PETALING JAYA: When the FBM KLCI fell more than 20% from its 2018 peak end of last month, the bear market alert was triggered due to “black swan” events – oil price crash and Covid-19 outbreak as well as domestic political uncertainties .
And, now, with the continued rise in Covid-19 cases and deaths both locally and globally, the pandemic is far from waning, with some quarters claiming that the impact could be worse than that of the 2008/2009 global financial crisis, which saw the KLCI plunge to a record low of 829 points.
Despite a rebound of 83.56 points or 6.9% last Friday, the KLCI still ended the week 41.47 points or 3.1% lower. At last Friday’s close of 1,303.18 points, the benchmark is trading at 14.56 times price-to-earnings ratio.
After a 18% decline year to date, the market has started to find its bottom.
Among the top 30 KLCI component stocks, Genting Bhd and Genting Malaysia Bhd have been hit hard, with their share prices falling 44.7% and 40.5%, respectively. All operations at Resorts World Genting have been shut down since the movement control order kicked in last Wednesday.
Glove makers Top Glove and Hartalega, meanwhile, recorded spectacular gains of 34.84% and 23.74% respectively.
CIMB Group Holdings Bhd and Public Bank Bhd are the worst-performing banking stocks as their year-to-date share prices have tumbled 30% and 29.45%, respectively.
In a recent note, Affin Hwang Capital said fears over a global economic slowdown have started to sink in as global equity markets begin to ponder the negative impacts of production supply disruptions, lost man-hours and weaker consumer spending, especially as the Covid-19 outbreak has turned into a worldwide pandemic.
However, every cloud has a silver lining. Market downturns mean lower prices, and traditional investing strategies suggest blue-chip stocks are the way to go when seeking stability.
If there’s any time to buy, it’s now.
AmInvestment Research pointed out that over the last 15 months, the KLCI has lost 26% – from 1,691 points to 1,257 points – of which 6% of the drop occurred in 2019 and 20% in just the first quarter of this year alone.
The research house has picked a number of KLCI component stocks which it views as defensive or fundamentally strong as top buys. These are: Tenaga Nasional Bhd (TNB), Digi.Com Bhd, Malayan Bank-ing Bhd, RHB Bank Bhd, and Sime Darby Bhd.
Year to date, these stocks have seen price declines of 9.62%, 6.92% 14.17% 14.17% and 23.66% respectively.
Banking stocks, in general, could be considered a value buy at this juncture, as analysts say they still offer attractive dividend yields – despite their earnings being impacted by the cuts in the Overnight Policy Rate.
CGS-CIMB Research said, overall, it considers banks’ 20220 dividend yield of 6.3% to be attractive, as the latest round of cuts to the statutory reserve requirement ratio will help improve banks’ net interest margins.
Its top picks for the sector are RHB Bank Bhd and Public Bank Bhd, which are projected to have dividend yields of 7.44% and 5.65% respectively for this year.
For now, it remains unclear when the uncertainties might end, and one can only hope that it will be sooner rather than later. However, for those looking for opportunities in the market, there’s no time like the present.