KUALA LUMPUR: Bursa Malaysia and other emerging stock markets will likely remain a laggard until June this year, partly due to the outbreak of the novel coronavirus (2019-nCoV).
Analysts said the regional markets would be extremely weighed down if the deadly 2019-nCoV prolonged.
Foreign investors had taken a cautious stance on Bursa particularly, amid the negative headlines emanating from China, they added.
Bursa’s benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) index ended mixed yesterday amid profit-taking in heavyweights and bargain hunting in small-cap stocks as global markets continued to face uncertainties.
The index fell 1.17 points to 1,550.47 from Tuesday's close of 1,551.64.
As of yesterday, there were over 6,000 confirmed cases related to coronavirus globally, with a total of 132 deaths in China.
Sunway University Business School economics Professor Dr Yeah Kim Leng said uncertainties over the extent, severity and duration of the coronavirus outbreak in China and its spread across the countries had spooked emerging markets.
“It could potentially slow down the Chinese economy with negative spillovers to the global economy and emerging markets that are dependent on Chinese import demand, tourist spending and investment activities,” Yeah told the New Straits Times (NST).
A prolonged outbreak would increase risk aversion and dampen emerging markets' attractiveness to foreign investors seeking higher returns and growth opportunities compared to developed markets, he added.
A source said foreign tourist arrival to Malaysia would be affected temporarily as people were afraid to travel with most airlines having blocked Chinese tourists, particularly from Wuhan.
“Normally, people would not travel during an outbreak as they are afraid to be infected. But as soon as the vaccine is available to cure the disease, the tourism trend will continue,” he said on condition of anonymity.
Tourism, Arts and Culture Minister Datuk Mohamaddin Ketapi had reportedly dismissed the concern of temporary ban involving Chinese tourists from Hubei and Wuhan to contain the outbreak would impact the government’s target of 30 million tourist arrivals for Visit Malaysia Year 2020 (VMY2020).
He said the temporary suspension would have minimal impact to VMY2020 as the Chinese government had begun to quarantine the affected city and its inhabitants to control the outbreak.
Asian Aviation consultancy firm Aer Mobi chief executive officer Michael Walsh said airlines would be more conscious to protect their crew and passengers.
AirAsia Group Bhd and Malindo Air had temporarily halted all flights to and from Wuhan, China following the outbreak.
OANDA senior market analyst for Asia Pacific Jeffrey Halley said tier-2 (regional) markets generally had less liquidity than the larger developed markets with offshore investors more likely to prefer for longer term investment horizons.
“Therefore, they (foreign investors) are not subject to the same fast money flows as say Hong Kong and Singapore. The other side of the liquidity coin is that they can be harder to exit should adverse news hit markets as well,” he told the NST yesterday.
Halley said major markets with free capital flows and deeper liquidity were now appealing for investors to reflect short term bullish positioning.
“In an interconnected world, domestic confidence is not usually enough. Well run and profitable companies’ prices on stock exchanges will adjust accordingly based on the external environments.”
Rakuten Trade Sdn Bhd vice president of research Vincent Lau said the FBM KLCI’s performance would continue to be driven by the technology, rubber, plantation and energy stocks in the near term.
“Based on the current performance, the technology-related stocks have continued to do well as demand rises for chips components for Apple. This has triggered Apple’ suppliers to ramp up their supplies,” he told the NST.
Lau said the FBM KLCI was still a laggard as investors wanted clarity on the government’s infrastructure projects, in particular on the contracts that are set to be awarded.
“The FBM KLCI is also largely dependent on the performance of the banking stocks, which have been underperforming.
“This was impacted by a lower interest rate because margins are compressed, thus weighing on the overall sentiment of the stock market as the banking stocks account for almost 30 per cent of the total market capitalisation volume of the FBM KLCI,” he added.
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