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Author: Koon Yew Yin   |   Latest post: Thu, 9 Aug 2018, 03:31 PM

 

Hengyuan: Why the Share Price Fluctuates so Wildly, Widely and Frequently? Koon Yew Yin

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The reason why the share price of Hengyuan fluctuates so wildly, widely and frequently is due to the maturity dates of call warrants. The financial institutions which issued the call warrants have to push the share price up or down in order to make more money from buyers of their call warrants.

I used to invest in call warrants. I could not make money from call warrant investing because I cannot beat the banks. My advice is don’t try to outsmart the professionals of call warrants.

Although I have advised you not to invest in call warrants, nevertheless you should know what is a call warrant.

What is a call warrant?

The call warrants will be issued on the basis that one warrant will be exercisable in respect of one share (subject to adjustment to entitlements referred to below). On exercise of the warrants, issuers have the option to deliver shares or pay a cash sum in settlement have the option to deliver shares or pay a cash sum in the settlement of their obligations. If an issuer elects to pay a cash sum, that sum has to be the difference between the exercise price and the higher of: ?? the market value of the shares on the date preceding the date of exercise; or ?? the average closing price per share over the period of thirty market days preceding the date of exercise. Call warrants will be issued on a registered basis. The registrar will be a company appointed by the issuer to record all transfers of call warrants and issue certificates to warrant holders. The time required for registering any transfer should not exceed five market days.

As I said before, I did not sell when the share price shot up above Rm 19 because I was too greedy and I forgot that no share can go up or down continuously for whatever reason. It must sooner or later make a correction.

Since the share price of Hengyuan fluctuates so wildly, widely and frequently, day traders have a lot of opportunities to trade. But I don’t how to make money from day trading.

I am a long-term investor and I only sell if I can foresee that the company has no more profit growth prospect.

Statistics show the followings:

1.   Long term investors, like Warren Buffet make more money than short term investors.

2.   Fund managers often cannot beat the stock market index.

3.   Professional stock market analysts always write articles to favour the companies they visited. You must always read analysts’ recommendations with a pinch of salt.

4.   Those day traders who trade too often lose money through of transaction costs.

5.   Financial and technical analysts always can make money, but they cannot make more money than serious long-term investors.

6.   For FA and TA practitioners to be more successful they should have good business sense.  

The movement of any share is due to the number of the buyers or sellers. If there are more buyers than sellers the price will go up but if there are more sellers than buyers, the price will come down.

Eventually the winners take money from the losers. Records shows that there are more losers than winners in the stock market. That simply means there are more losers than smart investors. If you have been losing money, you must change your investment method.

To be successful in share investment you must have luck. What is luck? You may think that luck comes from the sky or heaven.

No! To be able to make money from the stock market you must outsmart the losers.

To outsmart the losers, you must have luck and the definition of luck is when preparation meets opportunity. Preparation means that you must know the fundamentals for share selection, some knowledge of financial, technical analysis and good business sense.

I wish to take this opportunity to point out that sometimes a stock for example Malaysia Steel Works Bhd is showing good FA and TA but I cannot see that it has good profit growth prospect because the company produces steel bars for building constructions. The demand for steel bars will be less in the next few years because there is an oversupply of properties in every town and city in Malaysia.    

Good luck to all you readers.  

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