Personal Finance 101: Time to look at the equities in Malaysia

Stock market, anyone? I think it’s worth a look as part of our investment portfolio

Investopedia has this as definition of the stock market. “The stock market is not a place you can visit but refers to the trading (some physical, most online) of shares representing the partial owning of companies. It’s not only where businesses raise capital but is used as a sign of the economy’s health.” Link here for the full reading in investopedia.

What this tells us is that we are ‘partially’ buying into companies which has listed their shares. If they do well, the share prices go up and we are happy. If they did not do well and the price goes down, we are not happy. Well, what if the shares we buy move up even when the business is not doing as well? Or prices went up despite them having almost the same profits as the year before?

Perhaps this is because the stock is attracting a lot of interest and thus when more people wanted the stock, the prices would go up on a willing buyer, willing seller basis. There are signs that just maybe we would have more foreign investors coming into the Malaysian stock market in the second half of this year. Read on to understand why and what and who.

Article in nst.com.my MIDF Research says that it expects foreign funds to return when the ringgit starts to strengthen in the second half of the year. This is also due to expectations of the US rate cuts, as well as Malaysia’s sound fundamentals and rosy corporate earnings outlook. 

“We expect that this will be a key driver for Malaysia’s equities market performance in the latter part of 2024, which we remain cautiously bullish on,” it said.

From the start of the year through March 14, MIDF Research said foreign funds did not take into account the US dollar against the ringgit movements as reflected by a net inflow of RM24.5 million (driven by net inflows in January and February) despite the local currency depreciation. 

The firm maintained its projection for the ringgit to close 2024 higher at RM4.43 compared to RM4.59 at the end of last year. Please read the full article here: Article in nst.com.my

Never stray away from looking at the business itself

Foreign funds may buy. They may push up the prices to the typical higher price earnings ratio. Is this the correct thing to do? Please do remember that they have more funds to hold should things did not go as planned. They could also sell immediately if they found things not to their expectations which could drive prices down suddenly. This is why when we buy these companies, it is more important to understand the business which they do. Read their annual reports at least, maybe?

Investment could be for the long term gains with the business doing better every year, or it could be trap into a hole which goes deeper and deeper every year too. Happy investing into something you know enough and not just from sentiments because logical thinking requires sufficient knowledge.

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