RM149 billion KLSE losses in 5 days – PM/Ministers not stock market consultants

RM149 billion KLSE losses in 5 days

The Cabinet tomorrow should warn off all Ministers to stop acting as investment consultants to talk up the market after the expensive lesson of RM149 billion losses suffered mostly by small investors in the stock market in the past week after the Prime Minister, Datuk Seri Abdullah Ahmad Badawi’s Chinese New Year advice to enter the market to “ride on the momentum”.

Small investors had overcome their skepticism and reluctance to enter the stock market following the Prime Minister’s exhortation at the Gerakan Chinese New Year open house in Kuala Lumpur on the first day of the Chinese New Year on February 18, 2006 to enter the stock market to “ride on the momentum” of the good economic times on the ground that the Kuala Lumpur Composite Index (KLCI) could surpass the 1,350-point level following positive indicators of the country’s economic growth — namely the trillion ringgit total trade last year, the increasing foreign and domestic investments and the rising ringgit.

In less than a week, small investors who acted on the advice of the Prime Minister and flocked into the stock exchange were badly burnt.

In two days on 27th and 28th February, the KLSE plunged 76.42 points from 1,272.87 to 1,196.45, wiping out RM69.45 billion market capitalization in two days.

It is deplorable that Abdullah, who was visiting Yemen at the time, did not immediately learn the lesson that as Prime Minister and Finance Minister, he should not double up as stock market adviser as he persisted in advising Malaysians “to have confidence and be prepared to invest in the KLSE to attract bigger foreign participation”.

Other Cabinet Ministers have also got into the act to double up as investment consultants.

The Second Finance Minister, Tan Sri Nor Mohamed Yakcob told investors that “there is no cause for concern on the dip in the Kuala Lumpur Composite Index as the national economy remains robust with strong fundamentals”.

The Information Minister, Datuk Seri Zainuddin Maidin said on Sunday that he was disappointed that “the local media played up last week’s fall in the Bursa Malaysia stock index”, as such reports “could set off a panic situation and undermine investors’ confidence in the economic position of the country when it was seeing a surge in its performance”.

He said: “Such reports are of no help at a time when the country’s leaders, including Prime Minister Datuk Seri Abdullah Ahmad Badawi, are saying that our economy is on the right track with strong fundamentals.”

However, neither Nor Mohamed nor Zainuddin could talk up the stock market or prevent a “bloodbath” yesterday, which saw the sharpest plunge of the KLCI in nearly seven years, falling 53.99 points or 4.64 per cent to close at 1,110.69 — wiping out RM51.52 billion market capitalization in one day.

Bursa Malaysia was worst hit in the region in the beating suffererd by Asian bourses yesterday:
(Asian bourses) (Decline)

KLCI 4.64%
Manila CI 4.54%
Hang Seng 4.00%
Jakarta CI 3.48%
Nikkei 3.34%
ST Index 3.13%
Shanghai CI 1.63%

In the five trading days from 27th February to yesterday (March 5), the KLCI plunged by 162.18 points from 1,27.87 to 1110.69, wiping out a colossal sum of RM149.11 billion of market capitalization in five days, as illustrated by the following:

(Date) (KLSE decline) (Market capitalization loss)

27.2.07 35.79 pts RM38.38 billion
28.2.07 40.63 pts RM31.07 billion
01.3.07 15.54 pts RM14.84 billion
02.3.07 16.23 pts RM13.30 billion
05.3.07 53.99 pts RM51.53 billion
Total 162.18 pts RM149.11 billion

The Prime Minister and the Cabinet should contribute to enhancing investor confidence in the Malaysian economy and the stock exchange by positive, productive and creative actions and not indulge in empty and irresponsible talk causing small investors to suffer massive losses running to RM149.11 billion in five trading days.

Nobody blame Abdullah, Nor Mohamad and Zainuddin Maidin for causing the stock market “bloodbath” yesterday and the plunge in the previous four trading days, but they cannot shirk responsibility for inducing and misleading small investors to enter the stock market purportedly to “ride on the momentum” of the good economic times.

With the KLCI plunging to 1,110.69 at the close yesterday, it has virtually wiped out all the gains of Bursa Saham this year. It is going to be quite a haul to reach the 1,350-pt KLSE which Abdullah had promised only a fortnight ago.

  1. #1 by otyew on Tuesday, 6 March 2007 - 10:58 am

    this will be going to be a bad year for him. jus do watever he said on the opposite way and we all can have a great year instead. if he said left, we all go right.

    it was funny on that day when he said that it would be great to invest in the stock market but then after few days. the asia stockmarket plunged, so an advice. never listen to someone who cant even understand wat he’s talking about.

  2. #2 by Tai Lo Chin on Tuesday, 6 March 2007 - 11:04 am

    It is an extraordinary situation for government leaders to encourage people to take positions and make money in stock market. You will notice how active UMNO related counters were trading before the recent fall.

    It will only worsen confidence of genuine and big investors. They will reason that our market is dominated by stocks held by UMNO or government’s agencies that require cashing out to raise funds for coming election at the small retailers’ expense.

    This is irresponsible and downright manipulation. Haven’t they tax us enough by direct and all kinds of indirect taxes (service taxes, sin taxes, car taxes), concessionaire tolls in all major highways that they have to include making some more money out of us in our local stock bourse to finance election in order to return to power in order to continue with the pillage?

  3. #3 by madmix on Tuesday, 6 March 2007 - 11:08 am

    I do not not think any serious investor or trader put even a milligram of weight on the pronouncements of politicians on stock market matters. Unfortunately, the inexperienced player may be taken in by such talk and try to “catch the falling knife”. The direction of the market thus far seems to be: sell on rally.

  4. #4 by dragon88 on Tuesday, 6 March 2007 - 11:10 am

    AAB is an idiot. Whoever listens to him is even bigger…

  5. #5 by eltoro61 on Tuesday, 6 March 2007 - 11:15 am

    Why so strange? If former PM Mahathir can call for more bodybags to put American soldiers from Iraq to teach them a lesson why not the present PM to put foot in mouth and call for ‘ride the momentum’. He is the biggest gambler. He call people to gamble but he is selling short. How you know? Somemore our wonderful former PM can call for more to die and also be norminated for Nobel Peace Laureate? What is this world coming to?

    No wonder got Global Warming.

    Malaysia Boleh! Don’t have bird flu got Foot in Mouth Disease by half past six politicians!

  6. #6 by WTF-Msia on Tuesday, 6 March 2007 - 11:28 am

    monkey see monkey doo!!

  7. #7 by Chong Zhemin on Tuesday, 6 March 2007 - 12:16 pm

    Uncle Kit,

    It seems that today the share market is going to close higher. Anyway, Abdullah had made all the small investors lose big money for that piece of silly advice(wrong timing man!). The KLCI might go up to 1350 points. But i dont see this happening very soon. Analyst said that our market fundamentals is still strong and the 10 year economic crisis will not repeat. Let’s see what happens next!

  8. #8 by smeagroo on Tuesday, 6 March 2007 - 12:49 pm

    RM149 beli-yon.

    If a lousy finance man can gv such advise does it mean we are all financial consultants too?

  9. #9 by ENDANGERED HORNBILL on Tuesday, 6 March 2007 - 1:02 pm

    In 1998, several Ministers (including Mustapha Mohamed and the Prime Minister) came out with statements in open support of the dizzying heights of the KLSE. The people were encouraged to support the KLSE….and if you care to look around, you may see still the ashes of all those who were burnt alive! Maybe, some of the ashes have been scattered by the winds.

    Pak Lah never learns. BN never learns!

    THese politicians have no business to ‘manipulate’ the stockmarket for gains to ‘finance’ the General Elections or their cronies or whatever! The ordinary people would not know and have no way of knowing the truth when the controlled press and TV stations spew out all manner of misinformation unceasingly.


    We can’t trust BN with our mothers’ savings or our old-age pensions. SO WE MUST NEVER TRUST BN WITH OUR VOTES TOO!

  10. #10 by ENDANGERED HORNBILL on Tuesday, 6 March 2007 - 1:13 pm

    May I add:

    “In 1998, several Ministers (including Mustapha Mohamed and the Prime Minister) came out with statements in open support of the dizzying heights of the KLSE (and to rally around in support of the plunging market as well in the wake of the Asian financial meltdown because TDM said that the Jews and Soros were attacking the Malaysian economy). The people were encouraged to support the KLSE…

    That would give it the context and makes better sense..

    Please read on as above.

  11. #11 by Libra2 on Tuesday, 6 March 2007 - 1:28 pm

    Besides being bogus stock market consutants, they also provide marriage counselling, parenting , religious sermons, sports coaching and act as nutritionists.
    Just listen to their speeches given at school functions, temple and mosque openings and other political functions. They are jack of all trade.

  12. #12 by HJ Angus on Tuesday, 6 March 2007 - 2:05 pm

    Anyone who just listens to another’s advice to invest in the share market without proper study and resources needs to lose his money so that he will learn the lesson for the next round.

    People used to give me tips or rumours but I always used to say, “Even if the Finance Minister gave me a tip privately, I would have to know his position in the market before that advice becomes useful to me.”

    I also never ask my broker for advice as I do not know their position and if they are that good, they would not have to earn your commission.

    The same applies to most fund managers. I think most of them survive on the annual fees and most funds just track the market performance.

  13. #13 by sheriff singh on Tuesday, 6 March 2007 - 2:34 pm

    In 1997-98 in the wake of the Asian financial crisis, our stock market fell sharply started by Thailand. Who did we blame? CLOB and foreign investors especially from down south and we froze their assets and money for many years. Some people got rich, very rich, for unlocking the assets. Ringgit weakened to RM 5 to US$1 and capital controls were imposed.

    We get another sharp fall now prompted by Shanghai this time. Who do we blame this time and what will we do? Blame Soros and the foreign investors especially from down under again? Whose shares and money are we going to lock-in now? What will Nor Mohd do this time? Will the ringgit weaken to RM 5 = US$1? Capital controls? Will a DPM and FM fall like the last time around?

    The general elections after the 1997 crisis saw BN losing badly. Will BN lose again at the next GE after this sharp market fall? Is a snap elections looming before things get worse?


    Will history repeat itself?

  14. #14 by billyong on Tuesday, 6 March 2007 - 4:29 pm

    Why are people so gullible knowing very well that every time any of the UMNO leaders open their mouth, it will take more than mere words to convince anyone. I am a retail investor in the KLSE and when I read what the PM has to say in encouraging the locals to ride the momentum, I have only this to say to myself, “Fat hope if you think I am going to take the bait”. I was right! So to those whose jari kena bakar, let this be a lesson and not listen to lies anymore. Enough is enough. Since when a prime minister become a stock punter anyway??

  15. #15 by WFH on Tuesday, 6 March 2007 - 6:13 pm

    In the build-up in recent weeks of the KLCI to the upper 1200 pts, the “good” news was reported as if all credit is owed to the BN Govt for its “strong” econiomic management & performance.

    I’d dearly hope to now read reports in the media of the BN Govt clamouring to claim (negative) credit for the drop in the index and the corresponding massive unbelievable loss in market capitalisation.

    Recalling that around end-Jan/early Feb, the ascent in the KLCI was driven largely by institutional funds (foreign and domestic). The lower liners (and by extension, smaller retail investors/players) only started a noticeable surge just after CNY. It therefore means that the losers most affected were these small retail investors who picked up their stocks at or near their highs. The early institutional investors, in contrast, may still be buffered from massive losses simply by having bought in earlier, before the run-up quickened in pace.

    I feel disappointed that even the PM, a supposed national CEO, had led so many small investors up the garden path only to see their savings, maybe even borrowed monies, significantly wiped out. Oh yeah, I’m sure some analysts will soon issue market advice to buy on weakness, but it is no comfort to the small investors who already may not have any more money to buy back into the market, even at very much lower prices.

    As otyew said above, whatever the Govt says to do, just do the opposite, then anyone’ll sure come out ahead. In ANYTHING.

  16. #16 by Count Dracula on Tuesday, 6 March 2007 - 6:47 pm

    To be fair to the guy who as everybody knows has no schooling in economics, understands nothing about economics, he should not be blamed for the loss.

    The Dow lost some 500 pts in three days and this is said to be due to correction which is overdue. The Chinese market increased by some 150% in one calendar year last year. It is due for correction.

    The Dow is currently hovering around 12050.41 as a result of what is happening in China.

    The PM has not been relied upon to keep his word. So why trust him now?? Malaysians who treat the stock market as a casino have only themselves to blame.

  17. #17 by raven77 on Tuesday, 6 March 2007 - 8:25 pm

    The KLSE runs without fundamentals and degenerated into a casino during Daim’s time…..anyone with common sense would be able to see it is fool’s gold….but greed generally gets the better of most people and this is the price you have to pay. No short cuts in life….hard work is the way forward…ask the Japs and Germans…

  18. #18 by lepton on Tuesday, 6 March 2007 - 11:01 pm

    Uncle Kit,

    I think the PM shouldn’t be blamed for the loss in KLSE. He has every right to rally people to invest. Nobody is expecting this and it certainly can’t be predicted.

    The problem with this is that I think people should be more wary on claims such as this. And how people would say something is “likely” to happen or not. They are just not experts.

  19. #19 by Tai Lo Chin on Tuesday, 6 March 2007 - 11:02 pm

    Prime Minister Abdullah Ahmad Badawi has learnt his lesson to keep out of Bursa Malaysia’s woes. He said the government would not introduce measures to prop up the ailing stock market – http://www.malaysiakini.com/news/64165

    Time to take a pun (act opposite). Market rebounded today. Hope he would soon say something like “don’t play the market” so that more players will have confidence to enter the market now.

  20. #20 by pwcheng on Wednesday, 7 March 2007 - 2:05 am

    To be fair, nobody can predict the market not even President Bush. The PM is making this “buy call” remark according to how he feels but the difference is it is coming from the mouth of the PM and not any layman. However I still feel that the principle of “caveat empto” must be applied in so far as the share market is concerned. You can blame him if you looses but for somebody to loose there will be some who gain but will the latter share the fortune with him.
    I am not pro UMNO or pro BN but I am pro JUSTICE.

  21. #21 by jango ang on Wednesday, 7 March 2007 - 6:38 am

    Kit Siang, why are you harping on the stock market issue. To be fair to the government, they are not to blame. the blame falls squarely on the punters. nobody forces people to play the market. You go in with your eyes open. So Kit, you are going a bit too far.

  22. #22 by DarkHorse on Wednesday, 7 March 2007 - 7:37 am

    The head of the executive branch of a democratically elected government has no business in trying rally support for the stock market! Period. Unheard of elsewhere.

  23. #23 by DarkHorse on Wednesday, 7 March 2007 - 7:38 am

    But then the real suckers are the speculators who borrow short term at high rates of interest to invest and now have their fingers burnt.

  24. #24 by Tai Lo Chin on Wednesday, 7 March 2007 - 8:12 am

    Head of the Executive Branch thought that he was Alan Greenspan. Ha Ha Ha! What a joke. I think he learned, not from us or Kit Siang though, maybe from ECM-Libra.

    Already inestors are not happy. They say our Bursa Malaysia’s capitalisation dominated by counters related to government, UMNO, GLCs. There’s no level playing field when it relates to influence on the market.

    If political leaders someone try to shore up index stocks influencing PNB or EPF to come in to buy or sell at certain times, would you want to invest?

  25. #25 by littlebraain on Wednesday, 7 March 2007 - 3:22 pm

    As share market is unpreditable, even SOROS got burnt. To invest in the market without resevertion you are simply looking for troubles. In fact, one should take into considerations the fundamental and external factors. KLSE is not CASINO.

    To be fair, nobody should be blame. Right?

  26. #26 by shortie kiasu on Wednesday, 7 March 2007 - 6:04 pm

    As far as the stock market is concerned, nobody take responsibility for whatever opinion expressed, but it imprudent for PM or minister to talk people in believing something that is so intangible and so uncertain.

    So but we have it here in this nation.

  27. #28 by rm 0.02 on Sunday, 18 March 2007 - 7:34 pm

    I think that the PM should not be solely blamed for the losses suffered by small time investors during this latest correction in the Bursa Malaysia and a lot of criticism directed at him for his comments preceeding the correction is unfounded.

    As an individual he is entitled to an opinion of his own, although admittedly being a person of power, he should have known better that whatever he says will be used against him if things go wrong. He was not alone in his assessment of the performance of the stock market; there was a slew of good news and upgrades from analysts, both foreign and domestic. Why weren’t they taken to task as well?

    I believe it was just a matter of timing of his comments. Were his comments made just a month or two earlier, I’m sure everyone would be singing a different tune now – in December the KLSE Composite was hovering around 1,100 pts only!!

    Investors can only be responsible for their own actions. Following the herd mentality can be destructive in times like this; if instead proper research had been done, investors could weather this short-term losses and come out profitable in the medium and long-term.

    Let this be a lesson to all investors out there – what goes up must come down, eventually…

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