There’re reasons why the stock markets are such an interesting place and always compared to casinos. If you’ve been into casinos the view of gamblers shouting on top of their voice as if they were possessed by ghosts is common. Middle-age women could sit for hours playing slot machines and sometimes you wonder how on earth they managed the extraordinary stamina. All these people were so excited and enthusiastic for a single reason – to win. No wonder you can see the same behavior on the trading floor or rather the stock exchange gallery. The only difference is while you can curse the stocks from opening till the closing bell and return the next day fresh to do the cursing all over again, the same cannot be said about gambling at casino tables. You either win or lose your shirt there and then in the casino. That’s why you have terms such as long-term, middle-term and short-tem investment when you’re talking about stock investing.
Just like casinos, the current “rally” seems to be the main focus in the stock markets. Unlike casinos where the “house” or the owner can decide if you win or lose, the stock market is a different animal. No doubt there’re market-makers but it’s more efficient in the sense that these market-makers actually compete amongst themselves as well. In the process, the market sentiment determines whether the buys or sells win the day – the investors or speculators determine the direction of the stock market. As of now people are too tired with all the negative news so much so that when there’s a single news that somehow is “not too bad”, it would send the stock market up the roof. Make no mistake about it because the global recession is still intact. People are just finding excuse to buy especially in the country where short-selling is prohibited.
Investors and speculators are also “betting” that economic recovery could happen on the second half of the year. Although there’s no concreate proof that this will happen, people just couldn’t resists the temptation to buy not wanting to miss the boat. Call them “kiasu” or whatever but the urge to buy believing that they’re surfing on top of the recovery wave was simply too strong. It actually doesn’t matter if they’re long-term investors (they would like to think of themselves as another Warren Buffett who invest long-term) because even if the Dow Jones were to plunge another 2,000-points later, they still can claim victory because they’re long-term investor and someday their stocks will appreciate when the real bull comes charging (not sure when though). But this is only true for stock market that continues to register new high during the bullish time (such as U.S. stocks). What about stock market that does not have such historical movement?
The move by Malaysian government to remove the 30% bumiputra equity policy from 27 sub-sectors is laudable. Give credit where it’s due. The ridiculous 30% bumiputra equity has been the stumbling block in the foreign investors’ decision to invest in a big-way. It’s not that difficult to guess why the new Najib’s administration decided to do away with this spooky policy – it’s the hot money from foreign investors they’re hunting. However foreign investors were not born yesterday so it would be naive to assume the foreign hot money will start flowing in immediately after the bias policy was removed. If this is true then from where the so-called “hot money” did comes from? Looking at how the KLSE defied gravity and jumped regardless of Dow Jones’ performance brings back the old memory.
It’s nice to see how KLSE did it again. The only logic explanation on current bullish stock market performance is due to heavy buying by local government-linked funds. It seems the billions of dollars of stimulus package is doing its’ magic. During the 1997-1998 Asia Economic Crisis, Mahathir did used billions of dollars trying to support local stocks especially the blue chips but the harder he tried to support the greater the selling pressure kicked in. The former premier sensed he couldn’t fight the force of selling hence he gave up and started calling George Soros moron and all sorts of thing. Fortunately for Najib the foreign investors’s portfolio now is negligible and could do very little damage. Najib should have little problem pushing up the index to lure the second and third liners fans into the local stock market hence multiply the daily volume and declare the bull is charging. You decide for youself if it’s the bear rally now or otherwise.
Moving forward if Najib’s administration can convince the investors, both foreign and local, that the “true liberalization” is here to stay even if the extremist groups threaten to call him PM Najib-Altantuya if he doesn’t back off, the bull might be able to start charging once again – provided the Dow Jones doesn’t plunge back to below 7,000-points.
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