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2009-08-04

FBM-KLCI Is About To Celebrate Its "Full Moon"
























About a month since the FBM-KLCI start take effect, KLCI index has going up about 100 point due to the new calculation base on 30 share.

According to bloomberg, FBM KLCI is now priced at a price earnings ratio (PER) of 20.5 times. As the number suggests, it looks surprisingly more expensive than Hong Kong's 42-member Hang Seng Index at 18.5 times, and Singapore's 30 member Straits Times Index (STI) at 16.2 times.Is our stock market really more expensive than that of Hong Kong and Singapore, where trading activities are more vibrant?

I think the answer is yes because FBM KLCI's 30 constituents said to account for more than 60% of the Main Board's market capitalization, have government linked companies (GLCs) that are tightly held by government institutions. When a stock is tightly held, it is likely that its valuations are well supported and hence it becomes expensive.

Now government is easy to control the index and with the new launch Amanan Saham 1Malaysia sure will help government funding to continues to support the KLCI index and share market. I think to be save at all, invest into FBM-KLCI 30 constituents will be more sure profitable.

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My investment with RM5,000 initial capital have been growing since 2005.I found the stock market appears confusing and complicated, but it is most definitely based on logic "supply and demand". However, the laws of supply and demand as observed in the markets do not behave as one would expect. To be an effective trader, there is a great need to understand how supply and demand can be interpreted under different market conditions and how to take advantage of this Off Market Transactions in KLSE.

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