KLCI - History Repeats Itself ?

 

The FTSE Bursa Malaysia KLCI Index (Kuala Lumpur Composite) is a major stock market index which tracks the performance of 30 largest companies by full market capitalization listed on the Main Board of the Bursa Malaysia. It is a free-float (minimum of 15%), capitalization-weighted stock market index.


INDEX PERFORMANCE ...

Ignoring insignificant market correction, the KLCI investors experienced 2 bear market and 3 bull market starting from 1998 until 2015. Question arises is 'Has the bull market run out of steam?". I wrote this article out of fun, and there are few interesting observations ...

BULL vs BEAR ...

Summary from table above :

• Bull market becomes longer (539 -> 2408 -> ??days)
• Bear market becomes shorter (448 -> 400 days)
• %change of index is always -65% in transition from Bull to Bear and +199% in contrast

If the history repeats itself, Big bear would be coming to town once %change hits +99% in current aging bull market. 

YEAR 2017 or KLCI HITS 2017 POINTS ...

To hit +199%, KLCI has to hike further by,

  -> 570 * 199% =  1134 points

Gap to +199%,

  -> 1134 - 879.89 = 236 points

Last KLCI Index, 1781 points, then KLCI index before BEAR strikes, 

  -> 1781 + 236 = 2017 points

  

Average index hike/day,

  -> 879.89 / 2218 = 0.40 points per day

To hike 236 points,

  -> 236 / 0.40 = 590 days

  -> 590 / 365 = 1.6 years

Now is March 15, then year before BEAR strikes,

  -> 2015 + 1.6 = End of Year 2016 or 2017

TRIGGER POINT ...

Now lets look at what is the potential trigger points that might lead to the market dip 

• Rapid depreciation of Ringgit vs USD
• US federal of deserve in the mist of raising interest rate as soon as June 2015 due to better than expected economy growth and unemployment.
• Raising interest rate means stronger USD weaker ringgit, companies with huge USD noted debt would encounter tremendous financial pressure and eventually collapse
• Bank Negara can follow suit to increase interest rate, however this will curb economy growth and reduces competitiveness of exports. 

• Deflation & Deterioration Global Economy Condition
• Deflation is looming in Euro Zone and economy slowing down in China, QE might not be the solution.

Anything else ??? However, Bear market is not entirely bad as it creates good opportunity for value investor as well as wealth reshuffling. Lets keep our fingers crossed for now. =D