George Orwell Revisited

We Are All Equal, But Some Are More Equal Than The Rest

sopskysalat said...
I just did a mental calculation. SIT, KLSE all done a 10% from top. HSI, DOW, N225 only did a 5% so far.

Depending on the markets, they will over-react more or less than others based on a number of factors. Let me point out a few:

1) High ratio of retail players. Weak holders generally. Self- explanatory. Not just China and Malaysia but just have a study on Indian markets for the past 12 months, the daily volatility there is quite horrendous.

2) Recent daily average volume compared to long term daily average volume. Or put in another way, the amount of fresh liquidity injected into the markets.

3) The nature and characteristics of fresh liquidity - speculative, opportunistic, short/long term, ... ??

4) Stretch ratio. The extent of gains over the most recent days or weeks. The higher the stretch ratio, the more vulnerable will be the markets as it also implies more people sitting on loads of gains, more prone to profit take. Malaysia was the BEST performing market so far in 2007 ytd (The Shanghai and Shenzen markets fell just as much because of the silly rumours, to them that was a localised event)