Tuesday, May 28, 2013

KLCI Historical Price Chart 1981 - 2012

Legendary investment guru, W.D. Gann once said: "Each decade or 10-year cycle, which is 1/10th of 100 years, marks an important campaign. The digits from 1-9 are important. All you have learn is to count the digit on your fingers in order to ascertain what kind of a year the market is in."

So I did a research on our KLCI prices for the past 32 years to see if there are any repetitive chart patterns and I discovered that:

  1.      the years ending with 3, 6, 9 are usually bull years.
  2.      among these 3 years, year ending with 9 has the biggest gain in history with 30% -175% gain, followed by 3 with 30% - 100% gain, and 6 with 18% - 22% gain. 
  3.       years ending with 1 and 5 are the worst performing years with year end closing price below or equal to the beginning price. 
          4. years ending with 7 and 8 tend to have stock crashes with the exception of 1988.     

     Although the charts are only applicable to the KLCI component stocks, but these findings are amazing! Most people think that market is random, you can't predict the market, however, the research shows that history does repeats itself and market is made up of crowd psychology, human behaves repetitively to certain external stimuli. In addition, in cycle analysis, it is believed that the "Nature's Law" or the "Secrets of the Universe" are affecting human emotion which in turns affect the financial markets. At least this is what Elliott and Gann had proposed in their books. Gann seldom revealed his secrets in trading as he thought that "people are not ready yet!" Gann had his unconventional ways to forecast the financial markets that I will not elaborate further (but I may in the future if people are more ready). 

       Since It is always good to use both fundamental and technical analysis in stock analysis,  let's look at this findings objectively. For example, if 2013 is a bull year, then it must be supported by the fundamentals. The EU economy is weak with austerity measures, the US is recovering but unemployment remain high, international fund managers most likely will consider emerging markets to invest, especially the South East Asia nations like Indonesia, Thailand, Phillipines and Malaysia due to their vibrant economies that are undergoing  structural change. As standard of living is rising for these emerging markets, these economies have rising domestic consumption, improving infrastructures such as the construction of Mass Rapid Transit in Kuala Lumpur and Jakarta, and moreover, all of these emerging countries have pro-business / pro-investment governments to attract FDI into their countries. 

     On the other hand, we must not forget history shows that with the influx of FDI, or foreigners purchasing our properties and shares, these emerging economies are subjected to the risk of hot money being pulling out if there is any negative news. 

      I do see some similarity between now and the 90's. Knowing what had happened before, it is important not to let the history repeats itself. These economies must do some precautionary measures such as cutting budget deficits, curbing asset bubble, and of course, let's build a more efficient government together!  

      Below are the historical charts:


Tuesday, May 7, 2013

Musing On Election

Some after thoughts on the Malaysian General Election:

High Turnout Rate
The 13th GE has the highest voting rate in Malaysia's history with 85%! This shows that Malaysian citizens are politically conscious and we want to take part in this meaningful event.

Super Senior Citizens
Super senior citizens age 90 and above have shown their keen support for the country. From the statistics, there are close to 40,000 of these people voted. Among them, East Malaysia including  Sabah and Sarawak has the highest rate of participation with more than 10,000 votes. For secrets of longevity can ask these people!

Social Media
For this election, social media plays an important part in getting the youngsters to be interested in politics. Of the 13.3 million registered voters, about 40% are aged below 40 years old, these people are active users of social media such as Facebook and Twitter. Hence social media becomes an information hub for the voters where they can learn the procedure for voting from the youtube videos and photographs. 

Chinese Tsunami
The prime minister made a statement after the election stating that the Chinese tsunami is the contributing factor for the poor win by BN. However, from the statistics, we can see that urban Malay votes are deserting the BN too. It is clear that it is more than ethnic issue here. From various sources of surveys, the top reason why the Malaysian are not happy with the government is: Corruption! And it is this "fighting for anti-corruption spirit" keeps the Malaysian together regardless of race.


Now that the election is finally over and BN won, the market responded with a big rally. My forecast for KLCI, based on Elliott Wave Theory, is 1800 by June or July, looks like it has already touched this level (intraday) yesterday, which was the next morning after the election day. Hence I will raise my target for this year to 1840, with a strong support at 1600 till end of the year.

Finally here's a quote from Obama: "In the end, that's what this election is about. Do we participate in a politics of cynicism or a politics of hope?"

My next investment workshop for the beginners will be:

Date: May 18th 2013 (Saturday)
Venue: Women's Institute of Management (KL)
Contact: 03-77250268 for more info.