Concerns of ‘retail liquidity’ evaporating post-moratorium overplayed — Analysts
KUCHING: Analysts reckon that retailers will remain active in the market, despite ending of the automatic loan moratorium.
The research arm of Hong Leong Investment Bank Bhd (HLIB Research) reckoned that concerns of “retail liquidity” evaporating post automatic loan moratorium ( ended September 30) have been overplayed.
“In our view, while some downward normalisation in retail trades is expected (say to the mid-30 per cent versus the peak of 43.7 per cent in August), this would still be much higher than the 10Y mean of 24 per cent,” HLIB Research said in its results review of Bursa Malaysia.
“In fact, despite ending of the automatic loan moratorium, average retail participation thus far into October, till 26th, rose slightly to 40.1 per cent versus 38.3 per cent in September.”
As such, the research arm believed retailers will still be active in the market for three reasons.
“Firstly, with low FD rates (August 1M rate: 1.54 per cent), equities still remain a viable liquid option to seek higher returns.
“Secondly, studies of banking data suggest that ‘ moratorium money’ did not play a significant role in boosting retail trades to begin with; i.e. despite individual loan repayments recovering from April to July (almost doubled), retail participation continued to increase over that same period.
“Thirdly, gloves (a retail favourite) is expected to remain in flavour given the rising global Covid count and possible higher KLCI weighting come November review.”
Meanwhile, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) believed 4Q will see a gradual tapering of trading activities on Bursa Malaysia.
Kenanga Research gathered that already, October’s average daily trading value (ADV) and average trading volume thus far declined by 23 per cent and 34 per cent month on month (m-o-m), respectively.
“The volatilities seen in the last two reporting quarters where investors sought comfort in counters unscathed by and those benefiting from the pandemic appear to be receding while potential uncertainties surrounding the economic recovery ahead will likely dampen further trading activities, in our view,” the research arm said.