Oh No! Oil prices falling means Bursa stocks and Ringgit will fall too!

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Oh no! Bursa Malaysia as well as the Ringgit is falling because of oil prices which has sunk below US$70 per barrel. This was the title of many articles about the current state of Bursa Malaysia as well as Ringgit. The stock market is at its lowest point since mid-October while the Ringgit is now at a level unseen for the past 4.5 years ago. So, is it true that oil price was the main cause for the fall? I am no analyst but I can tell you, they just need a reason and somehow oil price is the best. Go and take a look at all the stocks for which price has fallen, some are real estate related, some are food, some are manufacturing, some are pharmaceutical and many other industries. What has oil price got to do with it, suddenly? If it’s real estate related, shouldn’t they benefit a bit from falling oil prices? The sentiment is negative, many people starting selling and more joined and the whole market fell. The Ringgit fell ONLY versus US$. Please take a look at Ringgit versus other currencies and you would see that it is up against some and down against some. Think objectively please.

How low can the oil price fall to? According to the WTI technical analysis, the support level for the oil is at US$64 per barrel. This meant that the sentiment has to be really negative for oil price to fall below this level. If it does, then the analysis showed that it can fall all the way to US$32.40 per barrel. Ok, if oil price falls to this level, what should happen to Ringgit and Bursa stocks? I think everyone is now sweating? As explained earlier, the current oil price is because of demand not as high versus supply as well as the fact that OPEC does not like US for producing so much oil from its shale productions. I seriously do not think oil will fall to anywhere near the so called lowest level. The reason is because before it falls to that level, OPEC would have had to make a decision and many of the current US producers would have stopped production. Of course, I am only speaking about the potential that may happen, just like any other analysts which are trying to scare the market. They can profit from all these volatility. If it’s stable all the time, they have nothing to do. I do not.

For those who continue to think that Bursa and the Ringgit will be tracking the oil price movement, I wish you the best. I think one day when the oil price rises to US$120 per barrel, and Bursa is also falling and Ringgit happened to also fall, they would again attribute it to the high oil price. Haha. Always, understand what you are buying. Just like property, you buy with the intention to keep. That’s how you ensure you think objectively and buy the best. When we buy stocks thinking to sell the next day for huge profits, that’s not investment. That’s just gambling. For gambling, I wish you will be lucky. That’s all. Happy buying when markets are down and happy selling when markets are up. 

written on 2 Dec 2014

Next suggested article: OPEC vs US oil producers. Who’s going under first?

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