Last few trading days were particularly bad for Malaysia stock investors where, instead of enjoying the usual pre-budget rally, KLCI suffer one of its worst fall in the year and down to 6 month low.
There are a few explanation for the fall, in summary
- lack of growth momentum concern in Euro zone and China which expected to affect world's economy performance
- Outflow of capital from emerging market on expectation that US Fed will raise interest soon, thus stronger dollar anticipated.
- People suddenly feel that Bursa's stocks are overpriced? Especially O&G counters and Palm Oil counters?
- Rising inflation which will hindered consumer spending?
- Other factors, like bombing near bukit bintang, or potential outbreak of Ebola in US or Spain.
While some of doomsayers, like Mr. Tan Teng Boo maybe start laughing on " hah, i knew it" mood, here are a few sign why KLCI shall not crash yet...
- Malaysia economy's growth rate remain healthy at 5%-6% range.
- Lower Crude Oil price actually good for economy growth.
My view is that KLCI had been bouncing around range of 1780 to 1890 for 2014.There are no particular strong reason why the index shall move up and down, current movement looks more like emotional base. As market sentiments are strong, we may see a wider swing to continue.
Hence, at current level of 1808.88 , there are equal chances that the KLCI index can go up, down, or remain flat.
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