KUALA LUMPUR, May 20 — Local retail investors have been a saving grace with their increased market participation in the local equities market, amidst diminishing foreign funds and backdrop of uncertainties brought by the Covid-19 pandemic, says Rakuten Trade Sdn Bhd.

Head of research, Kenny Yee said retail investors have played a large part in terms of market participation on Bursa Malaysia of late and this trend would likely persist especially given the low-interest rates environment and cheaper valuations of stocks.

“Since February this year, we detected a surge in retail participation and this became more obvious in March following the market sell-down during that month.

“Overall, retail participation has risen by 62 per cent compared to 2019 average. As a result, the local bourse experienced a surge in daily trading volume, averaging 4.42 billion shares (Feb-Now) from 2.51 billion shares for 2019,” he said told a virtual media briefing titled ‘Entering a New Normal’ today.

Yee said foreign funds have been moving in and out of the market despite the downtrend on Bursa Malaysia since the start of the pandemic as valuations were still not cheap when compared with other regional markets.

He said foreign holding has been diminishing over time and it has dipped to a multi-year low of 12.9 per cent from around 20 per cent in 2017.

“We are not at all surprised by the lower foreign shareholding. On a positive note, with this low foreign shareholding, we may not see any massive foreign funds out of Malaysia,” he said.

Commenting on the recent uptrend on Bursa Malaysia, he advised investors to be cautious because it is likely to be liquidity-driven without any fundamentals.

Liquidity according to him, is playing its part in propping up the share market and the recent performance of equity markets seemed detached from reality, particularly Wall Street.

Yee said stock markets are highly susceptible for another sell-down since prevailing negative news has overshadowed that of positive.

“Right now, there are more negative news than positive. I am not saying that there will be another episode of panic selling, but to ignite this panic selling is not difficult at all.

“The only way the market can be on a more solid footing is when a vaccine for Covid-19 is developed and the pandemic is cleared out. We are only standing on one foot right now and we can fall anytime due to the slightest push,” he added. — Bernama