Big Boys in the Stock Markets

The Singapore equity market has recently reached historic highs with the Straits Times Index (STI) touching 3145 on 22 January 2007, never seen before. The volume of trade for that day was 2.94 billion shares, about 1.7 billion more shares traded than the daily average of 2006.

 

Ordinary Singaporeans would not have that kind of money to soak up the shares. Hedge funds, mutual funds, and asset management firms from round the world has eyed the Asian region as having brighter economic outlook in 2007. They moved capital funds from country to country in search of capital gains for their investment portfolios. They are full-time fund managers watching the equity markets round the world looking at signs of equity value appreciation. Their jobs are to watch the markets minute by minute, making analysis, reading news, etc., not like us who are small investors who have full-time jobs not connected with trading in the stock market.

 

Even during the course of a trading day, the professional fund managers can buy a stock at a lower price or sell a stock at a higher price (intra-day high or low) which again the ordinary investors may miss the opportunity. They do this for a living and remunerated for good performance in their investment activities.

 

There are many new unit trusts being launched and they will need to build up their portfolios and hence buying in shares is a necessity, despite the run-up in the share market prices.

 

If you have shares bought during the economic downturns, say 1997-98, 2000-02, you will be happy to sell them to make capital gains. There will be buyers for these shares. Then sit out until the stock market moved downward substantially. If you are trying to buy into the shares now, it may be beyond your reach because you will need a lot of money, e.g. banks and property stocks.

 

We are not like the big boys. There is the “unruly US$140 trillion international capital market” money that can move the stock markets round the world. (Newsweek, 29 Jan 2007 issue, pp 35). We do not have the financial muscles to weather the volatility of share prices, if it occurs.

 

Written on 1/24/2007 9:44 AM

 

Copyright © 2007, the author known as LKT in Singapore.

 

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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