The time of reckoning a.k.a. crash came sooner than expected

Do you still remember what I have written about the KLSE CI on Feb 21 (barely one week ago) in this blog? The warning issued by iCapital was proven correct.I hope none of our bloggers were “burned ” this round.  God saves those who believed AAB “the punter” (the PM earlier predicted that the KLSE CI will break the 1350 mark pretty soon). Guess why he was keeping very quite these days. Those who suffered big losses these two days should bring AAB to courts as suggested by DAP SG Lim Guan Eng earlier. I am reproducing the posting from the archive here. Just read the highlighted portion if you do not have time…

Archive for the ‘Economy’ Category

“KLSE CI is now only some 80 points away from its all time high of 1,314…

Wednesday, February 21st, 2007

and surpassing this would seem to be a breeze.”

The above comment came from a local stock market specialist. But he cautions Malaysians to be more circumspect rather than exploiting the current market rally and be patting ourselves on the back.

He commented that “for the politicians and policymakers, stock market rally can be very ego boasting (when the market rallies, they would claim all the credits but when the market drops, they would pass the buck to people like George Soros).”

“Why?A stock market rally seems to be telling the whole world that everything is fine with its economy and that the government has adopted the right policies”.

“Generally speaking, this is true but the stock market rallies for all kinds of reasons and some times, the market rally can be self-deluding or what is worse, the rally generates complacency among the politicians and policymakers and painful but necessary decisions are not made or postponed until it is too late. Then, the market crashes. The Great Asian Crisis in 1997/98 is a classic example of how rallies in stock markets can camouflage structural problems until it is too late and the day of reckoning comes in full blast”.

The specialist opines that the way to manage a country or company is in a sense , very simple and commonsensical. ” When things are fine and dandy, do not become overconfident;instead get ready for the storms ahead. This way, when the storms come, which eventually they will, one will not be so wounded or so devastated that one cannot recover forever or that the recovery takes such a long time to come. The storms, like the bright sunny days, will eveuntually pass and the whole cycle repeats. Take advantage of the storms and and use them to ensure that the eventual bright sunny days do not get to be so blinding”.

The essence of this specialist criticisms was that the government under the leadership of the former prime minister implemented very short-term measures that greatly reduced or attempted to reduce the pain of the Great Asian Crisis. “In so doing, the government ignored the the adverse long-term implications of its actions and decisions. Instead of using the Great Asian Crisis to implement serious structural reforms, the government went for quickies. And we all know what quickies are like. Instead of using the crisis to prepare Malaysia for more and greater challenges, it went round blaming others for its follies.”

” In many respects, Malaysia has paid a heavy price for this and is still paying the price for ignoring long-term problems. By shielding Malaysia from the harsh and painful realities of market economy, we now have a Malaysian workforce that is hopelessly complacent and in the process, losing out to the many fast rising regional competitors.”

With the KLSE CI rallying, the specialist is deeply worried that our world-class complacency would become universe-class. “As the LKSE CI rallies, the politicians and policymakers would surely sit back and pat themselves for a job well done . Such self-prasing and complacency can be very infectious and soon Malaysians from all walks of life would fall into the same mental trap. Then, when the next crisis hits us, totally unprepared again. A few rounds of such a crisis, very quickly Malaysia would be in an economic quicksand”.

The specialist’s analysis is directed at the politicians and polymakers and Malaysians from all walks. Do not be seduced by the current market rally into thinking that we are on our way to developed status. Do not postpone the major structural reforms needed.

Stock market recovers after panic selling

Feb 28, 07 7:15pm malaysiakini
Bursa Malaysia saw panic selling this morning causing the stock market to shed as much as 101.07 points to 1,136.01 – the biggest fall in recent history – before recovering to close at 1,196.45.The Kuala Lumpur Composite Index (KLCI) staged a late recovery, supported by strong buying from some institutional funds when the stock exchange reopened after lunch.Still, the index fell by 40.63 points, or 3.28 percent – the second day in a row in which KLCI was hit by significant losses.Yesterday, it shed 2.8 percent, closing at 1,237.08. The fall wiped out RM3.8 billion in market value of listed companies.

The last time the KLCI had its biggest single day loss was five years ago – on Sept 21, 2001 when it declined 3.5 percent.

Wall Street in tailspin

According to Bernama, the panic selling was triggered by the big losses on Wall Street overnight following the nearly nine percent fall in Shanghai stock market yesterday.

The Dow Jones index was in a tailspin yesterday, falling a whopping 416.02 points at 12,216.24 – a drop of nearly 3.3 percent.

This was the biggest fall since the September 11, 2001 terrorist attacks, and it erased US$600 billion in market value from listed companies.

All the regional bourses were down today, continuing yesterday’s trend, triggered by renewed concern over the slowdown in the US and China economies.

■日期/Feb 28, 2007   ■时间/12:40:19 pm
■新闻/财经前线   ■作者/merdekareview 陈慧思








全球股市相信是受到原油价格回扬影响,出现全线滑落的现象。由于美国对伊朗的战争一触即发,中东局势蒙上阴影,原油价格近日扳回跌势,持续回扬。由于股市进入了调整期,因此香港一家投资管理公司董事经理安迪(Andy Mantel)认为,香港股市下跌并非一朝一夕的事情尚有许多下挫的空间



3 Responses to “The time of reckoning a.k.a. crash came sooner than expected”

  1. Salute Says:

    I fully support Lim Guan Eng suggestion that those who suffered big losses these two days should bring AAB to courts.

    We have no hope with the current BN/UMNO government.

    Let united together to educate and inform all our colleagues and friends to vote for opposition in the coming General Election; and kick out the useless bodoh BN government.

  2. K.S Tan Says:

    Here’s a “big fire” starting … my advise to DAP is not to put it out but to let it burn a little more and we will see the Rakyat waking up from their long slumber and hopefully they will vote for the oppositionin the next GE.

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