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I once posted a lot of my views on the internet, under the same name tbull. That was in 1997, 1998.
10 Years has past. The market is now facing another credit crunch. This time around, it is the property bubble that went bursted in the US.
Financial market is very efficient in this sense. the 10 years cycle has never fail itself. I have witnessed 3 financial crisis, 1987, 1997, and now, 2007.
Althought the effect is not a full blown one yet, I believe market players has not factor in the worst yet. DJIA has fallen only 2000+ points and that is not even 25% of the total market Cap. KLSE is likewise. At 1150, it has fallen around 25% only.
This time around the fall will be slower with the following reasons.
2 emerging economies, namely China and India, has in the past 5 years become major consumers on the world market. These two countries make up 30% of the world population. With living standard rising in accordance with their per capital income, this will fill some of the vacuum with slow down from USand Europe.
The Beijing Olympic 2008, has been fuelling some fo the demand for commodities as well as products and services. After this, we need to factor out these demands, and indirect activity spur from this in mainland China.
On the local scene, we need to watch for the following barriers;
1) Political stability with BN losing two third majority and with constant fear of a change in political leadership. This will create major hurdle for implementing govenment projects, which in time like time, is what the local industries needs with the expected slower consumptions around the world.
2)Property developement in the last 2 years within Malaysia, again launches some of the most impressive high end products with the growing optimism of the local industries players. Few signs have emerge in the past one year with the re-introduction of Malaysia as a second Home program as well as the abolishment of property gain tax. Who will buy all these properties? A review in the recent local newspaper saw a higher advertising on projects that are still under construction and even some which has already completed.
3)The higher inflation rate recorded for the months of June is another sign there are inflationary pressure from the market with the recent hike in energy & food costs. If Bank Negara decide to raise the interest rate, then there is a real concern that property market, in particular will slow down. Big ticket items will be hardest hit. How many of you are thinking of getting that new car this year? Or should I say, how many of you have changed your mind on this.
4)I notice that Bill board advertising has reduced as some of the prominent location for advertising is now left blank.
5)Primary industries has been enjoying a boom in the past 2 years but with the slower demands, they will correct itself to a level that is more reflective of the market demands.
Whether or not our government will provide the right assistance to the poor is not a major concern. The fact is, cost of living has increased. Raising fuel to lower subsidy on fuel would just be placing money from right pocket to the left. How to do this effectively is more of a concern.
In time like this, people will concentrate on necessities and not waste on luxury and delay purchases that are not deem essential.
In my view, the market will only see a bottom close to the forth quater of the year with focuses on 2009 budget as well as the political chanllenges this government has to overcome.
GD.
Tbull
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