The current rally in U.S is definitely a bear-market rally.Meanwhile,in Malaysia,it’s a political rally. Local funds (private / government) have been holding up KLCI since Dec 2008.Whether they are instructed to do so does not matter.
Comparatively,companies in Bursa Malaysia are much more expensive than companies in Singapore, Hong Kong and other countries in ASIA.It’s sad to say that the current rally will mark a starting point for further decline for stocks in Bursa Malaysia.
There are a few reasons for the continuition of decline in Bursa Malaysia
1) Malaysian stocks are relatively expensive. Foreign investors may wait at the sideline / go to Hong Kong & Singapore.
2) Political uncertainties from now until next election. Or maybe for the next 10 years as capable leader is not yet produced.
3) Weakening export. U.S & Europe are still in recession.
4) Weak consumer sentiment and rising unemployment. This can be seen in retail sales and home sales. The government and media are trying very hard to cover it up. But you can actually see weakening sentiment with your naked eyes.
5) Foreign investors are saying “Tak Nak” to Malaysia. Lack of transparency,corruption and small market hinder foreign investment. Big foreign funds may go to Vietnam (Low cost with 80 mil people), China & India (full potential growth story), Singapore & Hong Kong (investment friendly countries)
My advice is not to buy during this rally. It may looks ‘yummy’ but it’s just a mirage.Start to invest again when the bear starts to rule.