Analysts believe the reintroduction of the RSS is probably timely if only to temper the emerging uncertainties and make recovery more sustainable. — AFP photo
KUCHING: Any negative market impact resulting from the lifting of the ban on restricted short selling (RSS) on January 1, 2021 will likely to be muted, analysts say.
To recap, the Securities Commission Malaysia (SC) and Bursa Malaysia Bhd (Bursa Malaysia) will uplift the temporary suspension of RSS and have reviewed other market management measures that were introduced this year following heightened market volatility arising from the broader impact of Covid-19.
“Meanwhile, the temporary suspension on Intraday Short Selling (IDSS) and intraday short selling by Proprietary Day Traders (PDT Short Sale) due to expire on December 31, 2020 will be extended to February 28, 2021,” the statement read.
“Consequential to the extension of PDT Short Sale, temporary waivers in relation to PDT will be extended to February 28, 2021.”
The statement also revealed that the RSS will be re-introduced with enhanced control measures to ensure stability and maintain investor confidence.
These included the daily gross short position limit for Approved Securities will be temporarily reduced from three per cent to two per cent and a new cap of four per cent on RSS aggregated net short position will be introduced.
With this latest development, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) gathered that glovemakers among those with highest outstanding net short positions.
“The top four names with the highest precentage total outstanding net short positions are, not surprisingly glovemakers namely Top Glove Corporation Bhd (1.27 per cent), Supermax Corporation Bhd (1.23 per cent), Kossan Rubber Industries Bhd (1.15 per cent) and Hartalega Holdings Bhd (0.97 per cent),” Kenanga Research said.
“Given the four per cent limit imposed, the amount that remains shortable for each name are thus 2.73 per cent, 2.77 per cent, 2.85 per cent and 3.03 per cent, respectively.
“In terms of total shortable volumes/average daily trade volumes, these figures translate to 3.5-fold, 2.58-fold, 6.77-fold and 13.38-fold, respectively, which are among the lowest in the list of 46 names.
“Stocks exhibiting far higher multiples (thus deemed perhaps more vulnerable) are Maxis Bhd (133-fold), Pos Malaysia Bhd (187.9-fold) and Digi.Com Bhd (91.7-fold).
“These trends hold generally true as well when viewed in terms of total shortable volumes/free float.”
Overall, given the strong rally in the month-to-date (FBM KLCI up 7.6 per cent resoundingly outperforming the rest of Asean), the research arm opined that the reintroduction of the RSS is probably timely if only to temper the emerging animal spirits and make this recovery more sustainable.
“We remain positive on this market with an 2021 year-end target of 1,803 points.”
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