What is a bull market?
Put simply, a 'bull market' happens when investors feel good about putting their money in the stock market, expecting capital gains when they sell the shares at a higher price from the original amount. When many people do this during a certain period, it is known as a bull market. Read on to find out more.
Internally
The Malaysian stock market, now called the Bursa Malaysia, has been experiencing the bull market trend for the past 12 months (as at July 2007). What constitutes this 'bullish' scenario?
It could be many factors. As for now, investors have plenty to look forward to for the Malaysian economy and the stock market. The Malaysian government has actively taken on 'deregulation measures', in its effort to make the country more attractive as an investors' destination for foreigners. Besides that, several huge projects are also being scheduled around the country, especially in the Iskandar Development Region in Johor.
On top of that, the upcoming general elections are also encouraging the government to do more for the people. Such factors contribute to a 'feel good' sentiment to investors and the public in general, making people more willing to invest or spend their money to move the economy.
External factors
The current round of the Bursa bull-run began in mid-2006, almost immediately after stock markets in Asia took a battering due to investors' fears on potential Federal Reserve rates hikes, inflationary concerns and fears of corporate underperformance.
However, the Federal Reserve's move later to pause rates increases freed up capital and resulted in huge liquidity waiting to be parked in markets all around the globe. It became the start of the current good showing for bourses throughout the world. The Bursa, not to be outdone, shot up from the then 900-points range level to its current near 1,400 points, albeit with a correction in February and March.
The run has admittedly receded over the past couple of months, swinging around the 1,300 to 1,400 levels, but struggling to touch 1,400. That said, the Bursa is still trading near its historical high, as investors still feel there is money to be made from the stock market. Some parties are waiting for the high levels to decrease after the Malaysian general elections.
A bit about the bear
The opposite of the bull market is the 'bear market'. If you ever visited the Bursa Malaysia building at Bukit Kewangan, you will see statues of the two animals outside its premises.
A bear market happens when general investment sentiment is low, investors are not confident about the economy, and therefore not many people are willing to spend or invest. Stock market movements would be sluggish. Bearish runs normally happen when a country is in recession.
© GTI Specialist Publishers. Reproduced with permission.
