Top Glove HQ PETALING JAYA: When it comes to choosing the right sector to invest in, it appears that retail, institutional and foreign investors are moving in opposite directions. But in general, the trend indicates that investors are rotating into what used to be laggard sectors as increased positive newsflow on Covid-19 vaccines is pumping up confidence on an overall economic recovery. The energy, property and telecom sectors were the biggest gainers during the week ended Dec 4. However, it is noteworthy that the common thread running through these three sectors is that their year-to-date returns are still negative. Meanwhile, the weakest-performing sectors last week were healthcare, consumer and plantation, despite the fact that both consumer and plantation sectors recorded positive gains in the week ended Dec 4. Latest stock market data showed that local institutional investors have been selling healthcare stocks last week in favour of financial services players. On the contrary, local retail investors and foreigners bought healthcare counters and instead dumped financial services counters. According to CGS-CIMB Research, foreigners were more positive on large-cap glove makers than retail investors. “The four largest glove makers by market capitalisation attracted the most net buy flows from foreign institutional investors. “In contrast, only Top Glove Corp Bhd made it to the top net buy list of retail investors (could be partly due to share buyback activities), ” it said in a note. A key observation from last week’s fund flows was that retail investors appeared most bullish on the market. They were the largest net buyers for two consecutive weeks and their net buy flows grew 248% week-on-week (w-o-w) to RM427mil. “Local retailers’ net buy flows mostly went to healthcare (RM163mil) and consumer products (RM75.7mil) last week. “They reduced their net sell flows on financial services w-o-w, ” stated CGS-CIMB Research. As for local institutional investors, the research house said they were the largest net sellers of healthcare (RM523mil) last week, which trumped their net buying of financial services (RM291mil). The three top net sells were Top Glove, Supermax Corp Bhd and Kossan Rubber Industries Bhd. “Foreigners were the largest net sellers of the financial services (RM304.5mil) and utilities (RM203mil) sectors last week and emerged as the largest net buyer of healthcare (RM380.5mil). “Their top net buy flows went to Supermax, ” it said. Speaking with StarBiz, Areca capital chief executive officer Danny Wong 9pic below) said the rotational play into laggard sectors was not surprising as the free market usually moved ahead of the economy. “Investors are making their buying decisions by judging what it would be like in the next one to two quarters. “As we hear more about progress of the Covid-19 vaccine, investors are expecting the economy to rebound going into next year and hence, we see a recovery play in the stock market, ” he said. Wong pointed out that investors are scooping stocks that are deep in discounts. For example, the financial services sector, where some banks have been trading below their book value. “Looking ahead, sectors that are proxies to economic recovery and growth will tend to perform well. “These include banking, commodity, consumer products and construction sectors, ” added Wong. Concurring with Wong, another fund manager said that sectors such as banking, commodity, energy and consumer products may outperform other sectors in the coming weeks. “That said, the movement of stocks in these sectors are mainly driven by expectations rather than fundamentals. “If we see interruptions in the roll-out of vaccines or any other disruption to economic recovery, it would adversely affect the recovery play in the stock market, ” he said. When asked about the rubber glove players, the fund manager opined that while earnings prospects are expected to remain intact for at least the next one year, investors’ shift towards recovery play stocks and coronavirus vaccine developments may likely erode market sentiment on the glove players. “The glove stock prices may go up but it will be volatile. “Any price movement will be news-driven, ” he said.
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