Tech Stocks: Has The Value Emerged?

Can I buy tech stocks now?

I think most stock market investors in Malaysia will have this question.

Year-to-date, most tech-related stocks have seen their share price dropped between 30-50%. Their previous optimistic PE valuation of 40-60x has fallen to 20-30x currently.

PE ratio of between 20-30x seems to be fair and not expensive in recent tech super cycle. 

However, will the PE valuation ever go back to 40-60x again when the sentiment in stock market improves later?

I really don't know. Who knows the PE might go back to 15-20x region when the worry of semiconductor oversupply emerges?

Anyway, tech related companies with high growth potential should be a safer bet.

Preview of 2022: Tech Stocks Off To A Bad Start

 

Which sector in Bursa Malaysia will excel in year 2022? 

I think many investors opine that technology sector will continue to flourish in 2022 after doing exceptionally well in 2020 & 2021.

The reason is simple: 5G, electric vehicles, autonomous vehicles, Internet of Things, IR 4.0, smart devices, metaverse etc. 

These things are the future and it seems like they are still in their infancy stage. All of them need a lot more sophisticated chip.

Thus, semiconductor's demand is high in the foreseeable future.

However, as we step into the first two weeks of 2022, the stock prices of technology stocks in Bursa Malaysia drop like nobody's business.

Most of them suffers 15-25% slash in their share prices in the past one week alone.

Is this a golden opportunity to grab their shares or is it just the beginning of a prolonged downtrend?

Black November: Pessimism Prevails

 

So far this November has not been a good month to most stock market investors.

This is the month when most quarterly financial results will be released, and we know that most results will not be very good.

We have stricter MCO 3.0 lockdown in June & July, and then the Covid-19 new cases surged to peak in August.

Currently there is worry about Covid-19 wave number four after everyone is free to travel across state borders.

New cases stay mostly above 5,000 per day despite close to 80% of the population have been vaccinated.

I sense that the whole stock market is full of pessimism in November. 

The share price response to good financial results was rather muted while a bit of bad results could be punished heavily.

What should be our strategy in such a period of time? 

New High Again (Not KLCI), Stay or Leave?

The image above shows the number of Covid-19 cases in the first week of MCO 1.0 in March last year. There was 106 new cases reported on 24th March 2020.

At that time, people were like scared to death and no one dared to come out from their home. Face masks were quickly running out of stock.

We thought that it was very serious when South Korea registered over 500 cases per day, and there was also that terrifying Japan cruise ship cluster.

Time really flies. Now it's already mid July 2021 and the daily new Covid-19 cases in Malaysia has reached a record high of 13,215 on 15th July 2021.

As of today, our accumulated Covid-19 cases has reached 893,323 cases while it's only 175,000 cases for South Korea.

Ironically, now people are not as scared as during March last year.

Best Opportunity Missed in Mac20-May20: What The Hell Were In My Mind?

Finally, year 2020 comes to an end. 

Everyone in the world will remember it as a pandemic year. What have you learnt from this turbulent year?

To me, I'm grateful that so far I have not been negatively affected by this pandemic. My family and I are still in one piece and I still have my job.

Malaysia implemented its nationwide lockdown (MCO) on 18th Mac 2020. Surely it was a new experience for all Malaysians.

I still need to travel to work though, and I like the feeling of driving on roads without other vehicles.

At the same time, we had a scary stock market and oil price crash on top of the back door government change.

What have I done and what was in my mind at that time?

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.

My Portfolio Mac20

Summary for March 2020

Mac-20
Numbers of stocks	11
Share Sold	Adventa @ 0.735, 0.645 (all)
Share Bought	None
Overall 2020
Portfolio Return Mac20	-21.70%
KLCI Return Mac20	-8.89%
Portfolio Return YTD20	-16.20%

Stock Portfolio @ End of Mac20

Stocks	Avg	Feb20	Mac20	Div20	Mac20%	Overall%
BJAUTO	1.92	1.78	1.13	2.75	-36.5	-41.1
DAYA	0.035	0.005	0.005		0.0	-85.7
DKSH	2.500	2.750	1.970		-28.4	-21.2
GESHEN	0.430	0.400	0.360		-10.0	-16.3
HIBISCUS	1.050	0.750	0.340		-54.7	-67.6
KRONO	0.76	0.635	0.430		-32.3	-43.4
LEONFB	0.505	0.390	0.300		-40.6	-23.1
MATRIX	1.42	1.94	1.57	3.00	-19.1	10.6
NOTION	0.40	0.990	0.660		-33.3	65.0
PRLEXUS	1.15	0.710	0.470		-33.8	-59.1
SCIENTEX	2.735	9.00	7.54		-16.2	175.7

March 2020 is a disaster month in stock market globally and my portfolio drops 21.7%. 

The percentage is actually better than expected, as I expect more than 30% loss. This might be helped by the profit took home from selling all Adventa shares earlier in March.

Anyway, the percentage does not matter too much. 

However, I'm surprise that quite a lot of stocks in Bursa Malaysia made sharp V shape recovery in the last week of March.

Some short term traders might have enjoyed good gain in this month.

I don't have a lot of stocks in my watch list, but most of them rebounded around 50% or more from their lows. One of the best performer must be Frontken, as it was once traded below RM1 in March and now it is at RM2.05, a 100% gain in less than 2 weeks.

Since the MCO, I do plan to do short term trades but I still haven't make any move. I was just too "careful" and not brave enough.

Now a lot of stocks have already moved up so much, and I can sense some optimism in the market last week.

So I think may be it's not a good time to buy. I might need to wait until the time when everybody wants to throw every single shares they have. 

Will it happen again? 

If it won't happen again, that means stock market has already started its recovery and I will miss the opportunity which only occurs once every 10 years.

At this moment, Covid 19 is out of control in the most powerful economy in the world, the USA. Its 311,637 cases and 8,454 deaths now make China's figures of 81,669 & 3,329 very "presentable". 

The problem is, US still haven't find its peak yet.

For Malaysia, everything seems under control but we are not sure whether the MCO will be extended beyond 14 April. 

What I'm worry is the extent of recession Covid 19 will bring and how long will it take to recover.

At the moment I still haven't hear any businesses go bankrupt, any huge jobs cut or loans get defaulted and property get lelong. 

All these things should happen in recession right?

Perhaps they won't happen, as the lockdown is only 1-2 months and everything will go back to normal then.

I saw an Ad in FB by a fellow investor, telling readers that when the Covid 19 is settled, everyone will go shopping, dining, travelling & spending as usual. Since the government have already distributed so much money & incentives to individuals and businesses, the economy & stock market will recover in explosive manner. KABOOM!

This is what most people think, including myself. But, is it that simple?

I don't know. I feel that the worst is still to come. 

That's why I haven't buy any shares, yet.

In Limbo: How Low Can It Go?

From 2010 to 2018, there were 3 times when KLCI fell significantly but did not officially enter bear market.

The first time was from July11 to Sep11, when KLCI dropped from about 1,595 to 1,365, or 230 points (14%)  in 3 months.

At that time, I just started this blog in May11 and didn't really know what was going on. I didn't sell any shares, only bought shares as I was just starting to build my portfolio.

The second time was a correction from Jul14 to Dec14. KLCI dropped 9% or 170 points from 1,885 to 1,715.

The third time was from Apr15 to Aug15 when KLCI dropped from 1,865 to 1,575 points. This 290 points or 16% drop was still short of 20%.

All three "correction" did not fulfill the definition of bear market. I just held tightly and did not panic sell any shares. 

This time in 2020, of course it is totally different. From my previous "pattern" I would have held the shares tight and refused to sell any of them.

Fortunately I didn't do that this time. I sold more than half of the shares in value.

Unfortunately I didn't sell all of them.

I think no one would have anticipated the stock market to fall so much in such a short period of time. It can be described as ferocious.

Last time out in 2008 it took 10 months to reach bottom, losing 600 points or 40%. Now it's only 2-3 months, KLCI has already fell 400 points or 25% from 1,600 to 1,200. Are we already reaching the bottom?

If it is a big bear, another 400 points decline is not impossible at all. We might be only half way through this mess.

Even though KLCI "only" declined by 25%, most stocks already fell more than 50% in this short period of time. Will they fall another 50%?

Everyday the share price falls 15% and looks like no end to it. I already feel "numb".

My current portfolio can be described as "no eye see". Perhaps this can provide some consolation to others who are suffering too.

Anyway I'm not too worry as I think I have ample cash in hands.

For those stocks which are "trapped", I only consider them as being placed in EPF or PRS fund, which I can only withdraw after 3-5 years.

At this moment, when the share price drop a lot, especially those in my watch list, I feel happy and excited. When the share price goes up, I feel a bit "worry and uneasy".

I believe that those investors who are waiting for a good timing to buy cheap have the same feeling.

We don't want to miss the boats that sail north.

However, if we're not careful enough and take the wrong boats that continue to sink like Titanic, then we will still get drowned no matter how much cash we have now.

At this time, may be it's a good opportunity to do contra or short-term trades. As share prices are fluctuating wildly, one can easily earn 10-20% in one or two days time.

Even though Malaysia is implementing movement control order now, I still need to work. I don't have the luxury to sit at home for 2 weeks to monitor the share price closely.

Personally I don't feel the worst of Covid-19 is over, especially in Malaysia.

At this moment Malaysia has 1030 confirmed cases, with 3 deaths. We are already the fourth highest in Asia after China, Iran & South Korea.

Though for the last 5 days the total daily cases did not surpass the record 190 cases per day, it does not reflect the true situation as the Covid-19 test results which normally take 24 hours now take much longer to release because of the sudden huge load.

With the help of private labs now, the results should be able to be released faster so it's not a surprise if we see a spike in cases later.

Government hospitals which are almost always full before the outbreak, will not be able to cope with this surge in Covid-19 patients if it continues to rise like that.

As for stock markets, after a deep fall 2 days ago, most regional markets including KLCI see a spectacular rebound yesterday. Notion jumped more than 30%!

Will it stage a V-shape quick recovery from here? Or is it just a breather before it dives even deeper?

Whatever it is, lets pray that this Covid-19 pandemic will be brought under control as soon as possible.

But, where are those 2,000 Rohingyas??!

To Buy or Not To Buy

Last week, US stock market just recorded the biggest single-day jump since 2008, with DJIA up more than 9%.

Today, KLCI dropped another 64.12 points or 4.77% to close at 1,280 points. Another bloodbath day.

Either you have a bit of cash or lots of cash, surely you are asking yourself:

- When is the best time to buy stock?

- What is the best stock to buy?

- This stock's share price has dropped 50%. Can I buy now?

- That stock's PE ratio is just 5x. Can I buy now?

Everyone dreams of buying at the lowest point, AND catching the stock which rebound the most. Yes it can be done, only in dream.

Stock market is like a roller coaster recently. Today the market fell the most since so many years, then the next day it jumped the most in recent history.

This morning you saw the stock market dropped like hell and you felt relieved that you didn't buy any shares yesterday.

Later in the afternoon all the stocks shot up 10-20% from low and you regretted not buying in the morning.

Then the next day those shares fell to new low and you felt very lucky that you didn't buy yet.

Investors' emotion are also riding on a roller coaster.

So, when is the best time to buy shares in this situation?

No one will know the lowest point for sure. Today might be the lowest point, you buy now you win. May be Dec 2020 will be the lowest point, you buy now then it's not ideal.

During 2008's bear market, KLCI started to drop from its height in early Dec 2007 and only reached the bottom in early Oct 2008. So it took 10 months to reach bottom.

It then lingered at the bottom for around 5 months until early Mac 2009, when it began its uptrend journey and met its previous high in May 2010.

Financial crisis 2008 took 10 months to drop, 5 months to rest until it showed sign of bottoming out.

So, isn't it ideal to enter the market during the 5-months trough?

Currently, even though KLCI has its previous high of nearly 1,900 points in April 2018 which is almost 2 years ago, the actual bear market feeling only started from Jan 2020 when the KLCI was 1,600 points.

In 2008, KLCI dropped approximately 40% from 1,450 to 850 points. If it were to drop in similar magnitude, we might see KLCI drop another 300 points to 1,000 points.

If Covid-19 is the main culprit of current bear market. Is the worst over? Far from over.

Europe's numbers are rising alarmingly, so does Malaysia.

Yesterday there was 190 new cases of Covid-19 in Malaysia. Today there are another 125 new cases, bringing the total to 553 cases.

We all know what is the situation like now, the virus has already spread among the public. We should see many more cases being confirmed in the coming weeks.

It might be a matter of days when our numbers exceed 1000 and grow exponentially.

We don't have the luxury to hospitalized all confirmed cases by then, and we need the discipline of self-quarantine. 

We won't have enough ventilators to support those who are ill with severe pneumonia as well.

How about the other countries with relatively low count now? Is that logically possible? I think it is only possible because there are not many screening or contact tracing done. If those countries explode, the neighbouring countries might get second wave or third wave of outbreak.

The virus threat will surely go away one day, just like what we witness in China & South Korea. By then, how much damage will it do to the world, and how long will it take to recover?

How many orders deferred or lost? How much the sales drop? How many loan repayment defaulted? How many companies will go bankrupt? How many people will be jobless?

Now, more & more leaders come out to warn that this time it will be as bad or even worse than previous financial crisis. Such acts only make the market plunge deeper.

For me, while it definitely does not look good at the moment, once the fear of Covid-19 subsided, people will continue to travel and shop right? Will we see a quick rebound?

Anyway, what we can do now is to play our part in fighting Covid-19 so that it will end early.

To Sell or Not To Sell

Today is the worst day of Bursa Malaysia since the 2008 crisis. KLCI surrendered 74.68 points or 5.26% to close at 1320.96 points.

At this moment, some investors might have already sold ALL of their shares.

Some might still hold a few stocks, either already kept for months or years, or just bought recently during the drastic drop but only to see them drop deeper.

If you still hold shares now, you might have a doubt:

- Should I sell now to minimize loss since it's likely to drop further?

- Should I just hold since it has dropped so much and unlikely to drop further?

These are very difficult questions to answer, as I think the answer should be individualized.

We have different stocks, different cost price, different risk appetite, different mind strength, different cash level & cash flow etc. So it's good to work out a plan that suit you the most.

I can't remember very well exactly when I started my stock market investment. I started working in 2004, and bought my first unit trust fund in the same year.

If not mistaken, I should have bought my first stock around 2006 and I can remember the first 2 stocks I bought were WCT & Mahsing.

Even though I started to join the stock market before the 2008 financial crisis, frankly speaking I don't have a clear memory what happened to me during the market crash.

I don't have any painful memory, nor any exciting memory. In the other words, I seem to learn nothing from that bear market in 2008.

Perhaps I was not that active in stock market or did not hold lots of stocks at that time.

Now it's definitely different, I have so many stocks in hands going into year 2020. I must have a plan when bear strikes.

If you read my blog recently, you should have known that I have a plan to sell stocks to trim my portfolio, and also in anticipation of potential bear market.

Even after clearing 5 stocks, now I still have 11 stocks with me which I decided earlier not to sell first. Holding so many at this point of time, too bad isn't it?

Out of those 11 stocks, I think Matrix & BAuto are well-managed companies supported by fantastic dividend yield. Both are not that overvalued as well that's why I decided not to sell.

Anyway, share price of both stocks still fell significantly but I'm not too worry about them. Financial crisis will affect their sales but low interest environment should benefit them.

Scientex is also a magnificent company which is traded rather cheaply while it's still growing its business. After it announced its latest financial result few days ago, I had a dilemma whether I should sell it first to lock in the gain, and buy back later as almost certainly the share price will drop.

At this moment I haven't sell Scientex's shares as I just feel not right to sell. Will its business affected by Covid-19? I don't think it has direct long term negative effect but I know that low crude oil price should benefit it.

DKSH is a company which is also not traded at high PE ratio and has decent dividend yield. I think it is undervalued and plan to add. How can I sell if I have plan to add more shares?

My cost for Notion is quite low at 40sen. I can sell all at above 80sen and take home a handsome 100% profit. However, I decided against selling them because I have plan to "average up" if the price fall to lower level.

Notion's share may fall to 60sen and even 40sen or lower, then surely I will regret my decision not to sell early but what to do? No one can predict the market precisely.

These 5 stocks above are my "winning stocks" that I decided earlier against selling. Now of course share prices of all of them have dropped and BAuto and DKSH suffer paper loss.

The rest are deep in trouble.

Before that I have 3 high PE tech related stocks. These type of stocks have been pushed up high and are risky to fall harder.

I have cleared Inari & Frontken, but left Krono behind.

If I can foresee that Krono can drop to 40sen, I will definitely cut loss at above 60sen and buy back at 40sen. However, even Feng Shui Master Joey Yap also can't foresee this to happen.

After Krono's FY19Q4 result, I have a bit of doubt whether its business and profit can grow as expected. I'm also not sure how Covid-19 can affect it in short term.

This makes me a bit hesitant to average down Krono. I think I might need to wait for another quarter.

When I bought Geshen last month at 43sen, I thought I got a good price as its shares are really hard to buy due to low liquidity.

Because of this, one sell transaction can see the share price drop by more than 10%, another buy transaction can raise the price 10%.

Geshen might be at higher risk of being affected by Covid-19 and all these supply-demand disruption issues. Though it seems like the company has invested a lot on new machinery and capabilities in its Malaysia & Vietnam operations, I might have bought it too early.

Hibiscus should be able to make profit even if the crude oil price is at USD40. I think crude oil price will not stay at low level for a long long time. Once it rebounds, so will Hibiscus's share price.

Perhaps I should have sold all Prolexus & LeonFB shares just like Latitude. All these feel like "dead wood" because it seems not easy for them to grow well from here. Everything seems tough for them.

Both are deep in paper loss. They have dropped so much but still can drop further. Since they are still doing business as usual, it looks weird if I sell now at big loss.

Lastly I would like to announce the winner of "The best performing stock" in my current portfolio in 2020 - Daya. It doesn't drop!

Those 6 stocks (Krono, Geshen, Hibiscus, Prolexus, LeonFB & Daya) are losing stocks. After giving so much explanation and excuses of why I didn't sell yet, the main reason is "unwillingness to realize loss", haha.

Some of you might think that I should sell all those hopeless losing stocks in my portfolio, get the cash and put them in better quality stocks which can rebound faster than others.

Ya, I agree and this sounds very logical. However, I don't do it due to various reasons, at least for now. May be I will change my mind in the near future, I don't know.

With ample cash in hand, next question will be: When and what should I buy?

破屋更遭连夜雨，漏船又遇打头风

"Broken house meets torrential rain, broken boat meets strong wind"

Covid19 spread, supply chain worries and politics drama are not enough, here comes the sensational crude oil price collapse in a day.

Brent oil price plunged 30% from $45 to $31 in a single day today, thanks to the price war between Saudi & Russia. 

This is the worst intraday drop since Gulf War in 1991, and it might drop further according to some "experts".

So, are we witnessing the once-every-10-years major financial recession now, despite a slight delay?

Almost all stocks traded in Malaysia fell sharply. Without a doubt oil & gas related stocks suffered the most with a drop of 20-40% in a day.

Hibiscus which is directly affected by the oil price fell 42% to 41sen. This looks like an attractive price but I think I better wait for the dust to settle first before deciding to average down.

Oil price might continue to drop but should not be depressed for too long.

My portfolio has shrunk in value significantly. Even though I sensed that market will not be good in near term, I still decided to keep those stocks and only have myself to blame.

If not because of those stocks sold last month, my loss will be much more year-to-date.

Investors with lots of cash must be very happy as this is a golden opportunity to buy shares at great discount.

Currently my cash:stock ratio is about equal, but I need to be more cautious before buying any shares.

Anyway, if you're suffering temporary loss, it's quite "normal" and don't be too depressed. History has repeatedly shown that after a bear market, bull market will follow.

Year 2020: Cautiously Optimistic?

February 2020 should be a forgettable month for most stock market investors.

If you're making loss so far in year 2020, you're definitely not alone. The loss might just be temporary and you might still register positive return at the end of the year. 

For me, surely I'm heavily affected. Even without calculation of the return I already knew that year to date I'm making loss.

I have a plan in place since Jan20 to trim my portfolio which has too many stocks. I already have a list of stocks in mind to clear.

However, I decided to wait until the latest quarterly report announcement in Feb20. This has proven to be a bad decision in hindsight.

Escalating concern over Covid19 worldwide, sudden political crisis and last but not least, out of expectation's CY19Q4 financial results all sent the stock price tumbling.

Is it a temporary setback with quick rebound, or will it be the beginning of a prolonged bear market?

Of course no one knows but if you ask me, I think generally year 2020 might not be a good year for stock market.

KLCI has dropped more than 20% from peak of 1,900 in mid 2018. Currently it stands at 1,482.

I'm still not sure to what extent Covid19 will affect the economy in Malaysia & worldwide. Some companies may benefit from it and vice versa. We can only get a glimpse of it in CY20Q1 financial results to be announced in May.

A lot of experts expect the Covid19 fear to subside comes May, as the weather gradually turns hot, just like SARS in 2003.

However, Covid19 seems to be highly contagious and definitely affected more people and countries. Up to today, more than 86,000 Covid19 cases have been reported in 64 countries, and we have countries like South Korea, Iran & Italy which reported exponential rise in cases recently.

In contrast SARS has affected only 29 countries with only 8096 cases reported. Fortunately, the mortality rate of Covid19 is not as high as SARS.

Anyway, we can be 100% sure that Covid19 impact will be over one day, just the matter of when. Two months later, six months later or even one year?

Airlines and tourism industries will no doubt be negatively affected. Those companies who depend a lot on China as customers or suppliers or producers might also feel the heat.

Regarding the political turmoil in Malaysia, it seems to be settled but it might not be in reality. I'm really sick of politics and won't make any comment here.

So far I have trimmed my portfolio a bit last week but not in the way I wanted to. I keep more cash now as planned. I don't know whether I'll regret that later.

I'll remind myself, fear in stock market gives opportunity.

Brief Notes On Current Economy Situation

Investors are told by experts to read more investment books and financial news in newspaper.

Do I read a lot? Actually not.

I only read a few books on investment for the past 3-4 years, which includes the 2 books by "Cold Eye", one on basic accounting and another 2 books on stock market investment.

I never read a single book about Warren Buffet and other famous investors, or other famous investment books such as Millionaire Next Door etc.

I do read one book from the Rich Dad's series though. That was long time ago.

I read newspapers almost everyday, but ONLY the Sports column. I find that I'm actually not too interested to read financial news. This is bad, I know.

I may flip through financial news on newspapers a few times a week, but I mainly read local financial news only.

I am still new to those financial jargon & the law of economy. You don't expect me to read something that I don't understand, right?

I get the financial & business news mainly online from i3investor and The Edge, but I only choose a few to read, as I'm not able to get online frequently now.

To force myself to read more, I started to subscribe to Busy Weekly in Nov14 when they were doing the offer. Til now there are a few editions that I didn't even read a single page.

So do not always agree with me. I still have many things to learn.

In order to become a better investor, I know that I need to force myself to swallow more world financial & economy news. It's not easy frankly.

I will write down my own view on current world economy in this blog so that it can serve as reference in the future.


Before Oct 2014, I thought that there was no reason for a bear market in 2015. The impression I get from financial news was that US & Europe were in the process of recovery.

The only concern might be China, who may face a slow down in growth.

Now with the unexpected drastic drop in crude oil price, the whole picture seems to change.

In order to eliminate competition from high-cost shale oil producers in North America, OPEC decided not to reduce their oil production.

As a result, crude oil price continue to drop.

Those net crude oil exporting countries are feeling the heat, including OPEC members.

Russia's situation is scary, with a double blow from the drop of crude oil price plus the effect of economy sanction by the West.

Its currency Ruble has crashed from 1 USD:35 RUB to over 70+RUB at one point in just a few months time.

It is a 100% drop. Just imagine if USD/MYR suddenly depreciates from RM3.20 to RM6.00...

To check the continuous depreciation of Ruble against USD, Russia central bank recently raised its interest rate from 10.5% to 17.0% overnight!

If this happens in Malaysia, I think many Malaysian with high debts including me will "mampus".

If Russia goes bankrupt, will it drag the whole world into recession? 

I remember few years back when a few small countries in Europe faced the similar threat, it seems like everyone is panic and the whole world will be seriously affected.

However, I read some reports saying that Russia's collapse will not affect the world much as it mainly exports energy which can be substituted by other countries.

So is Greece more important than Russia? I don't know.

One local economy & financial expert with PhD title writes a series of articles regarding current & future economy outlook. He predicts that the next 2 years will be really really bad for Malaysia. 

After reading those articles which seem to make sense, I feel like I should dump all my shares and hold cash for the next 1-2 years.

Anyway, no one can predict the market accurately, and sometimes theory is just a theory.

Ringgit has depreciated almost 10% in 3 months time to RM3.50. It will benefit USD-based exporters and burden the importers and those companies with debts denominated in USD.

How will it affect the whole country in general?

With the fall in crude oil price, Malaysia as a net exporter is expected to suffer due to its "not-so-healthy" financial situation. 

Petronas will cut its capex by 15-20% next year and hence government income from Petronas will also go down. 

Its CEO told reporters in the end of Nov14 that payment to government could be 37% lower if oil stays around USD75 per barrel.

Petronas contributes about half of Malaysia government's revenue, and now the oil price is even lower at around USD60. It may still go lower.

However, the fuel subsidy has been abolished since Dec14 and GST will kick in from Apr15. No one can be sure whether the government can sail through the low crude oil price environment peacefully.

If the government has difficulty to cope, then a lot of major projects have to be put on hold I guess. It will affect a lot of sectors.

Thus, foreign investors started to flee Malaysia. KLCI slumped and Malaysia Ringgit depreciated, while most other regional stock markets gain.

US and Euro markets are busy breaking new highs. Why KLCI does not follow US anymore? When US economy is good, other countries' economy can be bad?

Actually US did not suffer much during Asian Financial Crisis in 1997-98. 

       Dow Jones Index since 1985

In the end of Oct14, US just ended its 5-year quantitative easing programme (QE) as its economy has improved.

At the same time, Japan announced that it will further expand its own QE in response to an ailing economy. This makes many people planning a Japan holiday trip next year as Yen has depreciated quite a lot against MYR now.

China surprised everyone by cutting its lending interest rate for the first time in 2 years to 5.6% in order to tackle sluggish growth.

Eurozone is also hinting to implement a large scale QE to give a push to its slow recovery.

Because of the reasons above, aided by low crude oil price, stock markets of those economy powerhouse such as US, Euro, China & Japan are expected to advance next year!

Besides, US Fed is also highly anticipated to raise the country's interest rate in 2015 for the first time since 2006. Its current rate is only at 0.25% for quite a number of years already.

       US Historical Interest Rate

Raised interest rate in US is said to further strengthen USD, and may give further pressure to other countries' currencies.

Low interest rate environment means lower cost of living. People can buy houses, cars etc more easily with low borrowing cost.

Sooner or later this will lead to inflation when demand is more than supply. This is when interest rate hike comes in.

I get an impression from certain articles that US rate hike will have negative impact to Malaysia & KLCI. Will it happen suddenly in 2015, or gradually over many years? 

It is just a start of interest hike, should we need to worry now?

As Ringgit is cheap now, isn't it attractive for foreign investors to invest in Malaysia? Of course Malaysia need to be in a good shape to attract foreign investment.

For the past one year, it is obvious that crude oil, crude palm oil & KLCI all retreats from its recent peak in mid-2014.

Brent crude oil price started to drop from its peak in July14, which coincided with KLCI. However, CPO price started to trend downward earlier since Mac14.

For the past 10 years, during the bear market in 2008, all three reached their peaks in early 2008 before the massive slump which found their bottom at the turn of year 2009.

After that, both CO & CPO rebounded and reached their peaks in early 2011.

From there, crude oil fluctuated around USD110 for 3 years+ until the sudden fall recently, whereas CPO price was in a gradual downtrend.

Nevertheless, KLCI did not follow this time. It only experienced a major correction in 2011 but kept on breaking new high after this.

I think it is the same for almost all major stock markets around the world.

So now, crude oil at USD60 is very close to its lowest level during 2008 crisis at around USD50. CPO at RM2100 now from its peak of RM3800 is also quite close to RM1600 in 2008.

Despite a drop of 10% from its peak in July14, KLCI at 1700 now is still far away from lowest point of 800+ in year 2008.

As economy has largely improved, I think it is unlikely to touch that level again in the next bear market.

Anyway, during the period of 1997-2000, KLCI and CPO price actually moved in different direction.

It seems like rosy outlook suddenly turns sour towards the end of 2014. This is how fast things (or emotion?) can change.

As an investor, I think it is important to learn from experience and do not forget our initial investment strategy.

If you have got a few sleepless nights or near heart attacks for the past few days, then you might need to review and change your strategy to one that suits you better.

When we step into the year of 2015, will things turn better or worse?

If it becomes better, then it's nice.

If it becomes worse, then it's opportunity.

But you need to have enough CASH of course.