Large red bars

Many stocks gapped down when today's market opened in Malaysia, and we'll probably end up with a large red candlestick bar in the charts at the end of the day. S&P downgraded US debt to AA+ on Friday.


I am rather peeved that some of my paper profits that took some months to build have been wiped out or reduced drastically in a day.


My current forecast is that we'll have a 20-30% correction in the KLCI for 2H2011 i.e. it will be a downward bias market for the rest of the year, until we have some fresh catalyst. This will be a good time to accumulate some good quality dividend yielding stocks, while I'll try to unload some of my more vulnerable, speculative stocks if I am able to make a small profit on them. Otherwise I'll keep them for the long term. I know some traders would say to cut loss, cut loss, cut loss. But I know the stocks I have are companies that are financially strong and can survive a downturn (and have survived the last downturn). So I am comfortable with the temporary illiquidity.

It's time like these that knowing the financial condition of your company becomes more important so that you don't simply sell your good quality stocks in panic selling.


According to Macquarie, the US debt downgrade will benefit Malaysia and Singapore bonds.

 "Singapore and Malaysia will be the main beneficiaries of inflows into the region as global funds step up diversification into non-dollar assets after the US lost its top credit rating, according to Macquarie Group Ltd.

International investors will add to holdings of Singapore bonds, the only economy in Southeast Asia with a top rating from Standard & Poor’s, Moody’s Investors Service and Fitch Ratings, the bank said in a research note dated Aug. 6. Malaysia, which has the world’s largest Islamic debt market, will become more attractive to investors in the Middle East, according to Australia’s biggest investment bank."- Bloomberg

Read more: US downgrade to benefit Malaysia: Macquarie