KUALA LUMPUR (Aug 22): After the sharp correction in early March 2020, equity prices tumbled to levels not seen for quite a long time. 

However, in the last two to three months, the strong earnings growth potential of the gloves and healthcare sectors has led to the current euphoria in the stock market, lifting Bursa Malaysia’s daily trading volume to new records. 

A low interest rate environment not only boosts the broader economy by reducing monthly loan repayment instalments, but also tempts savers to move cash into higher-yielding — but riskier — assets such as equities. 

The six-month loan moratorium is also one of the main contributors to higher trading volumes in the market, as those funds have been put to use in the stock market owing to the loan holiday of six months.

As investors hunt for yield, the stock market euphoria is a self-feeding frenzy. Suffice to say, the focus is on momentum, not value. The higher stock prices go, the more compelling they become to many. 

And the most compelling reason to join the frenzy, is the apparent easy money to be made.

Nevertheless, as the loan moratorium is about to come to an end on Sept 30, there are concerns that liquidity will quickly dry up in the market. 

Moreover, margin calls may have been triggered by the recent correction of rubber glove counters — albeit not in a big way. In any event, it should serve as a reminder to investors who may be overly optimistic. 

As it is, the rally is far from over. But when will the stock market party end? 

As in the cinema, you know the movie is about to end when the usher heads for the doors, but the thing is, you don’t want to leave the theatre too soon. 

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