Look at this chart, it shows you the 34 most active stocks of today. I like this chart because they are almost all RED. Red means the price is DOWN. 3 are YELLOW which means price unchanged. There is no GREEN, so no UP for the day for the 34 most active stocks.
Why I say KLSE traders are POOR? Let’s examine the price of the 34 stock and calculate how many stocks are below RM1? There are 28 out of 34 (82%)! That means Malaysians are focusing on cheap-plak stocks under RM1 most of the time. This is what the uncles and aunties are looking at everyday in the brokerage house (the BIG screen).
Why do they like cheap stocks?
1. They don’t have much money, so they can only afford to buy cheap stocks.
2. If a cheap-plak stock of $0.20 rises 10 cents to $0.30, that is a 50% gain! If a $2.00 stock rises 10 cents to $2.10, that’s only 5% gain. “Not shock” for them.
3. Cheap-plak stocks are better target for big-boss to ‘fry’ it up and make money. A few millions are enough to ‘fry’ a stock up high and create a lot of volume and get them into the top 10 active stocks of the day. Uncles and aunties get attention and put their money in. The remaining is like LIQUA…
4. Did you notice that there are something like -CA and -WA in the counters name? These are not stocks! These are cheaper alternative to stocks thats is similar to stock options. But most uncles and aunties don’t know that (they don’t care also). As what they need to know is that they are cheap so that they are afford to play. -CA and -WA are something that will expired one day! And when it expired, it has the potential to worth nothing! $0! The rewards is that it can go up faster but the risk is that you can lose everything. How many of those who buy them know about this fact? In order for -CA and -WA to make money, the underlying stock (PLUS for PLUS-CA, GENTING for GENTING-CA…) must go up a lot. IF the underlying go down, stay the same or go up just a bit, you lose money! It is cheaper because of this risk and that it will expired in a predetermined day.
5. While KLSE index is represented by the 100 largest companies traded in KLSE (list here), only a few are in the top 34 active counters, they are DIALOG, TENAGA, MAYBANK, AMMB, TIME and COMMERZ (-CA and -WA are not included because they are not stocks). KLSE components are blue chips that are more expensive, so uncles and aunties are not interested with them.
Malaysian traders are indeed very poor and highly speculative (gambling mind)! Let’s say an uncle bought IRIS or JOTECH (the 1st and 3rd active stock of the day) and you ask him this question, “What business is IRIS and JOTECH in?”, I am willing to bet that he has NO IDEA at all! He is gambling, he is not investing! Same for my mum who got 30+ stocks which name I never heard of. She own more counters than Warren Buffet! But she knows nothing about the businesses. They don’t know what they are buying.
If I put something inside a box and want to sell it for you for RM1,000, will you buy it from me without knowing what’s inside?
Trading in KLSE is somehow became a morally-correct-legal-gambling for most. Pity Malaysians.