Nobody knows when the current temporary bearish sentiment will last. What we know is the U.S. sub-prime or housing bubble has burst and now is the time for financial companies to report the extent of the damages caused by it. Gauging from the initial reports, it seems the damage is quite serious but does not warrant the 1929 Great Depression. It’s already announced that the sub-prime problem might needs up to 2-years to recover. Fortunately China and India markets are still running at full speed and able to absorb some damages – from America to South-East Asia’s countries.

And please remember that Federal Reserves Chairman still has the aces of the interest rate of which he can cut anytime if the situation requires him to. In fact he has too much room to move around that investors are whining with the intention to force Ben Bernanke to use it. Hence logically investors should not worry and instead should let Ben’s team do their work. It’s not like the economy is on the brink of collapse with the interest rate remaining at 0.5%.

If you ever noticed the Kuala Lumpur Composite Index (KLCI) these couple of days, it’s taking the cue from U.S. stocks market most seriously. The fact that the KLCI has reached the 1,400 means the general election’s feel-good factor has been taken into consideration. The 1,400 mark is no simple quest, though I’m still puzzle why there’re still tons of penny stocks scattered around this time. Just grab this “1,400” figure and use a time-travel machine to zoom back to 1993-94 and you can see the wonders it can do to investors or traders back in the future.

It’s true that if you’re speculating or trading with penny stocks, you don’t really need to worry about having sleepless nights because your shares will not drop any much further down the drain even with today’s plunge (KLCI was down 20.71 as of writing). Trading volume drops significantly with less than a billion shares traded, which is normal considering few people will try to catch a falling knife. It’s a boring trading day and the Bursa Malaysia should accept the fact that most of the volume traded prior was from the penny stocks.

Needless to say, stocks above RM3.00 to $4.00 affected the most everytime KLCI drops. On the interesting note, the foreign Call-Warrants are being pulled down together simply because their main shares on the foreign soils took the beating more severely.

So what can the Bursa Malaysia do to create the excitement? Unless you’ve alternative bourse or equity markets to trade, go and take some sleeps now *yawn*. Bursa should seriously consider taking the quantum leap in introducing short-selling with easier and attractive mechanism. Put away excuses that short-selling might worsen a bear market and the local investors are not mature enough and so on. You need to start from somewhere. It will create more dynamic and efficient market with better supply and demand from the investors. Bursa and brokerage houses survive on commission and volume is of paramount importance. A one-way market is never interesting and can never mature.

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November 12th, 2007 by financetwitter

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