KUALA LUMPUR: Bursa Malaysia remains steady after Bank Negara stands pat with its key interest rate at a historical low of 1.75 per cent, despite jitters over the May reporting season and low vaccine supplies.
Bursa's benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) gained 2.66 points or 0.17 per cent to close at 1,578.33 yesterday.
OANDA senior market analyst for Asia Pacific Jeffrey Halley said the index had held steady after Bank Negara Malaysia left the OPR unchanged as expected by the market.
"The third Movement Control Order (MCO) imposed by the government are weighing on local equity markets, with the usual boost in domestic consumption now unlikely to occur," he told the New Straits Time (NST) yesterday.
Halley had expected Bank Negara to trim rates by 0.25 per cent which would be an immediate boost to the local stocks.
On the weakening optimism from foreign and institutional investors, he said outflows from these investors were not a vote of no-confidence in Bursa but rather they believed they had found better and faster returns in other markets.
"This is the nature of hot money flows. Glove makers, in particular, have been 2020 darlings, and it could well be that foreign investors feel we have seen the best of the price movement in that sector," he said.
Halley said the banking, glove and energy counters remained attractive on price dips.
"Once the global recovery narrative establishes itself in Asean, cyclical markets such as Malaysia will resume their rally," he addd.
Halley said Covid-19 fears across the region had weighed on market sentiment.
"Although a failure of support at 1,550 threatens a deeper correction, the FBM KLCI should find plenty of willing buyers if it falls to near 1,450," he added.
Malaysian Rating Corp Bhd senior economist and head of research Firdaos Rosli said sentiment in Bursa was expected to remain jittery amid the imposition of stricter lockdown measures.
"The lockdown measures announced have dampened business sentiment combined with the rising number of infected cases both abroad and domestic," he told the NST.
Firdaos said Bank Negara's decision to hold the OPR unchanged would provide no additional stimulus to lift the stock market.
"We are also ruling out further fiscal stimulus to cushion the impact of MCO 3.0 for now as the government exercises a high level of self-restraint," he said.
Firdaos said the present level of retail participation would continue its momentum.
He cautioned that Bursa could fall even further in May amid nervous sentiment ahead of the announcement on the country's economic performance for the first quarter of 2021.
Additionally, the possibility of a delay in Phase Three of Malaysia's immunisation programme due to supply shortages of vaccines could weigh in on the full impact of the prolonged MCO on corporate earnings in Q1, curbing recovery optimism.
"Besides, investors are also actively looking for a clearer signal from the Federal Reserve on timelines to raise rates sooner than by 2023," he added.