Malaysian Investors Association lauds the timely circular issued by Bursa Malaysia to alert capital market players against the many nefarious schemes by syndicates to pump and dump selected counters in order to reap huge profits at the expense of herd instinctive individual investors.
These syndicates planned well in advance to nibble and accumulate shares of targeted counters at low entry level prices. They then generated interest to give an appearance of active trading to lend credence to their tips and good news regarding the selected counters. Once the baits are swallowed, they exit the market leaving tailgating investors to huge financial losses.
The warning by Bursa should be seen as a proactive stand by one of the regulatory authorities to ensure that such nefarious schemes are exposed early by highlighting the warning signs of their modus operandi (m.o.).
Another proactive step to protect stock market investors is to issue early unusual market activities queries to companies that show such flurry of activities without solid basis. Let the manipulators know that their activities are being closely monitored. Let the herd instinctive buyers of such stock beware. The adage that ‘When all the good news have been exhausted, it is time for the share prices to crash’ holds true time and again.
Another way that would curb the activities of manipulators is to strictly enforce the regulatory ruling requiring listed companies to release vital information without long delays. But such information, be it positive or negative, must be true and accurate. In the final analysis, investors will make their own investment decisions. But at least they are furnished with facts and figures to make informed decisions.
The FBM KLCI ended 2016 at 1,641.73. Based on its closing at 1,754.67 on 21 March , the index has appreciated by 6.88% within 80 days. There are 285 more days for the market to react before year end. We are cautiously optimistic that the index will continue an uptrend despite a challenging year ahead. There are still concerns over the weak ringgit, the uncertain directions of global economies, the unorthodox political development initiated by US President Donald Trump, his impending impeachment or even forced resignation over “Russia Gate”.
Add to this the uncertain job security at home, the flip flop foreign labour policies, higher wage bills impacting the operations of local SMEs. A combination of negative factors combined may weigh down the index eventually, not allowing it to soar. What is evident is fluctuations in the stock market. However, from past historical perspective, many investors anticipate a positive sentiments to prevail in the run up to our impending GE14.
Investment strategy to protect our capital will then be emphasis on cash flow to take advantage of buying opportunities, acquiring high performance stocks with good values, attractive P.E., sound balance sheets and proven track records. But quoting a line from mutual fund prospectus, ‘Past performance is not guarantee for the future”.