KLSE falls and trading halted: Bursa KL merudum jatuh dan digantung!

So, the trading halt on Bursa Saham Kuala Lumpur (BSKL) or Kuala Lumpur Stock Exchange (KLSE) has been lifted and we are back trading again. The Composite Index is recorded an increase of 30.29 points or 2.58% as of 10.20 am Malaysian time just now. That’s a minuscule if you compare it with yesterday. Our market plunged a little over 130 points or more than 10% before being put on a trading halt at 2.58 pm.

Well, to be honest, that was to be expected. I’m sure a lot of people can only guess how the stock market was going to react to the Pilihan Raya Umum ke-12 results. It is usually an understood and well-accepted phenomenom that the market will rally up to the election and then cool off a little bit after. However, to be honest, due to the bear market that has unfolded globally and the huge volatility that struck our local market, we actually didn’t see much of a rally at all.

Whatever it is, I’m sure a lot of people were not expecting the market to free fall by that much yesterday!

I did expect the market to fall handsomely on Monday but I also was not expecting 10%.

Why did it happen? There are a lot of theories out there and here’s mine. The big fall was due to the opposition getting their so-called political tsunami and the denial of Barisan Nasional (BN) from their two third majority target.

Logic behind this could be:

Well, investors had felt safe and comfortable investing in our market before the election because they were satisfied with the policies (I’m using this term loosely here) carried out by the BN government. They were confident that BN is invincible. After BN was denied the two third majority and the opposition managed to invade the parliament and BN’s territory, investors started to get nervous, afraid that some of the policies will get questioned and kicked out of the door. Bear in mind that the opposition (or Barisan Rakyat) is a force to be reckoned with now. Putting myself in an investor’s size-10 shoes, I myself would feel nervous. Some investors might think that policies that induces economic growth (and inflation for that matter) will be scrapped and some of the policies (like the Negara Kebajikan policy) of the Barisan Rakyat adopted instead. Please please please, I’m not implying that one is better than the other. I’m just merely talking from an investor’s perspective.

Anyway, what did the investors do? Dump the stocks. When the big guns started dumping the stocks (which pushes the market down), the small fish will follow suit as well. Not to mention the margin calls and triggered stop losses that further drives down the market.

Call it panic selling if you may.

So, that’s my theory.

I’m sure my unit trust investment got hammered yesterday as well. Hard times folks. Hard times indeed.

News Articles: Utusan, The Star, Malaysiakini

Other blogs covering the same issue:
Sebolku
Pakdi
Ketua Perusuh (some conspiracy theories I see 😛 )

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This blog is about the journey of a 28-year-old Malaysian towards financial freedom. This blog was started back when the blogger was 21 years old. However, his journey towards financial freedom had begun way before that. Materials such as investing, business, entrepreneurship, equities, and real estate are presented. The author also posts his thoughts and observations on life in general.

Comments

  1. somehow, I don’t think this (market plunge) will last.. what happened was unexpected and people need time to accept the results.. meanwhile, BN still has majority and I think (or rather hope) all parties, including the opposition will work harder since both wants to prove they are the “better” choice.. but then again I’m no expert.. 🙂

  2. Saham yang jatuh adalah yang berkenaan dengan projek2 kerajaan, saham yang terbabit dengan perjudian dan saham yang terbabit dengan arak. Takut Malaysia akan jadi negara Islam aka Islamiphobia. Pasal saham – Kata pakar saham, Bull market masuk guna pintu tapi bear market keluar ikut tingkap… tapi Dato’ Salleh Majid cakap – this is just reaction – our country market fundamentals are strong.. jom tengok.

  3. @Sting and Dr. Azwan

    Yup, the market will rebound in due course. They always do. Sometimes, people are driven by irrational ideas and they need to act swiftly based on that irrational ideas. Soon after reality hits them, then only they will take corrective measures.

    Betul apa Dr. Azwan cakap, by the looks of it, the fundamentals of our local market are still strong.

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