Sunday, December 23, 2007

2007 Bull Run not too kind to retail investors

While the KLSE composite index has risen by about 30% for 2007, I understand that quite a number of retail investors have lost money or are holding huge paper losses in this Bull Run. It is not surprising if we survey the number of low liner stocks across the board that are hovering around or had closed at 52 weeks lows, last Friday, December 21.

I counted about 116 of them which include index linked stocks. A majority of losers were from the Mesdaq board. If we include stocks across the boards that have fallen by fifty percent or more from their 52 weeks high, the number would increased to about 250 counters, representing roughly 25% of stocks quoted in the KLSE.

Retail investors who had insisted to ‘stand in the middle of the mountain’ in October by averaging down low liners or hold onto stocks, have probably found themselves free falling into the chasm of Kun / Earth after the mountain imploded. Whether the fall (of their stocks) has hit finally rock bottom or not into the depths of Earth is quite impossible to tell. (Refer my entry on ‘Stand not in the middle of the mountain’, October 13) And there could be more losses around the corner.

However when the low and second liner stocks hit rock bottom, there could be a rebound. There is always such hope.

Take for example, the Australian quoted company – Centro Properties Group – which bought 700 US shopping malls in 2005 and 2006 for US$ 9 billion. The Company lost 86 percent of its market value within two days this week as it struggles to renegotiate debt. Its market value had fallen from A$ 4.8 billion to A$ 680 million during the rout. A day or two later, its shares rose 63% after the company announced plans to sell down properties. (Source –

Weaker investors who had bought the stock just before the plunge could have suffered a heart attack. So could someone who had sold the stock when it hit rock bottom. Does this Centro example not remind us of the Asian Financial Crisis in 1997 where multimillionaires literally turned into paupers overnight?

An investment analyst from an established bank had the cheek to revise down the Centro stock to A$ 1+ from his earlier recommended target price of A$ 7+. So much for professionalism, don’t you think? This is a good example of a Xiao Ren (inferior man) in my books and someone to avoid at all costs. Since those who bought the particular stock based on his earlier recommendation of A$ 7 would have lost a ‘bomb’.

For those retail investors or traders who had weathered the major upheavals in the KLSE in 2007, expect more turbulence next year.

Meanwhile I am searching for stock investments for 2008 that could double or more in value by bottom picking. How? By doing the necessary homework and consulting the Yi, of course. It would not prove difficult if the bulls and foreign fund managers decide to storm back to the KLSE in time for the Chinese New Year rally.

Obviously it would be nigh impossible to find a twenty fold increase in share price again, for example the GT stock, unless they have gone dirt cheap. By then many a retail investor would have been busted.

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