The headline in Bloomberg Asia on Friday March 7 says it all. The Hang Seng Index led falls in Asia with the worst weekly fall since 2001. Week on week, the HSI had plunged 1,830 points or 7.5% to close at 22,501.33. While the KLSE fell 61 points or 4.5% and the Singapore Stock Exchange fell 160 points or 5.29%. One was lucky to have disposed of half my investments the week before in line with the Yi chart for 2008.
Financial institutions, fearing the worst, have started to rein in over-excessive credit lending to hedge funds, private and public investment institutions exacerbating further falls in equity, fixed income and property markets across the globe with forced margin selling. Shareholders of another Australian investment company have lost four billion A$ after the public quoted shares have fallen 90% plus since its peak in May 2007. According to Bloomberg, shares of its major shareholders, who no longer were able to top up margin, were forced sold recently.
Anticipating things to go further into awry and because of another depicted major obstacle in the Yi chart next week, I have recalled more troops from the battlefield – the KLSE. The margin accounts now hold surplus cash to buyback stocks when opportunity beckons.
With the surprised election wins on March 8 2008 by the coalition of opposition parties where they took majority rule over five states – Kelantan, Kedah, Penang, Perak and Selangor – and which returned the government of the day with a reduced simple majority instead of the previous 90% control, speak volumes. The people have spoken. If ministers can lose their deemed safe parliamentary or state seats to the opposition, the tide has indeed changed. If after this lesson, the ruling government alliance for the past five decades still acts with much complacency, arrogance, non accountability, blatantly ignoring the rights of every Malaysian citizen including those of children, and allowing corruption to persist at the highest echelons of power, perhaps one day they may come to rue their actions.
Of course it also depends on whether or not the opposition can do a more efficient and effective job in their respective states than the previous state government in the next few years. Confucius and Mencius would advise these new rulers: Rule the people with benevolence and justice. Prosper and then educate them.
The 1.2 % fall of the Dow Jones Index on Friday and the unexpected general election results would probably cause the KLSE to plunge on Monday, March 10. Foreign funds may decide to exit the stock market. Unless there is real panic selling across the board, it may not be the right time to buy, since stock prices may fall further, compounded by margin calls.