In case you haven’t heard, the media has been hyping US Fed interest rate activity all week, so much so that it is actually making front page news. Reason? Because for the first time in 2 years the interest rates in the US may actually stop going up. Traditionally when this happens, stocks surge because cash as an investment becomes less attractive, the currency weakens and inflation goes up alongwith the prospects of a recession. Blah blah blah….
So why is this all so relevant for us, despite the view expressed by our beloved Bursa CEO that “we’re our own market”? The simple answer is: buyers. Although our politicians love living in a cocoon, our investment community is much hipper to the fact that the US consumer is the driver (directly or indirectly) of consuming power worldwide, and so if our companies can’t sell their stuff abroad, then we certainly aren’t big enough to be able to buy them all here. So there’s a sell off as investors brace for declining cashflows and rising PE ratios. Now, don’t lose sight of the fact that a US recession is definitely around the corner, no matter what temporary boost a pause in rate hikes will provide. If you want to read more about it, here’s a good link.
Okay enough about what should be happening, now let’s focus on what actually is happening. Although the KLCI is approaching oversold leves, it does not seem to want to sell off, so not wishing to be one to miss a good party, I am still dancing holding onto my positions and keeping my eye on plantation stocks. But I have one foot out the door and holding my carkeys in my hand.
