Would You Like Short-Selling By Now?

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Dec 19 2006
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Since Yusli, CEO of Bursa Malaysia (KLSE : BURSA, stock-code 1818) confidently declared recently that Kuala Lumpur Stock Exchange bull was the result of foreign investors jumping in to buy the stocks causing it to hit the 9-years high, I suppose Yusli can say the same thing about today’s performance whereby KLCI (Composite Index) plunge more than 30 points (2.7%) at one time.

Earlier blog reported how The Bank of Thailand surprisingly announced a new measure to curb speculators with plans to force speculators to keep their money in the country for at least one year or face stiff financial penalties, starting today, 19-Dec-2006. It was reported that as much as 950 million dollars of foreign capital flew into Thailand in the first week of December

This of course triggered a sell-off in the baht and the baht was last quoted at about 35.75 per dollar. There was also speculation that Thailand risked being dropped from international equities indices such as MSCI (Morgan Stanley Composite Index) with this latest move, just as Malaysia was in the late 1990s after it imposed capital controls on foreign investors.

Stock Exchange of Thailand (SET) index was seen plunging more than 10 percent at the open and forcing it to suspend trading. On the resumption of trade, the SET 50 crashed 85.89 points or 11.76 percent to close the morning session at 644.66, off a low of 630.16. It was the biggest one day fall in the 31-year history of the SET. Maybe it’s time to get Thaksin back on the seat with this disastrous act by the military government.

Investors do not like a sudden restriction implemented overnight when free-flow of investment is the rule of the game, besides transparency of course. Fund managers just do not like being held for ransom with such autocratic regulation – no one like it as a matter of fact. How would you feel if all of a sudden the bank which you invested suddenly declared 30% of your money cannot be withdrawn and will remain with the bank interest-free for 1-year? If you prefer, you can withdraw but you’ll only get two-thirds only – a pure loss of one-third or 33.33%? Isn’t this equals to daylight robbery?

Malaysia has learnt it’s lesson when it did the almost same things during the 1997 Asia Economic Crisis. And as a long and severe punishment, foreign investors ignored Malaysia equity market for almost a decade. And only with the recent China Remimbi Yuan revaluation did Malaysia follows. It’s interesting to note that Thailand did the same silly mistake yesterday. I wonder if George Soros make some profit this round. I’m sure he would have – he’s the guru of currency speculators. Maybe he dropped a tip/hint to Mahathir during their recent reconciliation – how much do you think Mahathir made (if he indeed speculate baht himself)?

Wouldn’t it be nice if short-selling is allowed across the board in Malaysia Stock Exchange? All of us would be making tons of profit by now. Don’t you agree?

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