The Market at 18 December 2006

Market situation. After 2 months of continuous rise of KLCI, the huge correction happened last week. Many stocks (precisely, most of the stock) drop tremendously, where rough estimate, a total of 30% of the market capitalization was wiped out in the penny stocks sector. MESDAQ, Second Board and Technology lead the bear. After detail observation on the drop of price, it is clear that the drop in price is largely (if not completely) caused by the negative market sentiment. There are no any strong economic indicators that are showing the adverse condition in the country, instead, economics indicators are supporting a rise. While the fair value of these penny stock is still hardly judged, particularly in a Malaysian context, many stocks are dropping (approaching) to the low value of the year.

Recommendations. The outlook is very hard to predict as the volatility is high and the stocks fall faster than gravity speed resulted from retailer distribution. Fears surround the environment. Volume shrinks suddenly and no institutional support is spotted to continue the up-trend. To predict the price reversal will be equal to predict the timing of the institutional support on the KLCI. Brave traders can buy at the current price from the sudden drop and could reap huge rewards should the price reverse suddenly happen the next few days. However, risk exists. For me, I am timid, and only dare to stand aside to watch the drama.