COVID-19 lockdown stimulates Malaysia's retail investor boom

COVID-19 lockdown stimulates Malaysia's retail investor boom

Bursa Malaysia
Bear and bull statues stand outside Bursa Malaysia Bhd in Kuala Lumpur. (Photo: Bernama) 

KUALA LUMPUR: Although Chen Pei Teck was involved in the palm oil trade as part of his job with a major plantation company, he had never opened a share trading account. 

“I was too busy, but it was always at the back of my mind,” said the 43-year-old financial controller.

He decided to take the plunge into retail investing in late February this year, as the COVID-19 pandemic deepened and a lockdown loomed.

“I can’t remember what the specific saying is, but it’s something about such times being a good point to invest,” he said.

Shortly after that, Malaysia went into the first phase of its movement control order (MCO) on Mar 18. Businesses, schools and offices were ordered to close to prevent the disease from overwhelming the healthcare system. 

Some curbs were later lifted in the conditional MCO (CMCO) phase from May 4 to Jun 9, before being eased further in the recovery MCO from Jun 10 to Aug 31. 

READ: Despite a 6-month loan moratorium, Malaysia's SMEs fret over cash flow and uncertainty

READ: Malaysia's May exports fall -25.5%, worst in 11 years

Chen is one of the many Malaysians who opened retail trading accounts due to the COVID-19 pandemic and stock market collapse in Q1 2020.

The logo of Rakuten is pictured at the headquarters of Rakuten in Tokyo
The logo of Rakuten is pictured at the headquarters of Rakuten in Tokyo, Japan, May 15, 2019. REUTERS/Sam Nussey/Files

In April, digital equities platform Rakuten Trade reported more than 11,000 new accounts being activated during the MCO in Malaysia, of which more than 64 per cent were opened in the first two weeks.

In addition to the surge in new accounts, Rakuten also recorded a 20 per cent increase in trading value month-on-month in March.

Last Tuesday (Jul 7), Securities Commission (SC) chairman Syed Zaid Albar noted that the Malaysian investor population has grown to be more diverse, and technological advancements have changed the way investors interact with the capital market. 

"It is important that our industry also evolves to meet the diverse needs of investors. These can be in the form of digital-only brokers that can cater to investors looking for no-frills services, or for example, algorithmic trading platforms or multi-asset brokers for more sophisticated investors," he said in a statement. 

RETAIL INVESTOR BOOM

Bursa Malaysia's statistics on Jul 15 showed local retail participation standing at 41.44 per cent, compared to 25 per cent in mid-June last year.

Local retail investors had been the market's saving grace as more and more foreign funds pulled out, with retail participation rising by 62 per cent compared to the 2019 average, according to Rakuten's research head Kenny Yee in a report by national news agency Bernama. 

A remisier, who only wanted to be quoted by his surname Tai, said he had received many enquiries from potential retail clients about opening accounts. Old clients, too, were eager to reactivate theirs.

Malaysian online trading app 01
Online trading has become much easier for the Malaysian retail investors. (Photo: Vincent Tan)

“This went on through March and April, and about 10 per cent of those managed to sign-up before the MCO. The service to open accounts was suspended when the MCO started, and was only lifted when we moved into the CMCO phase,” he said. 

This also explained the boom in new accounts registered with Rakuten Malaysia, he added. 

Other factors driving the retail boom was also due to the Kuala Lumpur Composite Index’s (KLCI) plunge into 1,200-point territory following the announcement of the impending MCO.

“Many investors were seeking alternative investments, and saw opportunities to buy blue chips at bargain prices,” Tai, who is affiliated with a local bank's investment arm, explained.

The effect was further compounded, he said, as the global demand for healthcare products rose. The shares of Malaysia’s rubber glove manufacturers rose, further fueling interest in stock trading.

READ: Schools in Malaysia to reopen on Jul 15 for those not taking leaving examinations

LEARNING CURVE

Jane Siew, a traditional Chinese medicine (TCM) practitioner and acupuncturist, also gave share trading a try when her workplace had to shut down during the early part of the MCO. 

“It was something that I wanted to learn and try. Previously I’d only invested money through robo-advisors. With no work during the first part of the MCO, it’s as good a time to learn,” she said.

As experienced retail investor and day traders already know, there is a learning curve in being able to trade effectively.

Adopting a long-term view, Siew said her first few weeks as retail investor and learning which stocks to pick and buy were hit-and-miss.

“It was my first time, and being overly cautious, I missed out on opportunities too,” she said. 

“Take the rubber gloves’ boom for example. People said ‘They are already so high, are you sure you still want to buy them?’ and I got influenced and didn’t purchase more. And then they rose further,” she laughed.

Malaysia stock market
An investor sits in front of private stock trading boards at a private stock market gallery in Kuala Lumpur on Aug 1, 2018. (Photo: AP/Vincent Thian)

With each extension of the MCO, Siew joined online investment forums, and watched online videos to learn more about retail investing.

Unlike Siew, who bought into oil and gas and tech, Chen went with what he knew best, the palm oil industry and opted to focus only in crude palm oil (CPO) futures.

“I went in with a strategy, but there was a lot of ‘gambling’ even with research. Being a newbie, my results have been mixed, but after four months or so, I’m starting to get a hold and refining my trading strategy,” he said.

READ: Asia's factory pain eases as region emerges from pandemic

READ: Malaysia reports no local transmission of COVID-19, 1 imported case

STIMULATING APPETITE 

In addition to bargain prices on blue chips, increased personal savings (due to lowered spending during the MCO), the COVID-19 economic stimulus packages and low interest rates all played a role in the retail boom, according to Professor Yeah Kim Leng, an economics professor with Sunway University Business School.

“For borrowers whose income and savings were not affected by the MCO, it’s rational to leverage on the loan moratorium to seek higher returns by investing the excess funds in the stock market,” he said, but also pointed out that they would be vulnerable in case of a downturn. 

“Such speculative activities are not condoned, but there will always be risk takers in the investment community,” he added.

And with Bank Negara's Overnight Policy Rate (OPR) reduced in May to 2 per cent,  Prof Yeah pointed out that the prolonged low interest rate environment would encourage investors and savers to seek higher-yielding, and therefore riskier, investment opportunities. The OPR has been cut further to a record low of 1.75 per cent on Jul 7. 

Bank Negara Malaysia's interest rate cut is the first since July 2016
File photo outside Bank Negara Malaysia. (Photo: AFP/STR)

“Retail participation momentum is expected to rise with stock market upside potential, commensurate with the economic recovery prospects which are supported by a low interest rate environment,” he noted.

At present, several of the local major banks in Malaysia are offering their own trading platforms for retail investors. Prof Yeah said that e-platforms would certainly boost retail participation due to convenient access and lower transaction costs, coupled with investment analytics that attract more sophisticated retail investors.

“While Bursa Malaysia and stock brokerages conduct regular investor education programmes to widen the retail investor base, there is a small, but growing niche market of specialised training firms offering courses for retail investors.

"They use proprietary trading software and databases, but this is still confined to a very small segment who have the time and inclination to invest directly,” Prof Yeah said.

For Chen, the new retail investor, share trading has given him something extra to do, while offering the possibility of earning some extra money.

“Better than sitting at home and not doing anything, at least now I sit in front of a computer screen and learn how to trade. It is fun,” he said.

BOOKMARK THIS: Our comprehensive coverage of the coronavirus outbreak and its developments

Download our app or subscribe to our Telegram channel for the latest updates on the coronavirus outbreak: https://cna.asia/telegram

Source: CNA/vt

Bookmark