Stock Market Tsunami

We have earlier seen a "political tsunami" on Saturday and today, we experienced a "stock market tsunami". The KLCI falls 123 points to 1,173 or almost 10% at the closing bell. This drop was one of the biggest fall in 10 years never seen after the 97/98 crisis. The wipeout was also recorded as a "first" since Bursa was suspended for an hour at 2.58pm as the fall triggers the 10% fall Rule in a single session of trading. The intraday fall was 139 points.

In this tsunami, many politically linked counters eg MRCB, KHSB, Tenaga, Puncak, Equine, Jaks, KPS were hit by panic selling and at the closed of the market, KPS and Equine had their 2nd limit down within the trading day. In total, the day closed with 1.2 billion shares changed hand with 26 counters up and 905 counters down!

The selling were mainly from retail investors and from funds particullary the foreign funds who sold earlier last week. The market lacked support from the local funds particulary from State Government funds as these funds were practically without guidance and advise from the top bosses as they probably either being replaced or put on notice due to changes in state government. The fact BN failing to regain 2/3 majority has been likened as a weak and politically unstable government. Many of the mega billions "corridors" project are being relooked and scrutinised again by the fund managers as they may not materialised or would be revised to a smaller scale, thus affecting margin, valuation, pricing of stocks and prospects.

This stock market tsunami has forced me to revised my outlook earlier for the KLCI of 1,270-1,200. It has way passed the Fibonacci retracement of 50% (1,210) and is well on its way to 61.8% which is 1,130 if political uncertainties continue to cloud the market. However, value investors will probably welcome a value buy now. If it does not rebound from 1,130, the KLCI will probably make an attempt to revisit 900 points. I hope we will not visit the 900's again while the ruling party and the opposition try to negotiate/sort out many issues, policies and differences for the betterment of our country. From now on, po-li-ti-ca-lly-linked counters will be looked at with suspicion as a "bo-leh ki-kah?" counters (ki - hokkien word for up)