Examination of Past Market Movements of Malaysia KLSE
What can we learn from the history of overall market movements in the Malaysia KLSE?
1. Generally Upward Trend
2. Trends Not Consistent
3. Irregular Price Patterns
4. Prices Can Be Very Volatile
5. Prices Move Volatile Upward
6. Big Booms Are Irregular
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6. Big Booms Are Irregular
It appears that the big booms take place somewhat irregularly.
There have been three in the last 18 years from 1970 to 1988; 1972/1973, 1980/1981 and 1986/1987.
Not only are they irregular but they are of short duration, one to two years appears to be the usual length.
This means that it is difficult to catch a big boom at its beginning.
If one goes in after the market has already moved up a great deal, there is a big risk that the market will crash shortly after.
Wednesday, 28 October 2009
Past Market Movements: Prices Move Volatile Upward
Examination of Past Market Movements of Malaysia KLSE
What can we learn from the history of overall market movements in the Malaysia KLSE?
1. Generally Upward Trend
2. Trends Not Consistent
3. Irregular Price Patterns
4. Prices Can Be Very Volatile
5. Prices Move Volatile Upward
6. Big Booms Are Irregular
----
5. Prices Move Volatile Upward
It appears that prices can move very much further from the trend line on the up side than on the downside.
Except for a short period at certain times in severe bear market or market crash, the prices do not move very far from the trend line on the down side.
But it can move a considerable distance on the up side.
It would appear also that there are more up years than down years. This means that the prices tend to build up slowly over several years and then fall much faster than they rise.
However, big upward movements tend to be followed by sharp downward movements. It is thus a lot safer to buy when the prices are below their intrinsic value than when they are high.
What can we learn from the history of overall market movements in the Malaysia KLSE?
1. Generally Upward Trend
2. Trends Not Consistent
3. Irregular Price Patterns
4. Prices Can Be Very Volatile
5. Prices Move Volatile Upward
6. Big Booms Are Irregular
----
5. Prices Move Volatile Upward
It appears that prices can move very much further from the trend line on the up side than on the downside.
Except for a short period at certain times in severe bear market or market crash, the prices do not move very far from the trend line on the down side.
But it can move a considerable distance on the up side.
It would appear also that there are more up years than down years. This means that the prices tend to build up slowly over several years and then fall much faster than they rise.
However, big upward movements tend to be followed by sharp downward movements. It is thus a lot safer to buy when the prices are below their intrinsic value than when they are high.
Past Market Movements: Prices Can Be Very Volatile
Examination of Past Market Movements of Malaysia KLSE
What can we learn from the history of overall market movements in the Malaysia KLSE?
1. Generally Upward Trend
2. Trends Not Consistent
3. Irregular Price Patterns
4. Prices Can Be Very Volatile
5. Prices Move Volatile Upward
6. Big Booms Are Irregular
-----
4. Prices Can Be Very Volatile
The price movements even within a year can be considerable - the average is 38%.
The minimum movement within a year is still 19% from the highest to the lowest which is about six times greater than the average dividend yield.
This means that price changes can very quickly wipe out any return provided by dividend.
This means that the value of one's investment can vary considerably from year to year.
One must be able to sustain such losses if one wishes to invest in shares.
What can we learn from the history of overall market movements in the Malaysia KLSE?
1. Generally Upward Trend
2. Trends Not Consistent
3. Irregular Price Patterns
4. Prices Can Be Very Volatile
5. Prices Move Volatile Upward
6. Big Booms Are Irregular
-----
4. Prices Can Be Very Volatile
The price movements even within a year can be considerable - the average is 38%.
The minimum movement within a year is still 19% from the highest to the lowest which is about six times greater than the average dividend yield.
This means that price changes can very quickly wipe out any return provided by dividend.
This means that the value of one's investment can vary considerably from year to year.
One must be able to sustain such losses if one wishes to invest in shares.
Past Market Movements: Irregular Price Patterns
Examination of Past Market Movements of Malaysia KLSE
What can we learn from the history of overall market movements in the Malaysia KLSE?
1. Generally Upward Trend
2. Trends Not Consistent
3. Irregular Price Patterns
4. Prices Can Be Very Volatile
5. Prices Move Volatile Upward
6. Big Booms Are Irregular
----
4. Irregular Price Patterns.
Although the price movements appear to be centered around the trend lines, they do not appear to be regular. Small troughs can be followed by big peaks and vice versa.
The period in which the market prices stay above or below the trend line is not regular either.
The market can stay under or overvalued for some years.
This means that it is probably very difficult to predict accurately the direction of market movements over the short run.
What can we learn from the history of overall market movements in the Malaysia KLSE?
1. Generally Upward Trend
2. Trends Not Consistent
3. Irregular Price Patterns
4. Prices Can Be Very Volatile
5. Prices Move Volatile Upward
6. Big Booms Are Irregular
----
4. Irregular Price Patterns.
Although the price movements appear to be centered around the trend lines, they do not appear to be regular. Small troughs can be followed by big peaks and vice versa.
The period in which the market prices stay above or below the trend line is not regular either.
The market can stay under or overvalued for some years.
This means that it is probably very difficult to predict accurately the direction of market movements over the short run.
Past Market Movements: Trends Not Consistent
Examination of Past Market Movements of Malaysia KLSE
What can we learn from the history of overall market movements in the Malaysia KLSE?
1. Generally Upward Trend
2. Trends Not Consistent
3. Irregular Price Patterns
4. Prices Can Be Very Volatile
5. Prices Move Volatile Upward
6. Big Booms Are Irregular
----
2. Trends Not Consistent
It is very difficult to draw trends to fit stock market movements.
The main problem is determining the starting point of the trend.
While it is true that statistical programmes can be used for trend determination, one still has to rely on subjective judgement to determine the beginning and ending point of a trend. The trend lines shown in charts are drawn based on the best available projected knowledge.
What can we learn from the history of overall market movements in the Malaysia KLSE?
1. Generally Upward Trend
2. Trends Not Consistent
3. Irregular Price Patterns
4. Prices Can Be Very Volatile
5. Prices Move Volatile Upward
6. Big Booms Are Irregular
----
2. Trends Not Consistent
It is very difficult to draw trends to fit stock market movements.
The main problem is determining the starting point of the trend.
While it is true that statistical programmes can be used for trend determination, one still has to rely on subjective judgement to determine the beginning and ending point of a trend. The trend lines shown in charts are drawn based on the best available projected knowledge.
Past Market Movements: Generally Upward Trend
Examination of Past Market Movements of Malaysia KLSE
What can we learn from the history of overall market movements in the Malaysia KLSE?
1. Generally Upward Trend
2. Trends Not Consistent
3. Irregular Price Patterns
4. Prices Can Be Very Volatile
5. Prices Move Volatile Upward
6. Big Booms Are Irregular
-----
1. Generally Upward Trend
We can see that although there are peaks and troughs, the overall tendency is for the market to be moving upwards. From 1970 to 1981, the Malaysian market was growing at an annual rate of about 12% (Singapore market 15%). From 1981 to 1987, the trend appears to be much less, around 4% per annum for the Malaysian market (6% for Singapore market). The reason for the slowdown in the growth trend from 1981 to 1987 was deflation and the negative growth experienced during the first half of the Eighties.
These trend lines may be regarded as equivalent to the intrinsic value of an individual share for they mark the inherent value of the market as a whole. The market seems to fluctuate around these trend lines.
In the future, the upward tendency of the market is most likely to continue although we are not sure what will be the actual growth rate.
However, by projecting a trend which is conservatively drawn we can have some idea where the market is heading. If we buy our shares when the market is at a reasonable level (that is when the index is around the trend line or below), we can rely on the long term rising trend to obtain our gain from the market.
Unless we buy shares near the top of the peaks, we should be able to profit from buying shares after a few years. It is therefore important to go for the long run.
What can we learn from the history of overall market movements in the Malaysia KLSE?
1. Generally Upward Trend
2. Trends Not Consistent
3. Irregular Price Patterns
4. Prices Can Be Very Volatile
5. Prices Move Volatile Upward
6. Big Booms Are Irregular
-----
1. Generally Upward Trend
We can see that although there are peaks and troughs, the overall tendency is for the market to be moving upwards. From 1970 to 1981, the Malaysian market was growing at an annual rate of about 12% (Singapore market 15%). From 1981 to 1987, the trend appears to be much less, around 4% per annum for the Malaysian market (6% for Singapore market). The reason for the slowdown in the growth trend from 1981 to 1987 was deflation and the negative growth experienced during the first half of the Eighties.
These trend lines may be regarded as equivalent to the intrinsic value of an individual share for they mark the inherent value of the market as a whole. The market seems to fluctuate around these trend lines.
In the future, the upward tendency of the market is most likely to continue although we are not sure what will be the actual growth rate.
However, by projecting a trend which is conservatively drawn we can have some idea where the market is heading. If we buy our shares when the market is at a reasonable level (that is when the index is around the trend line or below), we can rely on the long term rising trend to obtain our gain from the market.
Unless we buy shares near the top of the peaks, we should be able to profit from buying shares after a few years. It is therefore important to go for the long run.
Past Market Movements: Malaysia KLSE
By using an index, we can very quickly have an idea of how much the market has moved within a noted period.
For example, if the index stood at 800 and it is now standing at 1200, we can say that the market as a whole has moved up 50% [(1200-800) divided by 800)].
Click: http://finance.yahoo.com/echarts?s=%5EKLSE#symbol=%5EKLSE;range=my
This figure shows graphically the movements of the KLSE for the years 1999 to 2009.
What can we learn from the history of the overall market movements in the Malaysia stock market?
For example, if the index stood at 800 and it is now standing at 1200, we can say that the market as a whole has moved up 50% [(1200-800) divided by 800)].
Click: http://finance.yahoo.com/echarts?s=%5EKLSE#symbol=%5EKLSE;range=my
This figure shows graphically the movements of the KLSE for the years 1999 to 2009.
What can we learn from the history of the overall market movements in the Malaysia stock market?
What is a stock market index?
A stock market index is a measure of the average price level of the shares traded in the market. Its use is analogous to the use of degree of celcius to measure the temperature. It is constructed by comparing the current price of a sample of shares with their prices at some earlier date.
The organization which is setting up the index (e.g. KLSE) has to make two decisions regarding the design of the index.
First, what are the companies to be included in the index?
Second, what is to be the starting point of the index?
Both decisions would involve a certain degree of compromise.
In general, 30 companies is a good compromise to represent the actual situation at the stock market. KLSE Indices have the starting date of 1st January 1970. The KLSE Indices are given the base value of 100 as at 1st January 1970.
There are various ways of computing an index but the easiest way to understand is probably the one using the market value of the companies included in the index.
The KLSE Industrial Index has a based value of 100 at 1st of January 1970. It stood at 700 at the end of August 1988. This means that the market value of the companies chosen for the index had increased their total value by 600 per cent since 1970 (an average annual increase of 11.5 per cent).
It is worthwhile to remember how indices are calculated and remind ourselves how much the market has gone up in the bull run. When the market is next in a manic phase, we have to ask ourselves if it is feasible for the market to continue its performance in the future.
Click:
http://finance.yahoo.com/echarts?s=%5EKLSE#symbol=%5EKLSE;range=my
FTSE Bursa Malaysia KLCI Index (^KLSE)
http://blog.limkitsiang.com/2007/03/06/rm149-billion-klse-losses-in-5-days-pmministers-not-stock-market-consultants/
RM149 billion KLSE losses in 5 days
The organization which is setting up the index (e.g. KLSE) has to make two decisions regarding the design of the index.
First, what are the companies to be included in the index?
Second, what is to be the starting point of the index?
Both decisions would involve a certain degree of compromise.
In general, 30 companies is a good compromise to represent the actual situation at the stock market. KLSE Indices have the starting date of 1st January 1970. The KLSE Indices are given the base value of 100 as at 1st January 1970.
There are various ways of computing an index but the easiest way to understand is probably the one using the market value of the companies included in the index.
The KLSE Industrial Index has a based value of 100 at 1st of January 1970. It stood at 700 at the end of August 1988. This means that the market value of the companies chosen for the index had increased their total value by 600 per cent since 1970 (an average annual increase of 11.5 per cent).
It is worthwhile to remember how indices are calculated and remind ourselves how much the market has gone up in the bull run. When the market is next in a manic phase, we have to ask ourselves if it is feasible for the market to continue its performance in the future.
Click:
http://finance.yahoo.com/echarts?s=%5EKLSE#symbol=%5EKLSE;range=my
FTSE Bursa Malaysia KLCI Index (^KLSE)
RM149 billion KLSE losses in 5 days
Market Timing
The fundamental approach to investment requires one to work out the intrinsic value of a share before its purchase.
"Why don't we just wait until the whole market is low enough and then go in and buy a wide selection of shares?"
This question suggests that one invests by means of "market timing". If practical, it will surely save us a lot of time and effort.
"Why don't we just wait until the whole market is low enough and then go in and buy a wide selection of shares?"
This question suggests that one invests by means of "market timing". If practical, it will surely save us a lot of time and effort.
- Is it possible to carry out consistently correct market timing?
- How easy or difficult is the art of of market timing?
KLSE 1994 to 2009
http://finance.yahoo.com/echarts?s=%5EKLSE#symbol=%5EKLSE;range=my
Is there a correct time to buy and sell?
Is there a correct time to buy and sell?
Tuesday, 27 October 2009
Insiders' actions in 3-A Resources
Click here:
http://www.klse.com.my/website/bm/listed_companies/company_announcements/changes_in_s_holding/index.jsp
Type of transaction Date of change No of securities Price Transacted ($$)
Disposed 15/10/2009 2,448,002
Disposed 16/10/2009 2,300,000
The recent budget introduces a mandatory basic insurance coverage
Insurance
A basic insurance and takaful scheme will be offered to provide mandatory basic insurance coverage for third party bodily injuries and death. The scheme is expected to be introduced by mid-2010.
Positive for insurance companies (Kurnia (NR), LPI (NR)) and banks with major insurance subsidiaries such AMMB (AmAssurance)
http://malaysiainfoedgezone.blogspot.com/2009/10/market-strategy-after-budget-2010-full.html
http://www.box.net/shared/uj9jmp9h63
A basic insurance and takaful scheme will be offered to provide mandatory basic insurance coverage for third party bodily injuries and death. The scheme is expected to be introduced by mid-2010.
Positive for insurance companies (Kurnia (NR), LPI (NR)) and banks with major insurance subsidiaries such AMMB (AmAssurance)
http://malaysiainfoedgezone.blogspot.com/2009/10/market-strategy-after-budget-2010-full.html
http://www.box.net/shared/uj9jmp9h63
Nestle 27.10.2009
http://spreadsheets.google.com/pub?key=tdjqbDNEEF54lSn6z6yORcw&output=html
Comment: Recent price has climbed faster than earnings.
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