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Market Recap: Negative returns across most sectors

RECOVERY has been the most talked-about theme in the local bourse this year amid the speedier vaccination rollout, which has helped contain the spread of Covid-19 infections.

Ironically, most sectors on Bursa Malaysia recorded negative returns during the year. The healthcare sector saw the largest decline at 38.8%, due to the sell-off in glove stocks. Other poorly performing sectors were energy (-24.6%), construction (-18.3%) and plantation (-12%).

Only three sectors were in positive territory, namely technology (+35.3%), industrial products (+10.5%) and transportation & logistics (+6.6%).

Spurred by strong market liquidity and optimism in the economic recovery, the FBM KLCI kicked off 2021 on a positive note, reaching a high of 1,639.83 points on March 10.

The positive sentiment on local equities was also fuelled by the technology mania, in line with a strong rally in the US’ Nasdaq Composite Index. That said, the persistent bullishness on technology stocks sparked concern that it might lead to the “mother of all asset bubbles”, which did not happen, at least for now.

As at the Dec 17 close of 1,502.01 points, the FBM KLCI had fallen 7.7% year to date (YTD), underperforming its regional peers. The drop was partly due to the decline in two glove stocks — Top Glove Corp Bhd and Hartalega Holdings Bhd, which had plunged 66.1% and 58.2% respectively YTD.

Likewise, the FBM Emas Index — which comprises all companies listed on the Main Market — and the FBM Top 100 Index had contracted 7.2% and 7.6%, respectively.

As a result of the lower returns from the local bourse, its overall market capitalisation shrank 4.9% to RM1.73 trillion as at Dec 17, from RM1.82 trillion a year ago. Note that corporate earnings in 2021 were affected by the reimposition of a full lockdown to curb the spread of Covid-19 infections.

Despite supply chain disruptions, technology stocks remained the star performers on the back of robust market demand for technology products, as the pandemic had accelerated digital adoption.

It is worth noting that industrial products & services emerged as the second-best performing sector, driven by pent-up market demand.

Rising container shipping rates, meanwhile, boosted the transportation & logistics index to a record high in October, with a rise of 6.6% YTD. Tasco Bhd and Transocean Bhd were among the top gainers in the sector, having increased 52.6% and 264.6% each.

While the interstate travel ban was lifted in October, it only served as a short-term catalyst for tourism and aviation stocks. Having touched a high of RM1.33 in October, AirAsia Group Bhd saw a reversal in its share price, with an 11.9% fall YTD, while Malaysia Airports Holdings Bhd was down 2.2%.

During the same period, the share prices of Genting Bhd and Genting Malaysia Bhd were up 0.4% and 4.5% respectively.

As retail participation waned, stocks on the ACE Market — predominantly supported by retail investors — lost 41.5% of their value in 2021 after doubling in 2020.

Nonetheless, retail investors remained the only net buyers of Malaysian equities in 2021, to the tune of RM12.44 billion, while local institutions and foreign investors were net sellers, accounting for RM9.31 billion and RM3.13 billion respectively, according to MIDF Research.

Data provided by Bursa shows that the overall trading volume eased substantially from 210.99 billion shares in March to 76.88 billion in November.

In the semi-annual review of the index constituents in June, Mr DIY Group (M) Bhd — whose market capitalisation had surged from RM11 billion upon listing in October 2020 to RM21.3 billion on Dec 17, 2021 — was included in the benchmark FBM KLCI, replacing Supermax Corp Bhd, which had slumped 76.6% YTD.

Meanwhile, in the recent review, the inclusion of Inari Amertron Bhd as an index constituent marks a milestone for the local bourse as this is the first time a technology stock is represented on the benchmark index. Inari is now valued at more than RM14 billion after posting a YTD gain of 37.1%.

Bursa lifted the suspension of regulated short-selling (RSS) early this year after imposing the ban in March 2020, in view of the global equity rout. For intraday short-selling (IDSS) and intraday short-selling by proprietary day traders (PDT short sale), the ban remains until the end of this year.

Following the lifting of RSS, glove stocks became the target of short-sellers, prompting calls to push up glove stocks against short-sellers, in a bid to mirror the “GameStop frenzy” in the US. With the help of social media, US-listed video game retailer GameStop saw its share price leap more than fivefold in just three trading days in January this year, causing a massive short squeeze for at least two hedge funds that had bet that GameStop’s share price would fall.

Although 2021 was a good year for the commodity theme — with Brent crude oil prices and crude palm oil (CPO) prices rising as much as 65.4% and 48.2% to US$86.70 a barrel and RM5,429 a tonne respectively — the gains in the oil and gas and plantation stocks lagged behind the commodity rally.

YTD, Bursa’s Energy Index had slipped 5.2% while the Plantation Index was down 12%. The weak sentiment on the plantation sector was mainly due to lingering environmental, social and corporate governance (ESG) concerns. For the O&G sector, investors were cautious about the resumption of investment activity.

On the capital market front, the Securities Commission Malaysia in September launched the third Capital Market Masterplan, which will serve as a strategic framework for the growth of the country’s capital markets over the next five years.

One of the development thrusts is to facilitate fundraising for competitive businesses through a diverse market and intermediation ecosystem. Mid-tier companies are also a focus area and financing options will be offered to help them accelerate growth, including potential expansion into other business verticals or overseas markets.

Downside risks to growth include policy adjustments by major central banks, high inflation, global supply chain disruption, new Covid-19 variants, an economic slowdown in China and higher volatility in financial markets, according to MIDF Research.

In its Dec 15 strategy note, Hong Leong Investment Bank Research says it expects 2022 to be another choppy year for the market as a “tug of war” manifests between the market headwinds caused by Budget 2022 and the economic reopening. “As such, we advocate a more trading-oriented approach in 2022, with a ‘buy-on-weakness’ range of 1,460 to 1,490 points and a ‘sell-on-strength’ range of 1,620 to 1,640 points.”

The research house’s top picks are Tenaga Nasional Bhd, RHB Bank Bhd, Telekom Malaysia Bhd, Sunway Bhd, UWC Bhd, Astro Malaysia Holdings Bhd, VS Industry Bhd, Syarikat Takaful Keluarga Malaysia Bhd, Bumi Armada Bhd, Kobay Technology Bhd, TSH Resources Bhd and Focus Point Holdings Bhd.

Meanwhile, Credit Suisse expects the tourism, property, technology and construction sectors, as well as IHH Healthcare Bhd, to deliver the highest net profit growth in 2022. While tourism and banking stocks will be the largest contributors to earnings growth in 2022, it said the earnings are expected to be weighed down by an anticipated earnings compression for the plantation and glove sectors.


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