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Of Shares and Markets - Benkaiser.NET Investment Portal

The Bulls are not back yet

August 28th 2007 07:24
Asian market today slipped into the reds after Singapore DBS Group revealed that it has more mortgage-backed securities than previously disclosed. Although without any indication of US-exposed collatarised debt obligations loss, shares nonetheless fell, reflecting the nervousness still strongly present in the market over US subprime exposures.

Weak US leads and data showing the number of unsold homes in the US highest in 15 years also pushed the market lower. Australia benchmark ASX S&P 200 index shed 9 points to 6176.2 points at closing.

Although the recovery over the past two weeks was a feel good factor but a closer look reveals that the positive performance was not accompanied with strong volumes.


A casual look at the volume turnover in the US, Australia and Malaysia markets show similar trend, which indicates that many investors are still staying on the sidelines waiting for more stronger signs.

The charts:

US S&P 500



Source: StockCharts

Australia All Ordinaries



Source: Yahoo Finance

Malaysia KLSE Composite Index




Source: Yahoo Finance

As in the charts, all the three markets show a similar uptrend over the same period with Malaysia having the weakest volume turnover of the three. Only a few bulls out there.
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Attention shift?

August 27th 2007 08:43
Following the positive leads from US market performance last week, boosted by stronger than expected economic data, the Australian market closed the first day of the last trading week of August, 2007 by a gain of 1.6%, as displayed by the ASX S&P 200 benchmark index. The index added 96.7 points to 6,185.2 points.

The overseas leads combined with strong local earnings pushed the market higher.

Having mentioned several times, that until the full extent of the damage caused by the credit slump in the US is known, the markets will continue to perform nervously due to the lack of strong information regarding the mess to be priced. However, given that its not possible to know the complete situation now, investors came out from their bunker with great caution in search for some positive information and earnings. And thus the positive performance of the markets recently, moving the attention away from the subprime mortage issue for the time being.

The show has to go on.

As reported by The AGE today:

'Still, they cautioned that persistent worries about credit markets will continue to keep investors wary.

"The subprime debt issue will take a while to work through the system and there could some reasonably large losses but it appears that the market is prepared for that,'' said Paul Xiradis, chief executive officer of boutique fund Ausbil Dexia.'

All is not lost as long as it is 'quality' play.
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A Herd Play

August 26th 2007 07:44
After weeks of roller coaster ride in the market, the mainstream press finally made some space for behaviorial finance to explain the volatility in the financial markets that are not supposed to happen according to the standard theory lead by Eugene Fama's Efficient Market Hypothesis.

Today, Melbourne's broadsheet, The AGE, published a piece on behavioral finance for the crowds:

'ECONOMISTS don't like to think about it but, according to conventional theory, events such as the present wild gyrations in financial markets aren't supposed to happen."

[...]

'Because herds are ruled by the majority, trends in financial markets appear to be based on little more than investors' moods. These moods are generated "endogenously" — that is, by factors within the system, not outside developments.

Moods are the basis on which investors judge the way they expect other investors to value shares in the future, so they motivate current buying and selling.

Thus in markets for financial assets there's no tendency to "revert to the mean" of equilibrium. There are just the ceaseless waves of social mood, fluctuating between optimism and pessimism.'

No surprise, as over the years the performance of financial markets have created problems for the information efficiency theory leaving large gaps that demand alternative explanation of the phenomenon. And thus the behaviorial finance camp plugged the hole with their theory and empirical evidence that resonates with reality. The rival claims of the two camps have always been mentioned on this site.

Here are some of the recent related posts:

1) Fama's EMH took some hits

2) The market is just as human as you and I

Meanwhile, Friday's negative closing for the local market reflects a shaky foundation despite the relative calm and positive performance over the week. The benchmark ASX S&P 200 index shed 71.2 points or -1.16%. Across the pacific, the US market closed the week higher on the back of positive economic data and such positive sentiments are likely to be in play for the market here on Monday.

Is your mood ready for the play?
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The show must go on

August 23rd 2007 12:03
It is the same story again, that things will turn out fine over time. It will soon be a month that such sentiments were repeated on this website. But then again, it takes time to drive home the point. Of course, this message is for 'investors'.

New York-based wealth manager, Russell Bailyn, is among the many optimists in the crowd. "Overall, my feeling is that both stocks and bonds are now priced at more attractive levels. I don’t believe we’re about to face a major recession or anything drastic like that. My view is that private equity firms and hedge funds have really created some waves in the market. The broader economy should be able to protect itself against further declines in price level. Remember, traders focus on the daily swings in stock and bond prices. Investors don’t."
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Enjoy while you can

August 22nd 2007 15:06
The magnitude of the volatility in the market was relatively mild this week so far as compared to what was seen since late July. It even looks like as if calm has been restored. One way or another, enjoy the moment while you can.

There was the Feds and now the reported corporate earnings that was factored into the market, providing some fresh lead away from the credit slump induced market free fall. On the back of strong reported earnings on Wednesday, the ASX S&P 200 benchmark index rose 15.7 points to 6005 points at closing ending the day slightly higher after a volatile session.
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The market is just as human as you and I

August 21st 2007 09:51
Active markets do not act independently on their own but are actually a reflection of human decisions and movements of capital. Perhaps this is what some would say 'the collective wisdom of the majority' and in some cases, the opposite. Whether the collective wisdom is the true wisdom in a strict sense is another story.

It is suffice to say the market is as human as you and I. Being human, we know that sometimes we act irrationally and so will the market because it is essentially 'human', which forms the very basis that modelling the market is a difficult task because markets do not function independently nor can it be experimented in a control environment of a laboratory.
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A much needed boost but...

August 20th 2007 10:20
A weekend to digest the Feds discount rate move and following last week positive leads from the US markets, sharemarkets of the Asia-Pacific Region rallied to one of the highest one day gain in nine years.

The surge is a respite from the gloom over the past few weeks, and restored some confidence to investors. But the positive performance is too early to tell that the mess is over. In fact, does it warrant for one?
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Feds to the rescue

August 19th 2007 08:11
If the Feds were the police then its decision to cut the discount rate on Friday would have been a SWAT storm, attack and rescue. It stormed and attacked but the outcome of the rescue is still unknown. Rescue from the global market turmoil that is.

In what has been a described as a welcomed 'shock' or 'surprise', the US Federal Reseve Bank on Friday reduced the lending rate to banks from 6.25% to 5.75%, together with a 30 days rollover period instead of the usual 1 day. The move signified the magnitude of the credit slump induced market turmoil worldwide that could solidify into wider economic problems if left unchecked.
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What Buffet thinks of the current mess

August 18th 2007 08:34
The Sage of Omaha, Warren Buffet, lost almost as much as the US S&P 500 index. Hickey and Walters of Bespoke, did a casual performance comparison of Buffet's portfolio to the S&P 500 index, and it was found that Buffet's portfolio as of 31st March, 2007 took an average loss of 7.64% since 19th July, 2007, compared to S&P 500 index loss of 7.69%.

The following table produced by Hickey and Walters summarised the findings


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Don't blame the lenders, blame Adam Cheng

August 17th 2007 10:45
For the uninitiated the name Adam Cheng may not ring a bell but for some observers and the Chinese community, Adam Cheng is well known as a Hong Kong television drama actor, and also for the wrong reason as well.

Wrong reason being that ever since 1990 he starred in a popular drama series, Greed of Men, playing the role of an antogonist known as Ding Hai, sharemarkets around the world have suffered losses each time he appeared on television. The phenemenon is popularly known as the Ding Hai Effect or Adam Cheng Effect.
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Blood on the street

August 16th 2007 11:14
It is not too much to say that many investors would have felt their knees giving way when they saw the Australia sharemarket plunged more than 5% today. A combination of technical glitches in the Sydney Future Exchange and the current credit slump caused investors to dump physical positions when hedging was halted by the ASX.

And it is not too much to say it caused 'blood on the street'. But thankfully it was just a technical glitch and not anything information-induced plunge which at the end of it, the market closed with a lesser loss of 1.32% ending at 5711.5 points for the benchmark ASX S&P 200 index.
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A hazy state of affairs

August 15th 2007 07:55
It was consoling to read about the positive performance by some of Australia business icons in times of a gloomy sharemarket.

Commonwealth Bank, JB Hi-Fi, Reject Shop and James Hardie today posted positive earnings performance with some of them taking the opportunity projecting better growth in the future. Thumbs up, the market need some good news but it did not stop it from another round of plunge as the credit slump continue to spook investors.
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Subprime Overdose

August 14th 2007 10:11
Is there really nothing else worthy of a strong focus other than the current credit worries? No doubt that the US subprime fallout is a major concern but there are issues that are of equal importance.

The current volatility in the market is under the dictation of the credit crunch which although seems substantial but how many stocks in the world are directly affected by it? Not to mention that the subprime fallout constitute a minor section of the US credit market, otherwise the growth fundamentals are relatively strong.
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Waiting for the sun

August 13th 2007 11:12
Given the precedent set by the financial markets over the past two weeks, the recovery by the market today is by no means an indication that all is over. The benchmark ASX S&P 200 index on Monday staged 1.3% higher after last friday biggest one day fall since September 11, 2001.

Signals are mixed for the short term as time is needed to know the real damage caused by the US credit crunch. The magnitude of the issue, however, at this point of time is not rather clear, with experts conflicting on the real depth of the credit implosion.
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What will Monday be?

August 12th 2007 16:33
Asia-Pacific will open their markets in less than 12 hours, the usual Monday headstart for the region before New York open theirs. After a weekend of processing information and leads from last week US close, the short-term signals are not very clear and more volatility imported from the US is expected.

But how will the Asia-Pacific markets react to China's inflation data due to be released tomorrow? Shanghai and Hong Kong especially could be under the spotlight.
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