The Coronasvirus, Dow Jones plunge, and our Malaysian political upset are depressing our stock market. Almost all the listed shares have been dropping in the last few days and all investors are affected. Unfortunately, there are a few idiots making stupid comments on the i3investors forum as if they are not affected, as if their holdings are going up higher and higher. Remember ego goes before a fall.     

Latest news

After falling sharply all week, the Dow Jones industrial average tumbled 1,190.95 points to close at 25,766.64 – its worst one-day point drop in history. Mounting worries about the virus spreading in the USA rattled investors as the number of worldwide cases topped 82,000.

Ever since I started to do business, I always borrow money to do more business to make more money. In all business schools, students are told if they use only their own capital to do business, they are considered inefficient.

I am not afraid to use margin finance to buy more shares and I am prepared to take the calculated risk. Otherwise my wife and I would not have bought so many Dayang shares. I am not ashamed to admit that I will soon have margin call if the share price of Dayang continues to drop. If I need to sell, I will sell. Even I sell at the current price I will still make money because my average purchase price is much lower. As you know the price was only 50 sen in January last year. It has gone up a few hundred percent to a high of Rm 2.94 within 13 months. If I dare not use margin finance, my wife and I would not have bought so many Dayang shares.

Reasonable Investment Bankers

Investment bankers are more reasonable. They will not force me to sell as soon as my margin account is breached. They also realise that our stock market is affected by our political upheaval which is most unexpected. No one could expect Tun Dr Mahathir would suddenly resign as Prime Minister of Pakatan Harapan which managed to kick out the corrupted BN Government in the last general election. Currently no one knows who will be the next PM. It looks like Dr Mahathir will die a disgrace. It is most likely the stock market will rebound rapidly as soon as a new PM is fixed to control the government. 

Margin call and forced selling

Forced selling is a vicious cycle. The more they rush to sell the more the price will drop which will create more margin call. It is a vicious cycle. Fortunately, investment bankers realise this phenomenon and they will not simply force borrowers to sell. In fact, Investment banks have been encouraging investors to use margin finance so that they can make more profit.    

My advice

My advice to all readers is to examine their own track record to see their performance. If they have not been making money, they must change basically their attitude and their ability to control their emotion of fear in taking calculated risk in using margin finance. If they have not used margin finance, they could not make much money.    

Many egoistic investors are boasting that they sold their Dayang shares earlier and now they do not have margin call. The last traded price was Rm 2.33. I know a few people sold below Rm 2.00 and they cannot be laughing that they do not have margin call.

I believe the market will rebound rapidly as soon as a new Prime Minister is selected to control the government. When that happen, those sellers will regret.

Those who have buying facilities should take advantage of the opportunity to buy at cheaper prices.

He who laughs last, laughs best is a saying that means the final winner will have more glory than someone who was winning in the beginning but ultimately lost.