KUALA LUMPUR: Out: Bull. In: Bear. Next: Stale-bulls.
Bursa Malaysia ended its 12-year reign as the world’s longest bull market on Tuesday after its benchmark FBM KLCI dropped more than 20 per cent from its peak.
And now analysts expect the rise of “stale-bulls” from the current bear market.
According to Investor-words, stale-bulls are investors who bought shares hoping that they would rise, and now find that they have not risen and want to sell them.
MIDF Research head of strategy Kifni Kamaruddin said technically speaking, a bull market ended when the price fell by more than 20 per cent from its high.
“In the case of FBM KLCI, the threshold level was at 1,516 points,” he said.
On Tuesday, the index dropped 2.69 per cent to close at 1,490.06 points.
Kifni explained that post-global financial crisis, Bursa’s fledgling bull market survived the Euro crisis in 2011 with a 16.5 per cent fall in the FBM KLCI.
Further on, a string of negative events in 2014/2015 namely commodity collapse, currency devaluation, worries over China hard-landing and 1Malaysia Development Bhd expose also failed to break the bull’s back as the local barometer retreated by 19.0 per cent at its worst.
“More recently, the FBM KLCI managed to defend, albeit barely, its bull streak despite the back-to-back net outflows of foreign funds (2018: RM11.7 billion; 2019: RM10.0 billion) from the local equity market during the past two years, and against the backdrop of prolonged US-China trade spat and region-wide economic slowdown.”
However, the already weakened bull finally relented under the weight of prevailing political upheaval with the index closing on February 24 this year 21.4 per cent off its April 19 2018 peak.
“The FBM KLCI is now in bear market territory. The stigma of a bear market may be injurious to investors’ psychology. In turn, it could propagate the rise in ‘stale-bulls’ which would negatively impact the short to medium-term price momentum of the equity market,” Kifni said.
Meanwhile, Bursa failed to extend its recovery despite settling 0.32 per cent or 4.85 points higher to 1,505.73 at midday break, following optimism that Tun Dr. Mahathir Mohamad could be the next Prime Minister.
The index ended the day 5.69 points lower at 1,495.19, after slipping 15.13 points in early trade to temporarily erase Tuesday’s 10.82-point gain.
Analysts said the index was dragged by generally weaker earnings performance announced by heavyweights such as Petronas Chemicals Group Bhd, SP Setia Bhd and Public Bank Bhd earlier today.
Throughout the day, the FBM KLCI moved between 1,485.24 and 1,508.53.
Hong Leong Investment Bank Bhd head of retail research Loui Low expects Bursa to stabilise as long as there was clarity on political development and this may further upside at least above the 1,500 level.
He told the New Straits Times today that there could be another round of potential buying interest into gloves, masks and sanitizers-related stocks on the back of rising Covid-19 cases outside China.