The direction of the stock market for the rest of the year would hinge directly on clearer global macro-economic indicators and clarity of the budget that would be unveiled by end of the month although most analysts said that there is the potential of upsurge to 1650 level by end of the year, economists, and analysts told Business Today.
They add the recent spike in the stock-market market may not necessarily be driven by the attraction of the local bourse alone but driven by “opportunistic “foreign funds that may have found their way into the local bourse.
Ivy Ng Lee Fang, Head of Research at CIMB Investment Bank Bhd says that among the factors that investors would be watching this month would be the tabling of Budget 2022 on October 29, news flow from the parliament sitting.
Investors will be focusing on fund flows to detect if the past two months’ net buying by foreign investors in Malaysia is sustainable, vaccination progress in the country rates and whether the various relaxation measures would have on movement control and the impact of new Covid-19 cases in the country.
Globally, she says that investors will be monitoring how the Delta Covid-19 variant is affecting the number of new Covid19 cases and the rollout of Covid-19 vaccination and distribution programmes globally.
Analysts also chime in to say that that the Evergrande debt crisis, China’s power crisis, and local political developments such as the progress of the Memorandum of Understanding (MOU) signed between the government and Pakatan Harapan (PH) and if there any shift .in political allegiances by Members of Parliament (MPs) would also weigh in on investor sentiments.
For the past several weeks, foreign investors have been net buyers although the net inflow has been shrinking for four consecutive quarters. Analysts have also said that the country’s recovery would be boosted if the government implements the 12th Malaysian Plan
Head of RHB Research, Alexander Chia says that there was foreign nibbling in the local bourse in August but these are mere opportunistic funds that may make their way into the local bourse.
He said that although the local bourse had the potential to touch the 1650 levels, it still depends on a slew of global and domestic factors that requires greater clarity.
A notable concern of the market is that there was limited fiscal space and the government needs to spell out its source of funding in the oncoming budget.
A strategist in a bank-based broking house says that another factor that could bolster buying support in the local bourse was the volatility of wall Street and the expectation of higher interest rates in the US. In addition, other factors that would bode well for the local bourse was the stellar growth in exports that stems from the Covid-led demand surge for gloves and the sharp recovery in commodity prices of palm oil, aluminum, and Petro-chemicals.