Retailers look for assets that offer higher returns

FOLLOWING the surge in retail interest in the stock market, CGS-CIMB Research initiated a survey to better understand Malaysian retail investors’ preferences.

A total of 1,122 Malaysian retail investors responded to the survey which started from June 4 to June 13.

Based on CGS-CIMB’S survey, it deduced that the main motivation behind the recent surge in the trading of stocks is due to investors looking for assets that offer higher returns.

“The three biggest sources of funds deployed to invest in the stock market were savings, income, and money set aside for other hobbies or purposes,” said CGS-CIMB research head Ivy Ng.

Through the survey, CGS-CIMB also found that the stimulus packages may have partly contributed to the liquidity in the stock market.

Market outlook from retail investors’ perspective: they appeared to be bullish as 41% of survey respondents expected the market to deliver a return of more than 10%, while only 17% of respondents projected a negative return.

However, around 80% of respondents predicted that the current rally in the stock market may not last more than six months.

Retail investors shared that the four biggest concerns that could trigger profit-taking are a sharp fall in global stock markets, an economic recession, external factors, and politics.

Based on the survey, the sectors that retail investors appeared to have the most exposure to are technology, glove/healthcare-related, oil and gas and banks.

It also appears that the retail investors based most of their investment decisions on their own research and very few are funding their investments in the market through margin-financing, unlike in the 1990s.

Although retail investors appear bullish on the stock market currently, most do not think that the rally would last.

“As such, when profit-taking sets in, we could see higher volatility in the market.

“Their favourite sectors are broadly in line with ours.

“At this juncture, it would appear that not many investors are planning to splurge their gains on property and cars.

“As such, we do not expect a significant spillover of stock market gains to these sectors,” says Ng.

She would not be surprised if the market correction happens as the FBM KLCI’S current price earnings ratio is at three standard deviations above its three-year average.

“We maintain our FBM KLCI target of 1,449 points. Downside risks are corporate earnings disappointment, second Covid-19 wave and political uncertainty,” concludes Ng.