KUALA LUMPUR: A rally in the local stock market has come to an abrupt halt with a global selldown from expectations of a higher for longer US federal fund rates, underwhelming China data and speculative bubbles bursting across various counters.
The FBM KLCI today closed 0.81 per cent or 12.03 points lower at 1,479.18 compared with Wednesday's close at 1,491.21.
Tradeview Capital fund manager Neoh Jia Man said he does not believe the sell-off signals a broader underlying market issue, as the fallout has mainly been contained within several highly speculative counters lacking fundamental support.
"In fact, this may present a rare window of opportunity for investors to accumulate high-quality stocks for long-term investing," he said.
Neoh added that while the impact on investor sentiment is inevitable, he does not think there is any need to panic, as the ongoing sell-off does not stem from a deterioration in stock fundamentals.
"Investors should consider this a reminder to prioritise stocks with strong fundamentals rather than pursuing high returns in speculative names," Neoh added.
He said considering the attractive valuation of the FTSE Bursa Malaysia KLCI relative to historical averages and regional peers, any further downside in the benchmark index will be limited.
Commenting on the high number of unusual market activity queries since the start of the year, Neoh said these occurrences are rare in the market and are likely linked to a domino effect stemming from the collapse of several stocks that have been artificially propped up by equity-backed financings from certain syndicates.
Meanwhile, Malacca Securities Sdn Bhd head of research Loui Low says the current market sentiment is quite weak due to several companies hitting limit down conditions early on and that has contributed to selling pressure across the board.
"I think this consolidation may continue for another week or so until most of the margin related stocks rebound later on."However for the time being, I do not see the rebound happening in a few days, I think the sell off as well as the consolidation may continue for another week," he said.
Low said the UMAs issued to companies like Datuk Yu Kuan Chon's Rapid Synergy, YNH Property and Imaspro Corp Bhd, Datuk Dr Yu Kuan Chon's acted like a trigger to the sell-off.
"The continuation of the sell-off is evident, driven by retailers holding shares early on, creating a contagion effect, as selling by retailers, especially when using margin, leads to margin calls and subsequent losses in various held companies," he said.
This interconnectedness extended to companies like Sarawak Consolidated Industries Bhd, Masteron Holdings Bhd, and Leform Bhd, causing a domino effect.
"Initially, only three counters were affected, but as more retailers are compelled to sell in this market, a broader sell-off ensues, impacting numerous companies," he told Business Times.
Low said this occurrence and events will happen once in a while where there will be some similar cases although it has not happened for quite some time, it may just be another cycle of sell-off.
He said it is important for retail investors to refrain from investing in stocks unless they possess a comprehensive understanding of the respective companies.
"It is crucial to scrutinise factors like net profit, financial statements, and overall fundamental strength. Analysing ratios, net income, and cash flow helps identify potential weaknesses.
"Fundamentals remain paramount for identifying quality companies. The impact is likely to affect smaller-cap companies lacking solid fundamentals, whereas financially stable entities, especially FBM KLCI-related companies, may present entry opportunities," he added.
Low advised looking out for opportunities to accumulate YTL Corp Bhd, YTL Power Bhd and property counters.
Rakuten Trade Sdn Bhd equity research vice president Thong Pak Leng attributed the market decline to a global sell-down, but remained optimistic about a market rebound.