Friday, June 21, 2013

US Equity Markets likely to drop further

DJIA, S&P500 & Nasdaq broke below their respective 50-day SMA line. This breakdown could signal a temporary top for US markets. I believe these markets would slowly slide back to their 2 years old uptrend line for support. If this scenario panned out, global equity markets for the next 1-2 months would not be good.

Chart 1: DJIA's daily chart as at June 20, 2013 (Source: Stockcharts)

Chart 2: S&P500's daily chart as at June 20, 2013 (Source: Stockcharts)

Chart 3: Nasdaq's daily chart as at June 20, 2013 (Source: Stockcharts)


rboSanwich said...

What happened to STAR today?

Admin said...

i have a property in KL, do u think it is a good time to sell now or wait and see?

Alex Lu said...

Hi rboSanwich

The movement of a few stocks- six stocks dropped sharply & two stocks shot up- was highlighted in the paper. STAR was one of two gainers. Apparently, these came from an overseas order by a fund that wished to re-balance its portfolio. I am not sure that is the real reason. There are ways to dispose and/or acquire big position without resorting to crazy trades such as these.

Alex Lu said...

Hi Admin

Thank you for your question. I can honestly tell you that I am not qualified to answer your question. The professionals in that field are the better people to consult on this point. My post is simply to highlight that one of the factors of owning a property- interest cost- may undergo a negative change in the next 12 months. That may not have an immediate impact on property prices in Malaysia. However, in the long-term, owing properties for investment/speculation purpose may not be so appealing and that would lead to a drop in demand and a correction in prices.

However, interest rate is only one factor to consider. Demographic and income are important factors which must be taken into account. For that reason, the Klang Valley will continue to see strong demand because of increased population (due to migration) and increased disposable income (due to strong economic activities). The strong demand creates housing problem for the lower income group. If left unchecked, this can morph into a social problem.

The government needs to tackle the housing problem by making more land available for property development. That cannot achieved by simply gazetting more land or changing land use. The land must also be made accessible by improving the transport network, etc. If this is not enough, the government may have to institute measures to discourage property speculation, such as raising capital gain tax, etc.

You have to take many factors into consideration and come to your own decision. Your task is not easy but you are in a better position than a young family cracking their heads on whether to buy a property now or later.

Good luck!

lai said...

Hi Alex,

i think property prices will still hold up well provided we dont face another 2008 crisis which i believe will happen soon.

Appreciate your view on this.