Is it the right time to invest?

Veterans who experienced the 1997 crisis which triggered an equity meltdown will tell you to be patient and wait as they had seen KLCI (Kuala Lumpur Composite Index) plunged to a new historical low of 262.7 points on the 1st of September 1998, when investors had strong confidence that the worst was over after a rally of 267.79 points to 745.36 on February 26, 1998. They are pessimistic over the current market condition and fear that the stock market's rallies which surpass the expectation of most investors are actually the beginning of another nightmare.

When the KLCI hit 964 points on 29th April 2009, worried investors were reluctant to give comments on whether the CI will penetrates the psychological resistance level of 1,000 points as the recovery of the current economic crisis was still vague. Although the sharp declines in economic activity appeared to have abated, it is not impossible that the CI might dip below 964 points. Therefore, most investors prefered to wait for a not-so-tentative indicators which could boost up their confidence level to retake their position in the market.

What happened the next week was really unexpected. Stock market were being very enticing during the first week of May as the CI gradually increased to 1,026.78 points. More than 100 of penny stocks (Share which market value are less than RM1.00) had their market price skyrocketed as much as 50 - 100%. Bilions of shares were transacted and people were confident that it was a starting of a slow and steady bull rally.

However, with IPI (Industiral Production Index) for March down by 14.4% compared with the same month last year, there were a group of investors who had a strong conviction that it was just another deceiving bear market rally . Even Maybank Investment Bank Bhd's CEO, Mohammed Rashdan Yusof said that Malaysian economy will not recover so soon albeit economic indicators were showing signs of bottoming out and that the local stock market may be overbought. What do you think?

Let's look at some figures.

11/5/09 - KLCI dropped 1.28 to 1025.50
12/5/09 - KLCI dropped 2.48 to 1023.02
13/5/09 - KLCI dropped 0.18 to 1022.84
14/5/09 - KLCI dropped 10.85 to 1011.99
15/5/09 - KLCI rised 2.22 to 1014.21

18/5/09 - KLCI dropped 2.20 to 1012.01
19/5/09 - KLCI rised 11.48 to 1023.49
20/5/09 - KLCI rised 19.14 to 1042.63
21/5/09 - KLCI dropped 7.07 to 1035.56

As you can see, 2/3 of the trading days were gloomy for investors. But even so, KLCI ended higher at 1035.56 points compared to 1026.78 points on the 8th of March 2009. The CI seems to be "reluctant" on dipping below 1,000 points. A sharp increase of CI on the 19th and 20th May indicates that more people are interested in blue chips (companies with stable earnings and no extensive liabilities) such as Maybank Banking Bhd, Axiata Group Bhd (Formerly known as TM International Bhd). However, this doesn't mean that people are shying away from the second liners. Prices of penny stocks can still shoot up as most of it had been severely undervalued in the past due to global recession.

That is why I personally thinks that this is the best time to grace your investment portfolio with a number of shares which have an upside potential. Technical correction is ought to happen following Tuesday and Wednesday's bumper gain and true enough the CI fell 7.07 points today. Nobody knows what will happen tomorrow. Both CI and share prices might continue to plunge or start to climb back to its highest value since September 2008. Anyhow, you should be poised to emerge as a shareholder when Bursa Malaysia starts to trade tomorrow morning. If you miss this great opportunity of getting shares at low prices, there's no telling when will the next chances come and knock on your door.