PETALING JAYA: 2021 has proven to be another tumultuous year for the local equity market as Covid-19 pandemic-borne volatility remains despite breakthroughs and progress made on the vaccine front, as reflected by the roller-coaster performance of Bursa Malaysia’s benchmark index, the FBM KLCI.
The FBM KLCI hit a high of 1,639.83 points on March 10 supported by a stronger Wall Street performance and lower average daily domestic cases of Covid-19. The index plunged to a low of 1,489.80 points on Aug 6 after Malaysia saw a record high of 20,889 new Covid-19 infections that day, the most since the pandemic struck the country in February last year.
To recap, the FBM KLCI started the year on a high note as the key index closed the first trading day at 1,602.57 points, building on the momentum of Covid-19 vaccine development and progress carried over from late 2020. At that time, interstate travel for most states in Malaysia was permitted as the Covid-19 caseload was manageable.
Nevertheless, the positive momentum was short-lived as Covid-19 infections multiplied, which led to the reimposition of restrictions, culminating in the declaration of a state of emergency on Jan 12, which resulted in a bearish equity market. On that day, the FBM KLCI closed at 1,612.04 points, a slight decline from its previous close of 1,617.25 points.
Then, in a little over a week, the index dropped below the 1,600-point mark and did not recover until March 5 on the back of the launch of the national vaccination programme and easing travel restrictions.
The month also saw the United States passing the American Rescue Plan Act of 2021, a US$1.9 trillion (RM8 trillion) stimulus bill in response to the pandemic, signalling the economic recovery efforts across the globe. Nonetheless, the optimism at the time was tempered by a wave of cases attributed to the Delta variant.
In Malaysia, the rising number of infections prompted the reimposition of the movement control order in Johor, Kuala Lumpur, Penang, Selangor and Sarawak on May 3, which resulted in the FBM KLCI dipping below the 1,600 mark again, closing at 1,590.73 points.
The government’s decision to impose a total lockdown on May 28 reinforced the FBM KLCI’s bearish trend.
In June, the index saw a reshuffle in its constituents as Mr DIY Group (M) Bhd, which made the biggest debut on the bourse in 2020, edged out glove maker Supermax Corp Bhd in the semi-annual review.
The introduction of a National Recovery Plan and the reconvening of Parliament on June 16 and July 26 failed to reinvigorate the local equity market.
On the contrary, political uncertainty at the time – due to the waning support from Umno in Tan Sri Muhyiddin Yassin’s governing coalition – exacerbated the bearish trend in local equities. The FBM KLCI closed at 1,494.60 on July 20, 2021, the day Umno officially withdrew its support.
Following the fall of the then coalition government, the local equity market returned to a bull run with the appointment of Umno’s Datuk Seri Ismail Sabri Yaakob as prime minister on Aug 20, as investors welcomed the political clarity.
The more stable political landscape afforded by the newly minted administration saw the tabling of the twice-delayed 12th Malaysia Plan, which was initially slated to be tabled in January but was thwarted by the suspension of parliamentary sessions due to the declaration of a state of emergency.
Initially, wary of possible political volatility, the equity market reflected investors’ hesitation over Ismail Sabri’s position. However, he managed to clear the first hurdle as lawmakers across the political divide came together to pass the five-year development plan on Oct 7, which drew a bullish reponse from investors, and the FBM KLCI briefly breached the 1,600-point threshold on Oct 18.
Investors’ optimism was short-lived, however, as Budget 2022 failed to inspire market confidence. Despite the budget having the biggest ever allocation, there were reservations from the business community over the one-off prosperity tax, dubbed “Cukai Makmur”, which sees a 33% corporate tax rate on earnings over RM100 million. Following the Budget 2022 announcement, the FBM KLCI fell 2% or 31.4 points to 1,530.92 points from 1,562.31 points in the previous close.
On Nov 24, the Covid-19 pandemic once again exerted its influence over global markets upon the discovery of the latest variant of the coronavirus, dubbed Omicron. Preliminary studies have suggested that the strain is more infectious than the Delta variant which sparked the previous wave of infections, but there is also evidence that it is milder than its predecessors and those infected with Omicron are less likely to require hospitalisation.
In December, the hawkish signals by the US Federal Reserve induced market jitters ahead of its policy meeting on Dec 13-15, clouded by the possibility of an interest increase and a quicker tapering of its bond-buying programme.
The spectre of a rate increase, which could have led to an outflow from the local bourse, resulted in the FBM KLCI ending at 1,488.88 points on Dec 12. Nonetheless, the Federal Open Market Committee decided to double the speed of tapering but left the key interest rate unchanged. However, across the Atlantic, the Bank of England emerged as the first major central bank to introduce a rate hike in the pandemic era, lifting its key rate to 0.25%, a 15-basis point increase, as Britain grappled with high inflation.
Last Friday, the FBM KLCI stood at 1,516.45 points, a marginal 0.03 point increase from the previous close of 1,516.42 points.
Source: The Sun Daily
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