I think I know why I'm feeling so uneasy with the rally this week. It has got to do with the currency. Coincidently, I tried out Deutsche Bank Forex demo program this week. I don't have the money to play with Forex (min USD50k) but I tried it just for fun. What a beginners luck I had with the forex. I bought GBP against the USD and earn 25% in a day. So I check the Forex chart and I discover that major currencies are in a long term uptrend against the USD. Furthermore, the EUR has just broke free of a symmetrical triangle against the USD. USD was really getting whack! So what does this got to do with stocks?
Well, if I'm investing in US stocks, most probably I will sell them and convert it to EUR or whatever to avoid currency loss (just like 1997). If everyone thinks like that, then US stocks will go down.
The next question is how will this affect Malaysia? If US sentiment is bad, most probably it will affect us also. I'm not sure what will be the correlation this time.
If you read the newspaper, they always says that the rally is due to foreign buying. So what will the foreigner do? If MYR keeps tagging with the USD, I think they will sell. If MYR breaks free of the 3.63, then they will continue to buy. Last check at the BNM website shows that MYR is still trading around 3.63. So what will it be?
3 comments:
http://www.yvonnefoong.com/archives/2005/07/malaysian-ringgit-depegged
Judging frm the way the stocks are reacting, I think it has successfully converted some disbelievers of this rally and it is still in the process of coercing many more who are not able to endure a rising market. Somewhat of an irrational exuberance. What's rational about this rally ? Is there anything that is rational ? Granted, some companies have reported an improvement in their results but then again... a large majority also have not. Oil palm prices have rallied, still overall gdp grew 5.8%, that's hardly anywhere near our neighbours. Rather than pumping more money into the economy to further fuel the economy, we are pumping RM95m up the moon. Wonder what the poor will think, when they look up into the moon, at night.
There you go again. Are you getting silly if not stupid with each passing day? C'mon Swifz, c'mon..
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