PETALING JAYA: Bursa Malaysia is not headed for a crash anytime soon, despite having been on a downtrend since Malaysia’s historic change of regime over a year ago, says a market expert.
TradeVSA Systems Sdn Bhd chief trainer Martin Wong said the local bourse is now hovering around its lowest level in years, which will see it rise gradually as it recovers from a correction mode.
“Bursa Malaysia is at the lowest point in many years, I don’t think the local stock market will go down further,” Wong said in an interview here recently.
Although a recovery is anticipated, Wong said the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) is still challenged by domestic and external issues including the ongoing US-China trade war.
The former fund manager expects the FBM KLCI to hit between 1,680 points and 1,700 points by year-end, backed by recovery in key sectors including plantation, construction and oil and gas (O&G).
The benchmark index closed at 1,599.22 points on Friday.
“Usually, when a market recovers from a correction, it will climb slowly as existing obstacles remain. That said, I don’t think the benchmark index will climb beyond 1,700 points this year,” Wong said.
Market correction is a phase when the stock exchange demonstrates a downturn following a temporary upswing in share prices, as it attempts to readjust them closer to their actual values.
Wong said the FBM KLCI would typically lose between five and 10 per cent during a correction phase, which normally takes place three to five times a year.
“So far, the FBM KLCI has lost about six to seven per cent in this current cycle. Past trends show that the decline would normally stop at 10 per cent before an upside momentum kicks in,” he explained.
Fears of a global market crash are growing following the overextended boom and bust cycle, which has breached the typical 10-year period since the 2008 financial crisis.
Back home, the negative sentiment has been amplified by the local stock market’s lacklustre performance after the new government took a bold move to reveal its worrying financial position.
Dampening the situation further is the unfavourable global trade environment no thanks to ongoing disputes between economic powerhouses, Brexit and the European Union’s ban on palm oil, among others.
However, Wong said, the next market crash is not likely to occur soon as predicted, in view of the upcoming United States (US) presidential election, which is scheduled for November 2020.
“US President Donald Trump would not want to risk a recession now as he plans to run for reelection next year. Market crash is bound to happen but the decision makers will try to delay it by manipulating the market.
“They can achieve this by way of changing the interest rates and flooding the US banks with cash through bond sales. Look at Trump’s tweets -- one bad tweet and the market loses one or two per cent and vice versa.
“If Trump gets reelected, we can expect him to make some monetary policy changes such as pushing the interest rate lower as he has always intended. This may eventually lead to a recession and market crash possibly in 2022,” he added.