Malaysia government have been saying that Malaysia is well insulated from the current global financial meltdown. How far is it true? Is it just some political agenda? Or is it they are just living in their own world? Perhaps, the impact won't be seen immediately, but recession is right at the corner, and here is why.
Many multinational companies around the world have announce job cuts, and we are not spared either. Just recently, Dell announced worldwide job cut which includes one of our Penang plant shutdown. So, how many jobs will be lost? Thousands. Foxconn is about to cut jobs in Penang as well. Samsung is going to shutdown 1 of their 3 plants in Malaysia. And many more unheard by people. But for sure, many companies have frozen their hiring. So, how will fresh graduates and and those who have lost their jobs going to find a job for living. Furthermore, some companies have announce no pay rise for the year 2009 such as Agilent.
All these will definitely lead to less spending power. Less spending power equal to slower economic growth and would lead to recession. Let's look at a simplified diagram below:
Well, of course what really happens is more complicated than this, but this would give you all some rough ideas. There are many indicators which can be used to see where Malaysia is heading towards. Problem with Malaysia is that, they are not transparent enough to let know the public of current situation. US financial market have so many indicators which could signal us of what's coming in the future. Two of the simple indicators are car sales and property sales.
When you see car sales and property sales are dropping, it shows there are more supplies than demands. Even thou we don't have such indicator widely available, if we open our eye and make more detailed observation, we could see something is going wrong.
The car and housing sales have been dropping since last year...
"You must be out of your mind. My friend just purchased a car a month ago. My uncle just bought a house two months ago. There are still demands out there, you idiot..", some smart @$$ start to show off...
When I said demand is dropping, it means there are still demand but not at the rate it used to be. The exact rate, I can't give because there are no published statistic available openly on these. At least for car sales, they did mention from time to time in the newspaper but not as a main topic, but rather a secondary quarter page column news. Thats the best news on car sales we can get. Yet, logically when the car interest rates goes up, there would be less people who could afford a car.
For housing market, you have to go out and have a look. There are so many unsold properties around us. It's taking longer time to sell of a property. The seller have to markdown the price just to attract buyers. Some are still being ignorant and never reduce the price thinking that the property market is still doing fine. To prove this, somewhere beginning of last year, I was looking around for property to purchase. I came across few properties and guess what, its going to be almost 2 years and they are still around unsold. One of the property owner have cut his price by more than 10%, but the property is still growing weeds.
Remember, this is just the beginning. Many more concrete indicators would pop-up, but it might be too late by then. Anyway, it doesn't mean it's the end of world. Always remember this...
"When there is a crisis, there is an opportunity"
When the economy is down, the stock market will be down. The same things goes for property. It means it would be time to buy, buy and buy. It's an opportunity within a crisis. But, the only question is when is the right time to buy. To answer this is not so easy. One must make a lot research and gain some experience before that person could roughly time the market. The keyword here is "roughly". No one could ever time the market exactly. Some might get lucky. Some would buy at a slightly higher price. But, whatever it is, you will be still buying at the lower than average price, that's what matters the most.
What's eminent is recession is on the way or perhaps have already started without realizing it. No matter what's happening, remember that when there is a crisis, there is an opportunity arise from it. In my many to come postings I'll explain more on the opportunity and how to identify it. Until then, enjoy the stock market falls, as there is an exciting opportunity awaiting us.
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