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2010-08-18

Why the Malaysian market is so resilient?

Now I think most of us will ask why the Malaysia market is so resilient and strong. One popularly accepted reason is the less urgency of the foreign funds to liquidate their Malaysian portfolio as their holding is near historical low of 20% right at this time.

Nonetheless, one cannot rule out the possibility of them liquidating their portfolio if the US economy falls back into a recession in the coming months or quarters as predicted by the well-known US economist David Rosenberg. During the Asian Financial Crisis of 1997-98, they had reduced their portfolio down to around 17% or might be lower.

Can we be insulated when the US economy and for that matter China economy starting to slow down? Since both of them are our large trading partner, our export will definitely be affected and hence our economic growth. Of course, some may argue that if we are able to fine tune our economic pump priming through the 10th Malaysian Plan, the prevailing annual rate of economic growth of 6-7% may be sustainable. However, when the storm is coming, the overall social mood will change due to fears and uncertainty. Hence, what actually guides the market direction is not the actual fundamentals but rather the social mood at that particular time.

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Investment Idea

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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