Bursa Digital Research said the recent selldown in the markets both domestically and globally has incited fear among investors, but reminded that the unavoidable bear markets are often relatively short when compared with the duration of bull markets.
“In the ‘Battle of the Bull and Bear’ report (released in February 2022), we have concluded that bulls generally last longer and are more sustained than bears with an average of 728 bull days versus 204 bear days based on 40 years of historical data,” the research arm of Bursa Malaysia said in a report on June 28.
“We analysed the historical data and results have shown that markets usually gain higher returns with an average of 83% as compared to an average loss of 30.6% during major bear market events,” it said.
Bursa Digital Research also clarified that the KLCI by definition has not entered into a bear market as the index has declined by 14.6% from its peak and not the threshold of a fall by 20% or more.
It found that the consumer sector tends to remain resilient and outperformed the other sectors in four out of five bear markets in its analysis, which included the 2008 global financial crisis, 2011 Japanese tsunami, 2014 oil glut, 2018 US-China trade war, and the pandemic.
The consumer sector, it said, is followed by the REIT sector and the technology sector, with the probability of two out of five bear markets.
“The REIT sector is known for its generous yields which could serve as a cushion when capital depreciates during bear markets. On the flip side, we find that the construction sector generally performed poorly during market downturns where it performed poorly in four out of five bears.
“This was followed by the property sector, which recorded the worst performing sector in two out of five bear markets,” Bursa Digital Research said.
It said key headwinds contributed to the recent drop in the market included Bank Negara Malaysia’s move to raise interest rates by 25 basis points on May 11, global credit tightening, sell side sentiment, prolonged Ukraine and Russia war, global supply disruptions as a result of Covid-19 lockdowns and geopolitical uncertainties, as well as global inflation.
“However, FBM KLCI is blessed with diverse industries that mitigate the impact of these headwinds. Malaysia and the ASEAN region are sheltered from the Ukraine-Russia war disruption as ASEAN is not Russia’s major trading partner.
“Furthermore, Malaysia is a net exporter of key commodities and one of the key beneficiaries of the commodity rally. Malaysian-listed plantation companies make up 11% of the KLCI weightage while the energy sector contributes 3% to the KLCI weightage,” the research outfit added.