Saturday, October 2, 2010

Wall Street: Money Never Sleeps

I did not get a chance to watch the movie Wall Street: Money Never Sleeps until yesterday. I made an U turn heading to cinema desperately trying to avoid a long queue packed up all the way to Penang bridge from the industrial zone.

If it was not because of Micheal Douglas presence, the movie would have gone off the cliff. He is such a charismatic actor. The story line was predictable to those who have been following 2008 financial news - bailouts, moral hazard arguments, housing and energy bubbles, etc. The movie did not position itself very clearly, was it a documentary, a thriller or a pure drama? It did not leave a strong impact on me like An Inconvenient Truth or The Devil's Advocate.

Sometimes watching a movie will teach us more about life than listening to high power pow wow conference speakers. One of the themes got me thinking was emerging of a new media - blog. There have been some debates going on whether blogs are part of a main stream media. Does it has a capability to reach the masses and swaying the market? The movie director projected that a tiny blog runs by Gekko's daughter Winnie did have such a great impact by exposing Bretton and brought him down to his knees.

In real life, can "new media" really sway the market?

(The Star)KEEPING tabs with new media is not easy for every one.

The explosion of news portals and blogs makes it a bit more challenging to follow all that’s being reported and rumoured. Market regulators are no exception.

A recent case highlights this.

Last week, a popular online news portal, The Malaysian Insider, ran a big article speculating that “an option to build a casino is on the table for the Karambunai IR (integrated resort)”.

The article appeared on the news portal’s website on Sept 21.

It didn’t take long for that information to seep into the market. The next day, the shares of Karambunai Corp Bhd (KCB) were actively traded and shot up from from 5.5 sen a piece to 8 sen by the end of that day.

Two days later, on Sept 24, the stock had risen by some 227% to hit a high of 18 sen.

It is interesting to note that the authorities only queried KCB on Sept 24, three days after the Malaysian Insider article first appeared. And Bursa Malaysia’s query to KCB was based not on the Malaysian Insider article but on an article that a “mainstream” newspaper wrote on Sept 22, about the same casino issue and which had referred to the Malaysian Insider article.

It is understood that the reason why Bursa did not query KCB earlier is because, firstly, the Malaysian Insider article did not specificially mention that KCB would be getting a casino licence.

The Malaysian Insider article only mentioned that the casino was an option for the Karambunai IR project, the latter of which was also a mere concept.

On the surface it seems like it could. There was another incident how a good company market cap was wiped out merely due to some silly poison pen letter rumors. Any sane person would not have acted but why they did what they did? Never ass-u-me the market is sane. The market can be insane, period.

(TheEdgeMalaysia)KUALA LUMPUR: Shares of Mudajaya Group Bhd continued their precipitous descent, plunging 20.5% yesterday, on investors’ jitters about an informal probe on the company by the Securities Commission (SC) as a “poison-pen letter” made its rounds.

Shares of the construction company tumbled RM1.01 to close at RM3.92, from RM4.93 on Wednesday, erasing RM156 million from its market capitalisation. Earlier, the stock fell to an intra-day low of RM3.75, the lowest since early November 2009. It was also the day’s top loser. Trading was heavy with 11.66 million shares changing hands.

The stock has slumped 35.7% from its recent high of RM6.10 on July 22, just before the selldown sparked by reports of the SC probe into the company.

Back to the question, can a blog sway the market? My answer: it's depends. A blog may have a few hundred to a few thousand readers daily. The readership reach is like a pimple on an elephant ass. It is unlikely to sway the market. However, if the main media picks up the story and begin to run them, it will reach the mass audience. It may sway the market for a couple of days and will not last more than 1 - 2 weeks.

Should you act when you see something you like on a blog or main media? I normally will apply the 7-day rule. Postpone the purchase until 7-day later. That was to confirm whether it was a infatuation or should consider serious dating.

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