Panic Selling Continues, first Stock Exchange to be Frozen

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Oct 10 2008
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The “Taikor” Dow Jones has erased a whopping 2,300 points since six days ago and all were in triple-digit loss. I hope none of FinanceTwitter readers bought any Call Options when all the gamblers and traders were shorting the market using Put Options since the ban on short-selling. After the 777-point plunge now we saw 678-point plunge to 8,579.19 Thursday. The scary part is not about the triple-point tumble although the 7 percent drop would normally saw many jaws dropped onto the floor before the $700 billion rescue plan; but rather the fact that the 9,000 level was breached with such an ease. This is bad news, mind you, and it’s no brainer that you can increase your bet on Put Options. Wait! Hang on there!

Dow drop 678 pointsIf you’ve existing profitable Put Options then transform yourself to be either a bull or a bear but not a pig. Take some money off the table simply because you won’t know when the technical rebound is. But if you haven’t enter into the market yet, please do your homework and gauge the stock market sentiment daily before the market starts. I’ve said in such a panic situation, you can relieve yourself of the abundance of technical analysis because it’s useless for the time being. Technical chart can’t tell you the force of panic selling (can they?) and the bad news / statistic to be released by government agencies. Simple yet disastrous news such as “possibility” of a credit rating downgrade on General Motors Corp. was enough to create havoc on the stock market as can be witnessed on Thursday’s trading. (Watch out Proton! You’re next)

And if you believe the curse of Friday, you just have added another reason to be extremely bearish when the market open later. People do not think logically and any attempt(s) or initiative(s) announced by the federal government to save or calm the situation will be seen from the negative perspective / angle. So when the federal government said they wish to stabilize U.S. banks in exchange for equity stakes, investors generally thought that more banks are crumbling down and this started another round of panic-selling. Since six days ago, the selling volume is still high and there’s no sign to show otherwise. I pity the next President of the United States, whoever he is because this is not a toy for small boy.

Dow 6 days plungeAt the same time I also pity Second Finance Minister Nor Yakcop (for being trapped in denial syndrome) on his statement that Malaysia will not go into recession although he was smart enough to say the economic growth for next year, 2009, might have to be examined. He might not want to create panic but it would be better to get the people ready instead; just like when the lame duck outgoing PM assured the people there would be not fuel hike only to raise it by 41 percent to the surprises and horrors of the whole population. Just because the U.S. is thousands of miles away doesn’t mean Malaysia is shielded from the impact. I think the situation is critical enough for Indonesian stock exchange to be “suspended indefinitely” to prevent deeper panic after the JSX was down by 21 percent this week alone. I can’t remember JSC was frozen even during the 1997-1998 Asia Economic Crisis, can you?

JSX Frozen indefinitelyI doubt the local banks would face the same fate as some of the troubled U.S. banks because the 1997-1998 Recession has thought the local banks to be prudent. Nevertheless local banks are starting to be selective in their lending which means more small and medium businesses would be affected. Although the local banks will not go bust (hopefully) the business will be slowing down and thus the earnings for the subsequent quarters will not be rosy. You can only expect more and more corporate earnings growth cut from analysts (Citi already did that) on local financial institutions (follows by other sectors) and this is enough to put many economic wheels to a standstill. It would be nice to make money from U.S. and put it to good use by whacking the local stocks. Isn’t it beautiful to watch the Ringgit flushing down the toilet against the Dollar? Is Najib any better than Badawi in managing the economy and to find a formula to minimize the impact?

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I think your blog is superb. i read it everyday and i learn a lot from that. I wanted to ask, if i were to buy US stocks where can i buy it on9 with low amount of service fee? and also if the stock is giving dividend? are they going to send the cheque to Malaysia? Thanks
Hope to hear from u.

Even , if our local banks have exposure, they will surely cover it up..Malaysia’s corporate reporting is very poor.

hello bibi, i believe i’ve wrote about it somewhere … kindly search for it …

hello kris,

that’s what we’re afraid of and since they’re still “covered up”, let’s give them the benefit of doubt …

cheers …

Why dollars keep on rising against others currency and ringgit to 3.5 rate? Any idea, when will it drop?

Thanks in advance!

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