There was desperate selldown in equities market all over the world with US Dow Jones, Japan Nikkei and Malaysia KLCI losing one digit in their index to below 10,000 for both Down Jones and Nikkei and 1,000 for KLCI… Both Dow Jones and Nikkei indexes are now about 10 times the value of KLCI…
Is it now the time to go for bottom fishing? The KLSE is unlikely to suffer the level of SUDDEN panic experienced in the 1998 Asian financial crisis whereby the KLCI index plunged 75% to below 300 points in about one year’s time as the bubble in US property market and credit crunch issues had been highlighted and warned by experts way before the bubble burst.
But then, the bearish sentiment is Malaysia may take much longer time to heal compared to the Asian financial crisis. The economy of Malaysia was able to recover considerably fast in the 1998 Asian financial crisis because US was doing very well during the period and it helped Malaysia to recover as US is Malaysia’s major export trading partner. The resilience of Singapore economy during the Asian financial crisis was a good evidence how the US had helped the affected Asian countries recovering from the financial turmoil. The scenario is quite different this time, economy depression is everywhere all over the world, and none of the economy giants such as US, Europe, Japan and China are spared. Couple with unprecedented political uncertainty in local front, the gloomy economy situation in Malaysia is unlikely to see light in the end of tunnel soon.
Meanwhile, the plunge in crude oil price and crude palm oil price will reduce the income of Malaysian government. This will widen the budget deficit and cause higher inflation and further depreciation of Ringgit.
The passing of desperate $700billions bailout and urgent interest rates cuts by major Central Banks did not restore investors confidence but in fact alarmed the investors how serious the credit crisis is as the share markets continue to slump after the measures were taken. The investors are doubting whether the measures will be affective in tackling the credit crisis. Investors would rather to err on the side of caution and liquidate their equity holding.
There are divided views whether bailout plan is effective in saving the economies from major recession. As elaborated in his book, The Age of Turbulence, Alan Greenspan emphasized the value of creative destruction, which is the killing of old business models and the shifting of capital toward better business ideas / models / formats. The bailout plan and interest rates cuts are likened to taking pain killer. It does not cure the problem but provide temporary relief. Worse, it may drag the economy depression longer.
Back to the question… KLCI is now at 970 points. Is it now the time for bottom fishing? There are opportunities in crisis but personally I feel it is still not worth taking the risk at this moment…
I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you down the road!
Bravo, I’m guessing long time ago that, u would had a blog of urself, but is just that I forgot to ask you.
Until I see today, I know my instinct is right. People like you that have thought in every issue that crop up, should share your view in the cyber-world. I wish to create one, but find it difficult to kick start, maybe too lazy…..
I like your thought in your posting.
To me, USD 700 B bail out is not the right move to sustain the US economy. The bail-out is just to passed the money around to stimulate the economy. I would prefer to put it as Stimulation Package. WHY…… simple example. A pass $ 10 to B and B passed it to C and C passed it back to A. A bit ridiculuos rite??? Today they do bail-out, tommorow they sold it off. Ppl like Warren Buffet may like this game, but I believe it will scare off the investors…
Maybe many ppl think like me!!!! Hehehe, that y even with the bail-out approved DOW JOnes still Plunge………..
I think they should had focus on their US currency as well, how to strengthen them is more important!!!!
Back to KLSE, I dont think so is bottom-fishing now too… I dont really aware what happen in 1998, as I’m still small then and well, who care about financial turnmoil, as long as I got my pocket money. hehehe….
Things certainly change as it comes, there is where I’m now!!!!
Ok ok back to KLSE, i always believe when there are crisis, there is the opportunities.
Take an example. IOI Crop, on the other day felt to 3.76 in the morning transcation, then rebound 3 days later to 4.50, if I would have taken the risk. Buy 100 lot, and sell it off at 4.50 within the contra days. I earn eemmm…. 74K within 3 days. sound good rite???
Let thinks otherwise, I may easily earn the 74K but I may easily end up borrowings with Ah Longs for 74K loses that I made too!!!! The higher the risk the higher the return, I always believe that, but never practice it. hehehe.
As conclusion…. still too early to go in, unless you are damn rich and dont mind take a risk.
For small fries like me, better wait for Recession, and then only pick up some blue chips, so that few year later, I’ll use the money to pay my son education. hehehe…..
If you have some extra cash now, can buy blue chips stocks by stages.
Even if KLCI is at 300 points now, we will wonder whether it will go down further