Saturday, May 23, 2020

The rise of the retail traders

What the movement control has managed to give rise is the emergence of the retail traders in Malaysia a number which we have not seen in the past decade. This is a welcome situation on the perspective of balancing the trades as in the past Malaysia's trade have been dominated by the very large pension or savings funds in Malaysia. I have never liked the situation in Malaysia as we were overly heavy on EPF, KWAP, PNB where decisions were focused on a few individuals rather than the masses.

Despite the CMCO, we have seen the largest trade volume in Malaysia on 18 May 2020. Although the Trade value was not the highest, the volume were high. These are probably due to 2 factors, emergence of the new retailers and very active participation from the syndicates. We need both to achieve that.

As an example how much were retailers in the market, see the volume below:

Trade on 16 March 2020 (before MCO)
As below, we would see retail participation has increased almost 2x of previous. The institutionals whom would be taking advantage assuming they are better fund managers would also be participating. So, we actually see more liquidity in the market despite the downturn where people are losing their jobs.
Trade on 18 May 2020 (during CMCO)
The numbers on 16 March was already on the highside. On a normal day, prior to COVID-19, the trades were usually about in the realm of RM1 billion.

During MCO and CMCO, things that never happened, this time around is rather unusual. I hear over the radio, a doctor whom was staying at home during the MCO, who usually would not have the time to do trading, started his stock market activities during then. I have friends whom I was convincing them to invest - many of them successful business person asking for contacts to opening of trading account.

While these people are rich and pretty successful, they are usually small business owners or professionals, whom would not know much about stock market valuations but they are people whom are smart and understand what looks good and what is not. They have some good sense or risk management. They are not that much of gamblers.

Now in this MCO, they are emerging. Question is how long they will stay. At least for now, they have created an account and have their money in the trading account.

If the market really experience downturns, some of these people would leave while some might even stay for a long while. For a while, Bursa Malaysia has been experiencing many delisting exercises as small companies which are not much of an interest to the large funds such as EPF, have seen their share prices being low comparatively to the international markets. These are the ones which retail should have participated but they did not. It remains to be seen whether these retailers would remain.

I am for it. At the end of the day, although there is an opportunity for trades and speculation, I still think investing over a longer horizon prevails. When I mentioned longer term, it means over few years - not over few months like some older person is trying to promote.

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