Every major investment market (eg. stock, property, commodity, forex, bond) has its own unique market cycle. A wise investor could combine 2 market cycles of 2 different markets to maximize the potential gains.
Currently, regional stock markets have diversified performance. Major economy such as US, China and Germany are still at moderate to high optimism levels. At the same time, countries with GDP depend heavily on commodity, eg. Malaysia, Indonesia, Australia, are suffering in slower economy due to declining commodity prices. Their stock markets are at low optimism level now, risk seems to get higher with political uncertainty and weaker currency.
The recent free-fall in share price for Glencore, major global commodity stock is an alert to the whole world, both commodity and stock markets. At the same time, local commodity related stocks such as Oil & Gas (Keppel Corp, Sembcorp Marine, Ezion, etc), Palm Oil (Golden Agri, First Resources, Wilmar), as well as overseas commodity related sectors (eg. mining in Australia), are recording huge correction is prices over the years. This could be a rare opportunity to buy during a crisis but many people do not know how to take this advantage.
The secret of making money in investment is simply Buy-Low Sell-High. However, most traders and investors are too normal, therefore their emotions will swing with the market news, ending Buy-High Sell-Low. Commodity related stocks locally and globally are very attractive in prices but whoever dare to buy, could end up buy low and get lower, eventually may sell lower due to fearful outlook. The dilemma is how to measure low and high, how low is considered low? It has to be 20%, 50% or more discount in price?
In the past few years, STI component commodity stock, Noble Group, share price has been declining from over $2 to about 40 cents now, more than 80% correction in prices. At which level, share price may be supported? When is the right time to enter? The decision requires good understanding of fundamentals of commodity and stock market cycles. Commodity market cycle now is in winter season while stock is near to summer time. A wise trader or investor would align these 2 unique market cycles in one’s trading plan or investing strategy. There is a limit in falling in price, as long as the reason is not due to fundamental of company is getting worse, eg. declining business with little asset or cash to pay for excessive high debt. Not everyone is master of fundamental, therefore a stock price could be over-corrected based on declining in business (eg. due to commodity market downturn). For the case of Noble Group, the accusations by Iceberg Research and Muddy Waters, resulting in share price falling below $1, all the way to 40 cents, is mainly a reflection of traders’ fear.
The safest time to buy a stock is when everyone is afraid the sky will fall down while the business is still operating normally with consistent performance. Such opportunity requires patience. Opportunity of fortune is for someone who is prepared.
