All eyes on the Interest Rate

 

Malaysia Stock Market Performance

ratehike

The Malaysia Stock Market started the Year 2016 by hitting its lowest point at 1,600 before rallying to its highest at 1,729. That was a good +8% performance before the market starts slumping its  way down to 1,611 in the month of May 2016 taking up almost all the gains earned over the past months. Broad market stocks are down and only a selected stocks are only performing well. Boring? Yes it is and here’s more to come.

Types of scenario you are in:

  1. You are still fully invested in the stock market and wondering when will the market starts shining bright for you again.
  2. You are sitting on a pile of cash waiting for the market to get cheaper for you to buy at bargain.
  3. You are an investor/trader that knows so long your stocks have been holding up well, you need not concern on the global financial market activities.

Where are we standing at now?

The Malaysia Stock Market Index, the FBMKLCI now stands at a crucial support point. As how everyone knows how to read the chart above, a break down on that support line will mean our market will create a lower lows = a bear market. If this scenario were to happen then there will be even lesser opportunities in the market seen in the mid term period. If cash is king, then knowing how to get out of your stocks to avoid being sold down matters a lot as well.

On the bright side?

As the foreign funds have been exiting our local stock market over the past 2 months, we will need to take note on today’s decision on the interest rate from the Bank Negara.

Rate Hike will possibly brings bad news to the market = FBMKLCI to break its support.

A Rate Cut will possibly brings good news to the market = FBMKLCI to stimulate upwards.

Rate Unchanged will possibly puts our market sideways.

What actions should you take?

The stock market are followed by a seasonal change of trend from the ups to downs and vice versa. At the end of the day how your stocks are performing in your portfolio matters more than how the performance of the FBMKLCI preforms. Hence always understand the performance of your stocks. Downtrend stocks are clearly stocks that you should not have in your portfolio unless of course you classify yourself as a long term investor. During period of bad performance in the stock market, there will be performing stocks as well and mostly these are stocks in their uptrend. Knowing how to hold on to these category of stocks allows you to have a different opinion towards the market compared to those who are holding on a downtrend stock. But the downside of the uptrend stock is, you got to know when you should exit your position in an uptrend stock to enjoy the profits made. Hence always have a investing/trading plan when it comes to investing/trading in the stock market.

 

screenshot-www.thestar.com.my 2016-05-19 10-52-26

(Source: http://www.thestar.com.my/business/business-news/2016/05/19/all-eyes-on-interest-rate/)

t6

(10 years position trader, Founder of http://www.trendfollowingmalaysia.com)

 

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