Saturday, 27 June 2020
A Different Bear in 2020
Back in May, I heard that someone who has never buy any shares in stock market before, earns more than RM300,000 in gloves stocks.
He just needs to follow his friends and "online teachers" to trade. Making money is so easy in stock market.
It's a fact that the stock market welcomes a lot of newcomers like him during this Covid-19-induced bear market.
Despite how the indexes drop in record pace and how bad the economy data show, the stock market staged a quick V-shape recovery.
This stock market & economy forecast mismatch is certainly contributed by technology - the ease to communicate and trade in stock market.
Back in the 1990s while many were joining the euphoria in shares trading, there were no smartphones, chat groups, Facebook etc. I doubt there was any online trading platform at that time with the super slow dial-up internet connection.
We had fixed line phones and remisiers. When you want to buy or sell shares, you have to call your remisier and queue up. I can imagine how difficult it was to get in contact with the remisiers when the market was hot.
Many investors and speculators did not have real time share price in front of their eyes. My parent bought a small Sony TV with Teletext just to follow the share price movement. It attracted lots of friends and relatives to "watch" this TV.
It must be a best-seller at that time.
There was no smartphone with data and no online trading platform to view the share price and trade the shares at a few clicks. There were no social medias in which investors and traders could share information, news and more importantly, tips & "insider news".
So when the market crashed in 1997, people just threw their shares out of the fear of unknown and many retail investors just left the stock market forever.
Ten years later during the market crash in 2008, online trading was definitely there but still not widely used. Hand phones were more common but they were not "smartphones". Even with a smartphone, data was often limited and I guess mobile phone trading was still not there.
Nokia, Ericsson, Blackberry etc still ruled the market at that time.
There were still no phone-data based messaging and chat groups like Whatsapp, while Facebook was not that "commercialized" and popular.
Stock trading can be done quite easily online through a computer though. However, if you don't have a computer around you, you can't do trading unless you call your remisier or agent.
This time in 2020, it's totally different. Every adults including foreign workers has a smartphone and phone data is getting cheaper and cheaper. People use smartphones to trade which is as easy as ABC. You can trade even when doing your business in the toilet.
Social medias are now widely used to communicate and share information. Once a guru says "buy", the message spreads like wildfire and immediately share price will go up. Once a sell call is made, share price can immediately drop, at least temporarily.
This is a world where information can be obtained easily through internet. Everyone is aware that a stock market crash will eventually rebound. Everyone knows that the best time to buy shares is during a bear market.
If you don't know about all these, very quickly you will know as you will find them on your Facebook or Whatsapp or others. Someone made a good profit and might share it out. Hundreds of newcomers know it and wish to follow the footstep.
It's just like that "someone" who does not have a clue about stock market but earns RM300,000, he might have been attracted into the stock market after hearing or reading something from his friends or relatives..
Stock markets worldwide are supposed to be bad at this point of time. However, they are not.
Retail participation has increased significantly during this time and certainly plays a part in the rebound while neutralizing the effect of foreign funds exit.
Trade statistics of May 2020 shows that local retail investors contributed more than local institutions in term of either value (32.4% vs 28.7%) or volume (45.3% vs 23%). Though I never track such statistics, I read that retail participation usually does not exceed 20%.
"Local Nominees" also make up a big portion of the trades. I wonder whether retail investors who open a nominee account are included here. If it is, then almost half of the stock market is "controlled" by retail investors or speculators.
Now we are coming towards the end of Jun and the stock market seems to lose some steam.
When more businesses shut down and unemployment figure rise inevitably, will the stock market still be resilient? We won't know.
For someone who just came in the stock market and earned RM300,000 in less than a month, definitely he won't stop here.
If he is to stay long in the stock market, perhaps he should learn the fundamentals of stock market investment, either by self-study or paid lessons. If not, someday he might end up like a lot of people who don't even want to talk about shares after 1997-98.