Dubai Sends Markets into Panic Selling

Probably a good thing Malaysia markets were closed at Friday. In Europe, the Dubai affair caused the biggest drop in 7 months. European banks have lent $40 billion to Dubai. Emerging markets lost 2.1% on Friday. Worldwide, the loss was 1.5%, even gold lost a little ground too. “People are panicking: this whole process counters everything that the rulers have been saying and the way it has been communicated before the holidays is confusing,” said one hedge fund manager from a report I read today morning.

But what is the real meaning of what is going on in Dubai? It’s the story of the collapse of the financial industry. Dubai has no oil...no natural resources...and no real industry. The rulers tried to turn it into a financial center. Entirely financed by debt. And now finance itself is falling apart.

However since we are in the recovery road and next month will be December, most of the windows dressing will be done by company so I think the share market still will end this year with a good number. Dec traditionally has been a profitable month as far as the Malaysia bourse is concerned. Between 1987 and 2008, the benchmark index was up in 19 years, translating to a high probability rate of 86%. The average return made during the month over the last 22 years stood at 5.1%. In the two most recent years, the FBM KLCI posted a monthly increase of 3.4% (in Dec 07) and 1.2% (in Dec 08). Thus, if history repeats itself, then investors will get a chance for a quick ride to lift further their portfolio performance ahead.

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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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2 comments:

Anonymous November 30, 2009 at 5:04 PM: that means dubai is on the rise again. u might wanna look into knm and green packet today.
East Point Trading December 2, 2009 at 7:27 AM: Dubai problem still not over yet but just that now is Dec so everyone need the economic to be good to end this year.

The effect of Dubai situation on market still no 100% surfaced and may be still had bad news like Dubai case not yet roll out, however I think all this will be unlikely to roll out by Dec or 1Q2010.

Bursa Malaysia (KLSE) Daily Info Edge Zone