It’s been the second week since the new Pakatan Harapan government came into power in Malaysia. Newspaper and magazine has been constantly selling out of stock on a daily basis ever since after the 14th general election. All Malaysians are delighted to read “discoveries” being dig out by the new government. Last week, all walks of life in town are talking about the new mathematics calculation of a Trillion. What it means to have a Trillion debt owed by the government was the major subject of the general public.
However, market reacted to that discovery with a surprise dip, especially on the third day after the announcement. Market closed at 1775.66, erasing all the gain of the year 2018 at 24th May 2018.
However when the figure of that 1 Trillion debt was detailed by the Finance Minister, market reversed its course by spiking up the next day.
It has become clearer to the stock market players that the actual 1 Trillion debt released by the new government is nothing new that should cause any alarming fear to the public. It was only a different ways of looking at those figures. The official Federal Government debt is still standing at RM686.8bil (50.8% of GDP) which was similar to the previous government announcement.
We as retail investors who have taken advantage of this unnecessary market dip are the happiest ones. We are thankful on how the new government made such announcement. We are hoping more of such “making” will come to shake up the market, so that we have chances to enter the market at its dips.
International Market performances
On the broader market horizon, the international markets did have their twists and turns in the past one week. First, it was looking like a happy ending for the trade negotiation between China and US carried out by Top leadership representatives from both parties. When Trump finally showed his unhappiness, both US and global markets have their dips as well. Secondly, it is the most comically historic making when Trump called off the peace talk with North Korea leader Kim Jong-Un. Market reacted to this sentiment instantly. However, on the next day, Trump broke the news that he has made good conversation with Kim, it might have chances that the Singapore peace talk may push through by June 12th. It shows the flip flock nature of Trump’s temperament. Global markets are expected to have their dances accordingly from now on.
On the US market, there will not be any more catalyst to push market up for hype from now on. But the risk of market down turn remains. The greatest risk is none other than the ever increase of the interest rate and the rising of bond yield. This will cause the tightening up of market liquidity and the risk of economic down turn.
At the home market in KLSE, new government hype is most probably over by now. Malaysians as well as investors are now have to get ready to face reality as the new government unfold itself as the days go by from now on. There is also a lack of any market catalyst to push market for higher height in any short term. It will take a longer term for the new government to convince the market that it has new and effective strategy to tackle its gigantic national debt. Malaysia market is expected to follow international market sentiment and direction by going side ways.
Investment turns to become trading
For the US market, it is expected to take its side way movement from now on until it can breakthrough its historical height or break down its strong lower base support. This period of time will be the most boring investment period ever. For those who do not want to waste time seeing index moving only up and down, it would possibly be ideal to take profit whenever market index reaches high points and top down whenever market touches low points.
Though this is not an easy task, as timing the market is the least successful task any investor can do with precision. However, it is always good to learn new lesson on how market moves during this time of uncertainty and directionless. But it is most advisable to use small amount of your capital to capture whatever profit in moment like this.
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The view and opinion expressed are personal views of the author and are subject to change based on market and other conditions. This write up does not constitute sole advice for investment decision. Investors are advised to do further reading and research to make up individual investment decision.