In the spotlight: Bursa’s trading halt and the biggest market-moving stocks

KUALA LUMPUR (July 17): Trading on Bursa Malaysia halted at 3.30pm yesterday, with the stock exchange operator citing “technical issues” as the reason, without giving further details.

This has left investors perplexed. Nonetheless, Bursa assures that trading will resume today.

Dealers, fund managers and analysts contacted believe that brisk trading volume could be what caused the technical glitch yesterday. Trading volume already swelled to 9.28 billion as at 3.30pm when trading halted, compared with the total volume of 8.23 billion the day before.

So far this month, eight out of the past 12 trading days had seen trading volume exceeding eight billion.

The technical glitch coincided with the resumption of trading on Top Glove Corp Bhd, the fourth largest stock on the local exchange in terms of market capitalisation, after a brief suspension to make way for its announcement that the US authorities had detained shipments of two of its subsidiaries at the Customs. (see story on Page 4)

Regardless of what could have caused the trading halt, investors have grown intrigued by the influence of glove stocks on the benchmark index as their share prices shot higher.

Based on Bloomberg’s year-to-date (YTD) data, the two KLCI component glove stocks are the biggest index movers as they have contributed a significant boost to the KLCI index (see chart).

Top Glove alone has lifted the FBM KLCI by 81.5 points YTD, followed by Hartalega Holdings Bhd, with 45.54 points.

There is quite a big gap between these glove component stocks and other big movers. For instance, Dialog Group Bhd has moved the benchmark index by 6.04 points YTD, while Maxis has shifted it by 1.14 points.

The rest of the component stocks, meanwhile, either contributed gains of less than one index point, or have been dragging the KLCI index downwards. Indeed, at last count, 21 out of the 30 constituents have been exerting downward pressure on the FBM KLCI, which has fallen 15.45 points or 0.97% YTD to close at 1,573.31. Yesterday alone saw the benchmark index losing 12.25 points.

The biggest laggards are CIMB Group Holdings Bhd (-29.93 index points YTD), Tenaga Nasional Bhd (-14.83 index points) and Genting Bhd (-13.07 index points).

In contrast, last year, Top Glove and Hartalega were the two component stocks that dragged the index down by 4.15 points and 2.7 points, respectively.

Increasing glove-weightage in KLCI

Nevertheless, as the glove makers grew to be the top fourth and fifth largest by market cap on the local stock exchange, their influence on the KLCI grew in tandem.

A rough calculation shows that Top Glove’s index weightage has jumped from 1.1% at end-2019 to 5.2% now, while Hartalega’s weightage leapt from 1.8% to 5%.

The increasing glove-weightage in the KLCI is self-explanatory, as other constituents have underperformed.

Particularly, 21 out of the 30 component stocks have seen their index weightages shrink, which is in line with their underperformance in share prices, which have caused their market caps to contract.

This means that the price performance of the two component glove stocks will highly skew the performance of the FBM KLCI.

Based on indicative data from Bloomberg, Top Glove contributed -18.68 points to the drop on the KLCI yesterday, while Hartalega contributed another -8.64 points.

Prior to the trading halt, Top Glove was the biggest loser on Bursa, as its share price fell RM2.10 or 9.63% to RM19.70, just as it resumed trading at 3.30pm.

In the meantime, Top Glove’s Singapore shares, which continued trading in the Singapore Stock Exchange, came under heavy selldown. The stock closed at its intra-day low of S$6.49, after sinking 11.1% or 81 Singapore cents.

Hartalega, meanwhile, was down 44 sen or 2.8% at RM15.16. In the morning session, the stock, in contrast, was mostly in the positive territory and reached an intra-day high of RM16.38.

Source: TheEdgeMarkets