invest@net

 

Issue No.

Part1of1

Back to index

Diversification - the only sensible way to reduce risks

This article is reproduced with permission from
Normandy Advisory Services Sdn. Bhd (Licensed Investment Advisor)
15th Floor Menara Multi-Purpose, No 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur
Tel : 03 - 469 5560 Fax : 03 - 294 5561


This article is copyright and no part of it may be reproduced in any form without the prior consent of Normandy Advisory Services


To contact Normandy

Email:nassb@po.jaring.my


























top

The recent financial shake-up in Hong Kong, the perceived safe-haven in Asia triggered massive selling across the major stockmarkets worldwide.

Barely a week after the Hang Seng's debacle, world key barometer the Dow Jones Industrial Average suffered its worst ever one-day decline in point terms, plummeting more than 500 points.

With the regional stockmarkets spiraling downward, some investors and even the best-performing fund managers are already fretting over what to do with their investments.

The collapse sent a large number of investors retreating from the region, putting further strain on the already-weakened local stocks. Regional fund managers are being forced to raise cash to meet huge redemptions.

The Asian debacle has certainly caught many players by surprise. Table 1 depicts the performance of selected Asian stockmarkets and their respective currencies (against the U.S. dollar) at specific time frames.

Table 1. Selected Stockmarket Performance Analysis

Countries

Indices

Currencies

Indices

Currencies

 

As at
31/12/96

As at
27/10/97

As at
31/12/96

As at
27/10/97

%
Change

%
Change

Hong Kong

31,451

10,498

7.735

7.729

-30

+0.08

Indonesia

637

490

2,361

3,567

-23

-51.08

Malaysia

1,238

693

2.5283

3.3580

-44

-32.82

Philippines

3,171

1857

26.26

35.42

-41

-34.88

Singapore

2,217

1620

1.4030

1.5830

-27

-12.83

Thailand

836

491

25.65

38.40

-41

-49.71

Source: Normandy Research


While prudent savings is important in anticipating rough times ahead, many are over reacting by pulling out completely despite severe losses. One should not desert investments entirely as extreme pessimism in any cycle or turbulence could result in missed opportunities.

Institutions with long-term perspective are beginning to pick stocks selectivly taking advantage of the low prices. Bargain-hunters looking for short-term profits may trade in and out of the market while there are others who prefer to move partially or completely into fixed-income instruments.

NEXT PAGE