Sunday, August 19, 2007

Which way the market now?

Upper most in the minds of most must be the question: “How much more will the subprime mortgage crisis hurt Bursa?" Obviously, there were some panic sales last Friday when the KLCI plummeted from an intraday high of 1218.8 to a low of 1141.5 before closing at 1191.5 with good volume. Those who had bought at the panic sales would have made some fast buck.

The Dow closed at 13,079, up 233 points. This couple with KLCI‘s off-low closing is likely to bring some cheers to the local burse, come Monday morning. We will have to wait to see whether it will be a flash in the pan. My reading of the chart is there will be resistance at 1214 points.

According to Prudential Fund Management Bhd, the subprime market stands at US$1.2 trillion out of a total US real estate market of US$17 trillion. Since when have the US hedge funds started their global sell-off? How much have they sold what they have to sell? If these hedge funds have to continue to sell their overseas investments to bring money home to face the credit crunch, more downslide will continue after some feeble rallies.

US have always emerged stronger after every crisis. This one will be no exception. Those who have plenty of cash in hand can start their bargain hunting. Look for sound solid companies that are cash rich, high dividend yielding with good prospective earnings. If you wish to play penny stocks, remember that low price is not cheap price.

As usual, this blog disclaims all liability for its comments.