Anything overvalued is best skipped, stocks for example

Blue chips, blue chips. Stock market. Everyone loves them. Big names are those known by everyone and bought by everyone. Sometimes, the share price is already pushed to its maximum and yet people still buy because of EXPECTATIONS. Surely it should continue to earn ever more profits, right? This is no different from investors who kept buying those online startups which has been around for such a long time that sometimes you wonder why are they still not yet profitable? Coming back to the stock market. There is one article talking about how the world stock market is now at its highest point in 17 years. This was revealed by a Bank of America Merrill Lynch (BAML) survey of fund managers Here’s the article in TheStar. Fortunately, emerging markets are still seen as UNDERVALUED by a large proportion of the investors polled. Yes, Malaysia is definitely under the emerging market category.

Pong Teng Siew, head of research in Inter-Pacific Securities said, “Much more caution in stock selection is necessary currently than at the start of the year. There are still value buys on Bursa Malaysia but the selection is diminishing. This makes it more likely for mistakes in stock selection to occur.” In brief, it meant that if you currently have no idea what is the current PER, it’s time to read a bit more before buying. According to 81 percent of the respondents in the BAML poll, US market is the most overvalued. (Then why is the US$ still so strong???)  44 percent thinks emerging market stocks are undervalued. According to Christopher Brightman, chief investment officer (CIO) at Research Affiliates, a sub-adviser to money managers including Pacific Investment Management Co (Pimco), Invesco Ltd and Charles Schwab Corp, ”
Stocks in emerging markets cost more than when he first made the call in February last year, but they remain an “enormous bargain.” (Be reminded, enormous bargain here is not saying every stock is a bargain….)

The Star Columnist Yap Leng Kuen sums it up best. She hopes these hot players are not caught dancing when the plug is pulled. Anyway, it’s never just stocks which are overvalued. Even properties can be overvalued. The whole area is RM1,000 per sq ft and the development you are buying is 20 percent higher. Well, there better be very valid reasons to buy such a unit. If it’s simply because you BELIEVE it’s worth it, the next buyer may not believe so. When a property is a small unit which can only be inhabited by a single occupant or at max a couple, let’s not think the sky is the limit. Unfortunately Malaysia is not Hong Kong, Singapore or even Australia. By the way, when we google, we would note that Hong Kong’s properties are already said to be extremely unaffordable, Singapore is already the city with the highest cost of living and Australia’s household debt to GDP is already 125 percent. I think this article in TheStar has reminded all of us that it is must to understand what we are really buying into. Happy reading.

written on 27 March 2017

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  • Fred on March 28, 2017

    I read somewhere a more amusing quote than Yap Leng Kuen’s. It goes ‘ it’s great swimming naked during high tide, until the tide recedes’

    • charles on March 28, 2017

      I like that quote too Fred. Haha. Yes something like that.

  • […] That’s the view of MIDF Research in an article in TheSunDaily.   It said that even though the net approved loan for January 2017 year-on-year (y-o-y) is up 6% to RM8.72 billion, this is not a signal of a sustained recovery for the property market. It shared that this is because the actual approval rate is still at 40.5 percent. It said that the loan demand was still weak and in fact declined 1percent because the ringgit’s weakness affected consumer sentiment.  (Anyone who’s buying property in Malaysia, it’s best to know what we are really buying instead of whether ringgit is up or down. By the way, it’s mostly affected by the US$ and not due to sudden fundamental changes. Just look at the sudden rise in stock market to understand a bit more)  Here’s a recent article on it. Anything overvalued is best skipped, stocks for example […]

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