As you know, our Prime Minister has issued MCO lockdown in the last 3 months due to the increase of Covid 19 cases and recently extended the MCO lockdown period until the daily Covid 19 cases are less than 4,000. Currently we have a 7-day average of 16,697 daily new Covid 19 cases as shown on the chart below. We have a total of 1.11 million Covid 19 cases, 915,000 recovered cases and 9,024 deaths. Unfortunately, all these figures are still surging.  

Based on the rapid increase of Covid 19 cases, Malaysia will soon have more than 2 million Covid 19 cases and 2 million recovered cases. When the 2 million Covid 19 cases recovered, we will have 4 million recovered patients. Our population is about 32 million. That means we will soon have 1 Covid 19 recovered patient for every 8 persons in Malaysia.    

Studies have shown that those recovered patients will continue to have ill health though out their lives. To provide adequate medical treatment for 2 million ill health patients will be an enormous burden for the families and the government. 

All investors must know which criteria pushes the share price up or down.

Among all the share selection criteria such as NTA, cashflow, debt, healthy balance sheet, dividend yield etc, the most powerful catalyst to move share price is profit growth prospect.

When an investor buys a share, he expects to gain from dividend yield and share price increase. Almost all Malaysian listed companies do not give out more than 5% dividend yield. So, investors should only buy shares that have good profit growth prospect; they can continue to report increasing profit. 

When a company reports good profit growth, many investors would chase to buy it. As a result, the share price would go up higher and higher until it is overvalued.

On the contrary, when a company reports reduced profit or losses, many shareholders would rush to sell off their holdings as quickly as possible. There would be many more sellers than buyers. As a result, its share price would continue to drop.

As I mentioned earlier, our PM has already issued MCO lockdown for the last 3 months and has extended the MCO lockdown until the daily new cases is less than 4,000.

All companies except essential industries have been   closed in the last 3 months and will remain closed in the months to come. Since steel companies are not classified as essential industry, their workers cannot work to produce anything. They will soon report reduced profit or losses for the quarter ending June 2021.

The rising steel price:

The rising steel price cannot help steel companies to make more profit because their workers cannot go to work to produce steel products. Even if they can make steel products, all the construction workers cannot go to work and they do not need to buy steel products. 

Don’t be tempted to buy steel stocks now!!!   

All the steel stocks have been depressed in the last few months. They look very much undervalued based on their good profit result in the last quarter ending March and many investors are tempted to buy them.

But when they report reduced profit or losses, their share price will surely drop lower. Only foolish investors want to buy steel stocks now.

All long-term serious investors should know that the overall stock market has been depressed in the last 6 months. KLCI chart below shows that most of the listed stocks have been dropping in the last 6 months due to MCO lockdown and our political uncertainty.