Malaysian glove makers fell sharply in mid-morning trade on January 4 and being components of the capitalisation-weighted FTSE Bursa Malaysia KLCI FBM (KLCI), dragged the 30-stock index deep into the red.

The sharp fall could be due to the uplifting of the temporary suspension of regulated short selling (RSS) by the Securities Commission (SC) and Bursa Malaysia Bhd.

Hence, glove companies could be among the targets for short-selling activities with most of the gains from 2020 being nearly wiped out, analysts said.

At 10:22am, the KLCI was down 33.91 points or 2.08 per cent to 1,593.30. Turnover was 2.81 billion shares valued at 2.31 billion ringgit ($577 million).

The selling of glove stocks cast a pall of gloom over the broader market where there were 960 losers, 161 gainers and 282 counters unchanged.

Hartalega fell 1.66 ringgit to 10.48, Top Glove 0.84 ringgit to 5.28, Supermax 0.62 ringgit to 5.39 and Kossan 0.54 ringgit to 3.96.

The SC and Bursa Malaysia said in a statement on December 16: “The suspension of RSS, scheduled to expire on December 31, 2020, will be uplifted on January 1, 2021, to facilitate investors’ risk management and revive securities borrowing and lending [SBL] activities, which is an integral capital market function to promote product development and market making activities.”

The capital market regulators first introduced the temporary suspension of short-selling activities on March 24 last year, barely one week after the KLCI slumped by over 200 points in the March 11-19 period.

The Star had reported that the glove companies could be among the targets for short-selling activities that will be allowed again.

Analysts said the selling was overdone as the companies’ profits remained visible for 2021 and 2022 and expected strong earnings growth.

However, they said the short-selling could continue until January 6 before slowing down.

THE STAR (MALAYSIA)/ASIA NEWS NETWORK