Posted on by Kit

PM’s CNY present – RM70 billion Bursa Saham losses by small investors

KLSE

The Prime Minister Datuk Seri Abdullah Ahmad Badawi had a special Chinese New Year message for Malaysians in the first two days on the Chinese New Year on February 18 and 19, 2006 — to enter the stock market to “ride on the momentum” of the good economic times.

This was his common theme at the Gerakan Chinese New Year open house in Kuala Lumpur on the first day of the Chinese New Year and at the open house of the Penang Chinese Chamber in Penang on the second day of the Chinese New Year.

Abdullah pointedly said that the Bursa Saham composite index, which was at the time at a high of more than 1,258 points, could surpass the 1,350-point level following positive indicators of the country’s economic growth — namely the trillion ringgit total trade last year, the increasing foreign and domestic investments and and the rising ringgit. (New Straits Times 21.2.07)

There had been widespread skepticism about the slew of “good economic news” which had been trotted out by the government in the previous two weeks, particularly about foreign direct investments which clearly conflicted with statistics released by the United Nations Conference Trade and Development (Unctad) — raising the question as to why there is a difference of between RM6.4 billion to RM9.8 billion in the statistics released by the Ministry of International Trade and Industry (MITI) and Unctad on 2006 FDIs into Malaysia.

However, when the Prime Minister openly urged Malaysians to enter the stock market “to ride on the momentum” in expectation of the KLSE rising above 1,350 points, small investors cast aside their doubts, reservations and skepticism and entered the stock market in a big way after the Chinese New Year holidays, lifting the KLCI to close at 1,283 points last Friday — with the Star yesterday carrying the screaming headline “KLCI poised to break record” for this week.

KLCI did “break record” in the past two days, but of a different kind – suffering the biggest drop in five years yesterday, plunging by 35.79 points to 1,237.08 and another 40.63 points to 1,196 points at the close of market today.

Yesterday, RM38.38 billion of market capitalisation was wiped out in one day while RM31.07 billion was wiped out today. The bulk of the RMRM69.45 billion losses in the past two days have been borne by the small investors who had been persuaded by Abdullah to enter the market to “ride on the momentum” for KLCI to surpass 1,350 points.

The unusual Cabinet meeting tomorrow should cushion the massive losses suffered by small investors who acted on the Chinese New Year advice of the Prime Minister to enter the stock market to “ride on the momentum” to surpass 1,350 points for the KLCI and who bear the brunt of the massive RM70 billion losses in the stock exchange in the past two days.

(Speech at the Pasir Pinji DAP Branch Chinese New Year reception in Ipoh on Wednesday, 28th February 2007)

39 Replies to “PM’s CNY present – RM70 billion Bursa Saham losses by small investors”

  1. Anyone who entered the stock market on the PM’s advice but got burnt during the last two days, and again today,( the market is down 4.16 points now) I would say “It serves you right”.

    Any man with his thinking faculty in working condition, will not believe whatever is said by this government. There were warning and contra views in the many blogs.
    Just go through all the many broken promises made by the government before before the last general elections.

    But then, some people can be fooled all the time.

  2. The Prime Ministers of Malaysia are jinxed when it comes to the share market!

    The last time TDM said something about the market, the market collapsed in 1997/1998! Then he announced a multibillion RM ‘plan’ to ‘salvage’ or ‘bail-out’ Malaysians & he asked Malaysians to hold on to their shares. Thousands upon thousands of Malaysians were burnt and bankrupted. BUT, his ‘Save Malaysians Plan’ benefited and bailed out his sons, Ling Liong Sik’s son and UMNOputras and Cronyputras.

    Now if AAB has failed his Statistics papers, as widely reported, there is no way he would be able to understand the convoluted machinations and mechanisms that underlie the stock market operations. So, to put it bluntly, AAB should not put his tongue where his brains cannot reach!

  3. I think to suggest that AAB should somehow be held accountable for the losses of small investors or that he somehow induced small investors to speculate in the stock market is stretching it too far. Punters are by nature greedy and have the herd mentality. No sympathies from me if they had punted and lost.

    Fund managers and professionals know that the market here (and elsewhere) had overheated and it was only a question of time when the chickens would come home to roost. Even if China had a 10 – 20 pct drop, this should be defined as a minor “correction” in the context of the 300 pct rise over the past 4 years.

  4. Libra2 & Godfather – the point is AAB was mindlessly irresponsible as a national leader to pass such encouraging remarks on the performance of the BSKL at a time when many, many commentators had warned of a ‘severe and overdue correction’.

    I think YB’s bone of contention, which I agree, is that no PM who is business-savvy, well-informed and careful rather than reckless and irresponsible would have committed such a boo-boo that would negatively impact the net worth of so many ordinary Malaysians. Ordinary Malaysians are not in a position to know much but are continually subjected to the steady stream of misinformation and disinformation that spews unchecked from the government-controlled press to suit their nefarious political goals.

    This is why I am so convinced this BN-led government has no right to lead this country. Come next GE, they MUST GO!

  5. “… no PM who is business-savvy, well-informed and careful rather than reckless and irresponsible …”

    The tragic fact is that poor Pak Lah, with due respect, just does not measure up and does not have strong leadership traits. I am so sorry for him b’cos he is actually a likeable person. But going into a globalised world, ‘likeability’ alone stands like a solitary blade of grass in a scorching desert. It just won’t survive.

  7. I was back home in Malaysia for the CNY holidays. On 18 Feb, I actually told my dad to sell all my Malaysian shares/stocks due to the long lagging swimming in the doldrums of the stock market. I did not read the speech of PM Badawi nor did I think about this when I told my dad to sell all my shares and just to cut any further “losses”. My dad did sell all my shares. Every single one of it and on the 24 Feb, he message me and told me the good news. Managed to get a tidy sum of cash out of divestment of my old stocks/shares that I have been holding for so long.

    I thing I learnt about investing in stocks/shares. Be prudent, think long term and do it with your own research and gut feel.

  8. A Prime minister of a country should not pass judgement on the sotkc market, especially, when he has no training even thought he is a Treasurer. AAB has not training in financial matters and only knows how to pray to Allah for results. But he is not so lucky as the Arabs who get most of the oil by praying. He is totally responsible for the loss to all losses by investors on Bursa. He had opened his mouth too soon or maybe, he knew that there will be a burst.

  9. Yup, Uncle Kit, this time, you cant tell AAB to carry the losses of those punters who got burnt in the stock market.
    Anyone who listens to an idiot is a bigger idiot. It is due to their heard mentality and greed that they are burnt. The stock market is not a place to put your money in when some idiot says that it will increase. If that is so, then all it takes is just to give some duit kopi to that idiot and tell him to say nice things and then dump all their money into the stock market. It is high time that those who do not think and have a heard mentality to be taught a lesson of believing outright lies. No simpathy for them… or rather I would say serves them right.
    However, AAB should be held accountable for lashing his forked-tongue and misleading the public. Being the PM, he should not have made unfounded declarations without any substantial evidence or support no matter what the subject is.

  14. i think it is not fair if we blame Abdullah Ahmad Badawi for this issue. The greediness of the retail investors and their reluctance/laziness to check a company’s background are the main cause of their losses.

    I agree with Educator that the KLSE had been treated just like a casino by those retail investors. The T+3 settlement that we are having now should be further reduced, to curb speculation. A lot of countries are having T+1 settlement btw.

  15. AAB being the Head of Govt has made a statement which is indeed damaging and misleading.
    Wise people like so many of us and me included will not buy his story to go into the market, however, there are busload, trainloads of grassroot Malaysians who still believe in him and can be swayed by his encouraging word. It is these segment of the rakyat who bore the brunt if they take his advise.
    In conclusion, by AAB’s own actions, even this group of ignorant, pious & oblivious bumi and non-bumi’s will think twice in giving him his vote.
    Akin to AAB digging his grave . . .
    I can’t even accord him any pity as he is supposed to have mighty brains as our PM.

  16. Nowadays when we hear of losses it’s all in the BILLIONS range. It’s very bad. Mr AAB should not be so rash as to ask the rakyat to gamble their money in the stock market. Isn’t it haram? Now that many have been burnt, it’s AAB can eat his own words.

  19. It is inappropriate for Prime Minister to comment on the feel good sentiments of the stock markets in the country, simply because he is not expert in the field, which is complicated, and requires deep knowledge and skill before one can comment.

    More so as PM, small people/investors/speculators look to such personality for whatever “guidance” or “words of wisdom” to invest/punt their money, hopeful that it will grow ten-fold.

    The knee-jerk came from abroad, the NYSE and Shanghai Stock Exchange. No Stock Markets here in SEA can withstand the onslaught of the collapse or upheaval from the major markets in the world and in the region. We have to accept the fact.

    Our market here is just but mere minnow even compared to Singapore markets. We are nowhere near any, and that is a fact that cannot be denied.

    So there no way that PM should have advised the rakyat “to ride on the momentum of the good economic times”. The rise and surge in the stock market needs not indicate that “of the good economic times”. We all know too well from the history.

    Although one can say that one has to be responsible for one own investment in the stock markets, but when the PM of the country give such affirmative advice to the people over the Chinese New Year, that is something the people will surely look up to. Otherwise what is PM there for? for the people who had elected him to that office. His advice and message is taken as “Golden Words of Wisdom”, but, unfortunately, this time to the doom.

  21. AAB’s favourite comment of “saya tak tahu” reverberates around the country and those who bought shares due to AAB’s words of encouragement or bullishness deserve to lose whatever they have lost.

  22. Perhaps FM1 was advised by FM2 that speculation is OK and should be encouraged. Losing RM 32 billion or RM 70 billion is OK. Everyone deserves a medal now from the government just as everyone is pinning medals on the Finance Minister 2 for his record speculation losses (Imagine, by ONE person alone; Malaysian Book of Records, where are you?).

    By the way, is the market a zero-sum game? If the buyers lost money, didn’t the sellers make money? If so, who?

    A Chinese friend of mine lost a bundle. A very bad CNY for him. Kongsi Raya? He is looking for “Kongsi Rugi” from the government.

    Can the losers also bring a class action suit against Pak Lah?

    Hey lawyer burok, what are your usual comments?

    Also did Joey Yap, Lillian Too and other ‘fortune tellers’ got it right for this Year of the Boar?

  24. //By the way, is the market a zero-sum game? If the buyers lost money, didn’t the sellers make money? If so, who?//

    A zero-sum game as the term suggests, is when you add the + and the – you get zero. In this case the only thing that adds to zero is your brain.

  27. hoi…

    count dracula, don’t be so nasty. different people got different levels of intelligence. sure, stock market is not an example of a 0-sum game cos sometimes everybody wins.

  29. Pingback: Esprit De Corps » Blog Archive » When PM become a stock market analyst

  30. There are many listed counters whose substantial shareholders are trustees for our ruling politicial parties. They want you to jump in, support the market so that they can liquidate at profit to raise moneys for election. What you should do is to sell the shares to them when they hype and make their money instead.

  31. “It is inappropriate for Prime Minister to comment on the feel good sentiments of the stock markets in the country, simply because he is not expert in the field…” Short Kiasu

    Why not?? Besides being PM he is also an ordinary citizen – and like any other person citizen or not, he is entitled to free speech. He is an ignorant fool who has been told what to say but even fools are entitled to free speech.

    When investors chose to follow his ‘advice’ they too were exercising their rights of free speech. Nobody is being forced to do anything.

  33. It is not a question of who is the greater fool. There are always wise investors/punters who make money and fools in the market that lose entire savings, probably more in the case of the latter.

    AAB is not exercising his so called right to free speech, talking about himself whether he believes in buying into the market.

    The question is whether AAB should, in his capacity as Prime Minister, encourage his citizens to enter the market to make money.

    It is unusual for a political leader to do so. OK so there are many fools who have yet to learn that when a PM gives a “buy” order the big boys who could “move” the market will normally sell. Even in the US. Every time Bush makes a speech on the stock market, stocks drop further. We’re learning it here. When PM reiterated yesterday our sound fundamentals for confidence in market, our composite index today fell further – down 15 points – though regional bourses recovered somewhat (in the aftermath of recent bloodbath in Shanghai market a few days ago).

    So if there were many fools, does it make it ok for a PM to influence them on issues like this – and make them yet greater fools ?

    Market should be lassiez faire : un-interfered with by PM or the Minister of Finance all rolled into one.

    Many people familiar with the workings of the stock market would associate with what Short Kiasu said.

  35. Whoever in the country can shout at the top of his/her voice and till the end of the day that the “Economic Fundamentals” of the country is still strong and intact. These will not sway the stock markets in the country.

    You look at the countries with much stronger economic fundamentals and strong econnomic base, their stock market capitalisation is astronimical in value, equally they succumb to the ravages of the markets in the world.

    Why would a market-ignorant PM, with due respect, advise the people over the Chinese New Year to enter the stock market to “ride on the momentum” of the good economic times? And the people who heed such “Golden words of wisdom” are majority Chinese and non Malays. Markets never work the way he thought to be so simple. Is there any hidden agenda in all these?

  37. No I do not think we can blame him for the KLSE’s nosedive.

    After all he did claim that the government is not buying the multi-million AIRBUS but just leasing so don’t expect anything he says about the share market to be worth considering.

    Just remember that a fool and his money are soon parted and if you treat stocks like the local casino, be prepared to lose ALL your money.

  38. It reminds me of the Johor MB who once remarked that the Johor unit trust would also rise to something like RM5 per unit some years back – not sure if the fund is still around.

    Political leaders should not try to talk up markets – it should be considered similar to a crime of market manipulation and insider trading.

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