Market Turmoil - What Should We Do?

Not long ago, KLCI achieved its height at 1392 on 24-Jul-07. After approximately two weeks, the KLCI falls more than 100 points closed at 1287 today. Many investors (speculators) are panic with such volatile market and wonder whether is the bear coming.

Most analysts have blamed the turmoil as a result of the sub-prime mortgage default problem. One should note that the name of the "sub-prime" is already indicating its high-risk nature. With the higher crude oil and interest rate, it should not be surprised to see the increasing default rate. It is basically a mis-pricing of the credit spread and it is healthy for the market to have such correction.

Looking back to our Asian region, any potential problem that could lead to such a recession? So far, I don't see any. With the booming economy and rising middle classes, China is definitely going to be another super economy and India is the next one. Locally government has launched several mega projects, waived the RPGT, increased government servant payroll to further stimulate local consumption. These measures will help cushion the impact in the event the economy turned down.

So what should we do? My opinion is that market will continue fall in the short-term. Why? Simply because more and more investors will withdraw from the hedge funds and hedge funds will be forced to unwind position. Expect more bad news to come in the coming weeks.

Advice:
1. Take this opportunity to do stock analysis
2. Look for companies that are under-valued, net cash (low debt) and having sound business model
3. Suggest utility and high DY companies.
4. Consider resource/commodity-based companies if the valuation is low enough
5. Personal recommendation: DIJAYA/ PLENITUDE/ TALIWORKS/ LITRAK/ MTDINFR/ MFCB/ PPB/ IJMPLNT/ AEON/ DIGI