More are flowing in, no alarms but always watch ‘valuation’ ok.

This is one usual observation about the stock market and the property market. The stock market would usually lead and the property market would follow. After the stock market has risen for many months, the property market would show some positive signs. This is because people may have earned some money from the stock market and would like to now buy some properties. What they are saying is however based on market sentiment. People do not buy property when they do not feel positive. The reason is because property is an illiquid asset. It’s not easy to dispose if there are any sudden emergencies. When the stock market rises, people who got richer overnight would spend their money, the retail sales may show good numbers and generally conversations become positive. BURSA Malaysia and the ringgit has seen better weeks too. In fact, when it comes to BURSA,it’s already close to 1,800 points. There are some technical charts showing it to be on an uptrend. (Just google for the news)  I do not follow charts when I invest. Merely reading and understanding the business that I intend to buy.

There’s a good article by an experienced columnist, Yap Leng Kuen in TheStar. Do read it here.  In brief, it tells about the availability of US$1 trillion funds flowing into emerging markets (EM). (Yes, of course Malaysia is still an emerging market) Nope, it’s not only for Malaysia, some of it should flow into Malaysia but this US$1 trillion will be shared by all the EMs of the world. Some comments which I term as cautiously optimistic. Danny Wong, CEO of Areca Capital said, “Valuations in general are not so demanding, for example, price to book value is still attractive although price to earnings is slightly above the long-term average. The situation is not so alarming.” Chris Eng, head of research, Etiqa Insurance and Takaful said, “We are still far away from a bubble although overdue for a retracement.” Lee Heng Guie, executive director, Socio Economic Research Centre said, “Risk averse investors would tend to seek safe haven assets such as US treasuries and shy away from risky assets in EMs including Malaysia, if there are risks that threaten to derail global growth and destabilise capital flows.” Full article in TheStar by Yap here. 

When public listed companies show better performance, its stock price starts to look attractive versus its earnings. Investors would buy and start driving up its stock price. This will go on until a level which everyone agrees as fully valued or overvalued. They would move on to the next potential stock. For some stocks however, people may believe that it’s worth more due to its potential. Internet stocks? However high, watch for profitability first Hopefully more people realise that however much money we have, it’s best to just buy based on fundamentals and not speculative hopes. It will make the market safer too. As for the property market, generally the predictions are more on a slow period for 2017 and even 2018. Property market oversupply? Improve by mid-2018 and recover in 3 years Happy signing that S&P if you need a roof over your head. That’s your correct focus. As for those actively trading stocks currently, I also wish you the best. Happy investing everyone.

written on 12 June 2017

Next suggested article: Any investment is a good ‘business’ due diligence needed

 

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