Securities Investment 101

Many of my friends know that I'm attached with Public Mutual Berhad, a Unit Trust Management Company (UTMC) listed under Securities Commission. However, I hardly penned down my views about the investment situation in our country, especially during interesting times like this occuring in our country and the region as well.

I hope nobody would quote me on my take on our investing environment here in M'sia. All the information written here is based on my readings, working/training/Financial Talk experience and discussion with senior personnel in Public Mutual Berhad.

Let's start talking about our general equity market. What is equity market? Equity market is essentially our stock bourse governed by Kuala Lumpur Stock Exchange. Here is the place where the securities are traded on daily basis. Securities can be in many forms, for example stocks, derivaties, commodities, Exchange Traded Fund (ETF) and etc. Our bourse's performance is reflected through Kuala Lumpur Index Composite. Index Composite is a group of counters (or stocks) from 100 big companies (usually we refer them as blue chip companies). For example, Maybank group, Public Bank group, Kenchana Petroleum Bhd. and Airasia Bhd.

For the sake of simplicity, let's focus on stocks market.

Why our KLCI is low at this moment?

It is simple. The market moves in sort of sinusoidal function. It has maximum point and minimum point. For the last 3 years, we have been experiencing a bullish market. Bullish market means that our stock market is rising in its value. The peak was at the beginning of the year when the market hit highest point in its history, 1516 point on January 11, 2008. This shows a 300% growth from the last recession which indicated 557 point on May 14, 2001. Very few people realized that we actually had a mild recession in year 2001 after we were hit very badly in Asial Financial Meltdown of 1997.

The concept of duality is applied here in the market. When the market is up, it also must come down to correct some sudden inflated figure in equity market. It is called a correction move, a self-fulfilling mechanism built in the market. What we are experiencing right now is a correction to our market after it has gaining momentum in 2006 till 2007. Some experts said that if the drop is more than 20% in market, it is considered as market crash. However, I am not too sure if we are experiencing a market crash at this moment.

Why Kuala Lumpur Index Composite is important to investors?

Because it indicates the health level of our economy. Like if you check your body temperature, you normally can guess if you are having fever or not. It is exactly like checking the body temperature of a nation's economic activities. At this moment the index is registering a decreasing trend. It translates to public confidence on our equity markets.



Why it happens this way? I will explain later in the next edition of Securities Investment topic. Hehehehhe.