of research to reprimand how his action brought disgrace to the organisation. Why am I saying this? Just look at what Macquarie send to my mailbox this morning.
My message to Macquarie - After adding salt to injury in the market yesterday, you have the nerves to reiterate outperformance on Bursa stock to promote your call warrants on Bursa. How dare you email me with his garbage? Bursa's share price and volume has been reaching record high because of Gloves sector. If you want to say Gloves sector's supernormal profit in 2021 will never repeat itself and its a one off, hence justifying pegged to 2022/2023 normalised ASP earnings, do the same for Bursa. Downgrade to underperform as well and pegged it to 2022/2023 normalised Average Daily Volume. Be Consistent in your message - Macquarie. Dont be joke.
Ps: McQ, just bring back the previous Glove Analyst - Denise Soon
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Food for thought: