THE benchmark KL Composite Index hit another all-time high of 1,440.39 points on Thursday.
While this means that blue-chip counters have done well, many mid-cap, small-cap and fledgling stocks are still languishing in the market, attracting little investor interest.
This lack of a broad-based rally has been attributed mainly to retail participation having dried up in the market or is still there but pretty cautious, depending on who you talk with.
The culprit for this is widely felt to be the drop in the market from 1,283.47 points on Feb 23 to 1,110.69 on March 5, and the fall from 1,392.18 points on July 24 to 1,192.55 on Aug 17, sparked by the subprime woes in the US that caught out many retail investors.
To jog the memory, February's drop was sparked by the widespread but short-lived Shanghai contagion.
Thus, retail investors have become understandably cautious. They could be “locked up” in stale bulls from the February or July market dips and did not have the funds to participate in the market.
“Too low to sell out or not high enough to cash out,” said a chartist.
The market needs to attract retail investors, which is essential to a healthy stock market and healthy rallies, but they will not be back until it is worthwhile and less risky to do so.
MIMB Investment Bank head of research Pong Teng Siew believes that apart from some losing money during the two major dips this year, retail investors are becoming more perceptive of the market than before.
“Retail investors are more perceptive now and they can see market rally is more focused, so they are investing more cautiously,” he said.
Pong said he would ideally like to see a gradual and predictable rise in prices of counters rather than them shooting up in a short time maybe past valuations and then falling suddenly.
“I hate to see investors lose money. I would like counters to have sustainable growth in a predictable way.”
He also said the stock market should not rise in a way that was out of step with economic growth and beyond what could be sustained by domestic investors.
In the current market, Pong suggested a stock picking on key counters, as the rally was at present much more focused.
A broad-based rally was always preferable to a focused rally as it benefited a wider base of investors and encouraged participation in the market, he added.
Another analyst said for there to be a broad-based rally in the market, there had to be liquidity both from foreign and domestic sources, but no one was sure when this would happen.
With the US market “climbing a wall of worry” that included subprime issues, high oil prices and worrying economic data, liquidity was unlikely to flow into global markets in the short to medium term, he said.
There is also the issue of investors everywhere finding it better not to have a position before the upcoming Dec 11 Federal Reserve committee meeting.
