the stock market is on the run
the new year saw a revival of the dying stock market and running like a charging bull. this is contrary to what i have posted earlier, that the market is at the brink of a collapse. my rationale is a simple supply and demand equation. when the number of stocks, derivatives and other financial products keep increasing, and the number of investors and the value of their investments keep dwindling, the market will die a natural death through over supply and lack of demand. in the last few days we are seeing a surge of demand, with transaction value hitting more than a million daily. but this is nothing new as the same value were hit in nov but then disappeared again. the market is as real as it is unreal. the volume and value transacted are real. but they are fictitious in the sense that they are probably churned up by a few big fund managers or big players. and this churning will stop as abruptly as it started if there is no support from a wide base of investors. the value of a stock can be as low as the piece of paper it is printed on. it is a perceived value and the investors must be convinced that it is worth the money they put in. or often the reason is that the value is sustainable. this is only true when the funds continue to support the price and more investors join in the fray. the market makers must not pull out as fast as they push up the market. more genuine money from big funds must go into the market to provide the support it sorely needs. only then can the market's uptrend be maintained to draw back the investors. confidence in the market has to be built over a sustained period of time. just a flash in the pan surge can be dangerous if it is just a weak attempt to push up the market and support by talks only. the stock market is a very important institution in the whole economy. any mismanagement that leads to its death will have far greater consequences than one can imagine. we can only hope that people are seriously working to revive the market and nurse it to health. and the real demand in terms of investors and capital going into the market must be there. otherwise the bull will turn to bear faster than you think. so far the only major input into the market is the supply side, more stocks, derivatives, covered warrants, discount notes, equity linked notes etc. the demand side has been neglected. i see a little spark in attracting the muslim funds. at least it will boost up the demand side a little. let us pray that the stock market is in good hands.