Trading volume on Bursa hits all-time high

PETALING JAYA: Trading in shares on Bursa Malaysia continued its uptrend to hit a peak of 7.67 billion shares yesterday after recording 5.11 billion shares on Tuesday, suggesting a market correction "will not be too far away", according to industry players.
A fund manager who declined to be named said despite heightened trading in the local stock market off-late, he opined that it is not a healthy scenario that could lead to a correction in the market.
"Each time when the volume shoots up, the market will go down then," he told SunBiz.
The fund manager revealed that the fixation on small caps has led "a few" security houses to impose trading restriction on large margin trading of certain stocks.
"They (securities houses) cap the trading to avoid a counter becoming a designated security," he added.
Even as volume hit an all-time high of 7.67 billion shares however, trading value less than half of that at RM3.30 billion, signalling that trading in the stock market was dominated by small caps. The highest trading volume recorded was 4.78 billion shares in February 2007.
Worth noting is that the buying spree on Bursa Malaysia turned into selling pressure yesterday with losers outpacing gainers by more than 3 to 1.
All stocks in the 10 most active list registered trading volume of more than 100 million shares. Globaltech Formation Bhd topped the list with 1.01 billion shares, accounting for 13.17% of the total trading volume on Bursa Malaysia yesterday.
This followed by Sumatec Resources Bhd and Hubline Bhd, which recorded 739.24 million and 710.25 million share volume respectively.
Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew opined that the "exceptional" surge in trading volume yesterday is unsustainable and it is unlikely to continue in the next couple of trading days.
He believes investors, particularly retailers, would turn more cautious after the heavy selling yesterday, stressing that the rally in small caps might not "come back" this time around.
"This is due to high price-to-earnings valuation in small caps which has gone back to the peak in 2007, internal weakness whereby number of stocks that hit 52-week high have fallen and the unsustainable volume also working against this rally," Pong said.
He noted that the selling pressure was also due to increasing foreign shareholdings in small caps in recent months.
"When they (foreign funds) want to sell, they just dump it sharply," Pong explained.
On the other hand, Pong said the FBM KLCI, which tracks 30 heavy-weighted stocks, will not be affected by the spike in trading volume, citing it will react more to the US and regional markets.
"The FBM KLCI is no longer reflective of the whole market, it goes on its own direction," he added.
The FBM KLCI went up 6.73 points or 0.36% to close at 1,878.89 points yesterday despite the bearish sentiment in the broader market.