Saturday, April 28, 2007
Wednesday, April 25, 2007
AS a result of China's higher-than-expected economic growth of 11.1% and fear of possible further interest rate hikes in China, regional markets, including Malaysia, fell sharply last Thursday.
This was the second time after Chinese New Year (CNY) that a drop in Chinese stock prices rattled the markets across Asia.
According to Lee In Ho in his study on Market Crashes and Informational Avalanches, there are four stages in a market crash. They are boom, euphoria, trigger and panic.
Under the boom stage, the market will normally have a main theme that excites everyone about stocks.
In Malaysia, several positive measures under the Ninth Ma- laysia Plan got investors excited about the construction and property sectors. At this stage, this is seldom a bubble as companies continue showing good corporate results. A bubble will be created at the euphoria stage. The unjustified extrapolation of future earnings and the revision of higher target prices by research analysts can cause overconfidence in companies’ future performance.
A bubble will start to take shape when the general public reacts to this overconfidence. An irrational exuberance will occur when market prices and expectations about future values are far beyond the fundamentals of the companies.
However, no one will know when the rise will stop. A market will resume its upward trend until something triggers the downfall.
Usually, the stock prices get higher and steeper just before the market crash.
At the trigger stage, private information will reach a threshold that triggers other traders to alter their behaviour. At this critical situation, when almost everyone is at irrational exuberance, any event can trigger the market to tumble.
In January 1994, our stock market put the blame on former finance minister Tun Daim Zainuddin for saying that he had sold all his shares because prices had reached dangerous levels.
Until now, nobody can really understand the main reason behind the sharp plunge on the Shanghai Index right after the CNY.
According to some fund managers in China, the selling was mainly due to investors panicking when they noticed that their friends were selling stocks.
A famous researcher in behavioural finance, Robert Shiller, conducted a survey by asking institutional and individual investors what was in their mind during the stock market crash in 1987. One conclusion he drew was that the crash was due to people reacting to each other with heightened attention and emotion.
Investors seemed to follow what other investors were doing. As a result of action and reaction, a feedback loop was created when everyone had a simultaneous reaction to common stimuli.
A market crash is described as a process that corrects a public belief that is inconsistent with the current distribution of private information. The severity of a crash will depend on whether the market is filled by “new generation” investors or experienced traders.
“New generation” investors do not know anything about the stock market but are greedy and want to get quick money from it. A market will not crash if it has experienced traders who know how to control risk and when to cut losses.
However, if a market is filled by “new generation” investors with no holding power and do not know when is the right time to sell a stock, any sharp drop in prices could result in panic selling. At this panic stage, the fear of further drops could cause big fall in prices.
When will the stock market crash again?
My usual answer for this question is the stock market will not crash as long as you continue to worry about when it will crash. The market will crash at the time when you least expect it to happen. Investors should remember that the market always performs beyond your expectations.
We should not be too worried about when the market will crash. Instead, we should consistently review our portfolio and sell those stocks whose prices have gone beyond their intrinsic value.
Saturday, April 21, 2007
Below is the compiled list of all high dividend yielding stocks. Those in light green are my preference at the moment. Take a look you may find your preferred stocks here. Bear in mind that these companies might not pay the same amount of dividend as they used to be, is very much depend on the company performance & result that lead them for consistent dividend payout.
Tuesday, April 17, 2007
Thursday, April 12, 2007
By YEOW POOI LING (Source : The Star 12 April 2007)
PETALING JAYA: High dividend yield stocks will provide support amid lingering concerns of market correction or weakening in the US economy.
OSK Investment Bank head of research Kenny Yee said dividend stocks helped “mitigate volatility in the portfolio” as they were more stable in terms of share price movement.
He noted that more and more companies were raising their dividend to reward shareholders.
“Companies realise that paying good dividends helps boost the share price as well as increase efficiency in capital management,” he said, adding that it also improved return on equity.
For example, Public Bank Bhd declared a total dividend of 60 sen per share for the year ended Dec 31, 2006. Since the dividend’s ex-date on March 16, the share price has appreciated 5.7% to RM9.20 yesterday, giving a total return of RM1.10 per share or total shareholders’ return of 12.6%.
Meanwhile, MIMB Investment Bank head of research Pong Teng Siew said during a market rally, investors tended to look for capital gain, hence stocks with attractive dividend yield only attracted “a certain type of investors.”
“Usually in a bull run like now, investors buy for capital gain and not for stable income because they do not want to risk under-performing the market,” Pong added.
Companies that had a stable recurring income would be able to sustain paying out high dividends, he said, citing examples like Chemical Co of Malaysia Bhd, Bintulu Port Holdings Bhd and Highlands & Lowlands Bhd.