Friday, November 16, 2007

Update on the KLSE and others

By the middle of September, I have cleared the balance of my stock investments. Nothing much has changed then, except I buy on dips and sell into the rallies to make some much needed pocket money.

Inflation has started to burn a hole in my pockets in Malaysia, you see, but there is minimal price rises in the US, if people want to believe in government statistics.

Reviewing online financial information of past investments, I was pleasantly surprised to see my name featured in the top thirty shareholders list of a few public quoted companies. Nothing to shout about really, since these companies are in the penny stocks categories. Ten years ago you have to be a multimillionaire to own the same amount of stocks to get into their top thirty shareholders lists. How times changed. From inflation to deflation, share price rises once again, hopefully.

Dabblers in the stock market are currently quite happy with their twenty to thirty percent gains, a far cry from earlier in the year when they would not sell for anything less than double their investment costs. Times have changed, and they are being realistic. Hopefully they will not be caught in a huge plunge in the KLSE, since the low liners have been drifting lower. If they have not noticed the KLCI prices had been shored up by last minute buying for the past two weeks. And there is not much money in the market.

Goldman Sachs has recently called for a sell in emerging markets which include Malaysia to take profits. Do not expect anyone to shore up the index if foreign fund managers start selling down their huge holdings. They need whatever profits or money in foreign currencies to fill up the big hole existing in their balance sheets. Yes, I know, they used to call it redemptions.

But nowadays the global and investment banks need the cash more than their clients, since they have started and are in the business of laying bets. Casinos or houses never lay bets but global banks broke that golden rule by gambling with their own and clients’ money.

Remember the European Central Banks' constant whispers on moral hazards?

In October, the KLSE Index finally broke the 1,400 point mark and reached an intraday record high of 1,423.81 on November 1st, only to tumble almost 40 points the next day caused by an overnight fall of 362 points in the Dow Jones index. There was not much joy for retail players since the low liners drifted. The Shanghai Stock Exchange Index shot up to its new record high of 6124.04 points on Oct 16 and has fallen about 18% since then till November 12.

Those who traded in the Chinese call warrants and derivatives in the KLSE may have made some money during the early part of October. They probably lost a fortune thereafter, when the plunges took place, what with the 30 to 50 percentage falls on some trading days during the second half of October and the past fortnight.

Malaysian readers who have heeded my warning not to bet on the Chinese stock markets, with ‘That October month again’ entry on October 2nd, may count their lucky stars, today?

If you are sitting on a cash pile and your hands feel itchy, after abstaining from investments for the past two months, make a small bet in the KLSE on one of your favorite stocks. I do not want readers, especially those of Chinese origin, to suffer from ‘withdrawal symptoms’ for not making any bets in the stock market!

Get ready to sell the investment, if the Korean stock market freefalls. You can always buy the shares back later, for cheaper or dearer!


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