Listening to Rumours?

The recent un-pegging of the ringgit vis-a-vis the US dollar seems to provide some opportunities on the KLSE.

Based on the quick reaction of BNM to follow the Chinese currency, it would appear that the ringgit movement is going to be directly linked to the Chinese moves.

The Chinese managed float of just about 2% appears small and many perceive it to be just to avoid trading curbs from the USA and the EU.
So how do you make money from this scenario?
My guess is that these two currencies will slowly appreciate over the next 6 months by at least 5 to 10% above the pre-managed float rates.

If you observe the KLSE, both volume and value traded have risen since the float.
This indicates that there is more demand for stocks as these represent a very liquid investment compared to property.

If you follow the Hang Seng Index of Hong Kong, share prices there have also jumped because fund managers believe it is only a question of "when, not if" the Hong Kong dollar will be un-pegged.

Hot money flows into the country and that invariably boosts up stock prices.
As the saying goes, “There is a sucker born every minute” and new players will be attracted to another round of “Get rich quick” stock picks.

I used to hear rumours about various stocks in the past but I always used to tell my friends. “Even if the Finance Minister gives me a tip, I would have to know his position in the market before I can properly evaluate his advice.”

Some people depend on their remisiers for tips. If they are not in the market, it may be OK but how many remisiers are not involved in buying and selling on their own account?
I have heard stories of remisiers becoming bankrupt in the past.

Of course I did miss a few good tips but I have no regrets on how I play the stock market.

Just like to share that I still own shares in the first counter I picked in 1972. It was then called Selangor Coconuts but has since changed its name to BSD Properties.
After various bonus and rights issues, I got back my capital long ago and still own the shares with quite attractive dividends.

I have never borrowed money to buy shares as I think you should not do this unless you are a speculator or gambler and prepared to lose all.

It is important to read the current events and also company news in order to pick good stocks. About 2 years ago, I read about Top Gloves and expected that business would grow as demand for all gloves would increase dramatically with all the problems of SARs and bird flu. I bought some at about RM1.70 and the price is now RM9.

When Najib became the DPM, I picked up CIMB below RM3 as the fundamentals looked good and I expected the connection would improve prospects.

You can get free advice from various sources before you make your stock picks.

I don’t bother much with IPOs as the record over the past 2 years is poor. There are still good pickings around.

Finally, you make the decision on how best to grow your money. If all the experts are that good, they would be too busy making money for themselves in the market rather than selling you expensive seminars!

Me? I use a trading system where I select fundamentally good stocks(usually the not so exciting ones) and the program will give "sell some advice" when the market goes up and "buy some advice" on the reverse.




(What has a butterfly got to do with stock prices? Well, like a butterfly share prices do not have a long life so you must fly away when you can. The other reason is that I have a limited image bank!)