Inflation, Bank Rates and the Stock MarketI was talking to my friend the other day. We were crystal gazing. I asked him what was his take of the economic outlook.
He said the three elements that we should take note are inflation, interest rates and the stock market. Inflation is rearing its head and it will effectively be above interest rates. Growth rate is going down. We may only be getting 5.5% or lower in terms of economic growth. The stock market is artificial. In spite of the new record setting composite index, things can be misleading.
The mutual funds are facing its biggest challenge in years. They have to re-balance their stocks in favour of foreign stocks as there are just too few good stocks on the Bursa as more and more good stocks are being taken private. Malakoff and Maxis are taken private. In some way PPOil is also on that track. Magnum 4D has already been taken private. Resorts, Tanjong and Berjaya Sports Toto may just go that direction too. Foreign feeder funds are coming in. If they should show better returns than local funds, there will be an en masse liquidation of local mutual funds in favour of foreign feeder funds.
The stock market may come down and with it interest rates. THe longest bull market is never beyond 15 months and the bear can takeup to a few years. With that knid of track record, not man ywill play the stocks when it coems tumbling sown.
He said the three elements that we should take note are inflation, interest rates and the stock market. Inflation is rearing its head and it will effectively be above interest rates. Growth rate is going down. We may only be getting 5.5% or lower in terms of economic growth. The stock market is artificial. In spite of the new record setting composite index, things can be misleading.
The mutual funds are facing its biggest challenge in years. They have to re-balance their stocks in favour of foreign stocks as there are just too few good stocks on the Bursa as more and more good stocks are being taken private. Malakoff and Maxis are taken private. In some way PPOil is also on that track. Magnum 4D has already been taken private. Resorts, Tanjong and Berjaya Sports Toto may just go that direction too. Foreign feeder funds are coming in. If they should show better returns than local funds, there will be an en masse liquidation of local mutual funds in favour of foreign feeder funds.
The stock market may come down and with it interest rates. THe longest bull market is never beyond 15 months and the bear can takeup to a few years. With that knid of track record, not man ywill play the stocks when it coems tumbling sown.
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Heartsong
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