This month has been relatively bad for Malaysia. The Ringgit has dropped in strength in relation to the greenback (US Dollar) and the FBMKLCI has dropped more than 6.5% Year To Date (YTD).
[FBMKLCI : capitalisation-weighted stock market index made up of Malaysia's big 30 companies]
The implications:
1) For ringgit holders expect a higher expense when dealing in dollars. And due to the high currency fluctuations worldwide (the ruble/yen etc), the impact is limited to your dealings, in your transacted currency.
2) Malaysian stock market still presents bargains, ever more now that valuations are getting cheaper
According to Peter Lynch, if one could predict interest rates (or macroeconomic conditions for that matter) there would be many billionaires out there which is numerically impossible.
[Peter Lynch is an American businessman and stock investor. As part of his role at Fidelity Investments, he managed the Magellan Fund between 1977 and 1990 averaging a 29% return, making it the best 20-year return of any mutual fund over the period. Wikipedia]
In other words, there are bargains out there currently but no one knows or will know how low prices may go. For instance, one would regard these stocks as cheap; Oldtown, small-medium housing stocks i.e. Titijaya, GAB and others.
Oil stocks are definitely down i.e. Petronas Dagangan bhd, SapuraKencana Petroleum Bhd, Barakah Offshore Petroleum Bhd and due to our institutional inspectors fondness of the sector, I would regard the cheapness an opportunity. HOWEVER, one should consider evaluating historical performance of oil companies in low oil prices environment. A look back at companies when oil tanked in price would be a good start.
Only after considering essential points and the sector's fundamentals i.e. nature of an oil company (upstream or downstream/new or old oil fields available/cost of production/long term fixed or variable contract etc) then investing is recommended.
In deciding to invest more in Malaysian stocks, consider watching this great find, a video explaining a simple approach to investment by Mr Lynch (whom also reminds one of Philip A Fisher's theories and principles i.e. the scuttlebutt approach).
Making Money in the Stock Market:
Peter Lynch on Investing in the U.S. Economy (1994)
http://youtu.be/Lxypq_qIw7M
In brief, his ideology is similar to Warren Buffett's principle of : you only need to make 20 good investment decisions in 1 lifetime from his famous line that basically states;
“Your financial wealth would be much greater if you could only make 20 investments in your lifetime. You would make sure they were great if you had only 20 chances.”
Happy investing.
