Is There a Market Crash?

KLCI took its biggest loss today since the COVID crash during 2020, retracing over 74 points with an overall super bearish market sentiment as we saw a record high of 1659 counters closing red along with it.

Daily trading volume also soared towards a new yearly high towards the 9.2 billion mark, unfortunately, mostly dominated by selling activities.

It's quite sad to say that after writing trading notes for over the past 3-4 years, there were no stocks that performed well today on the top volumes list. The whole market was in a panic selling mode with the Nikkei wiping off almost 30% from its peak in just a span of 2-3 weeks.

Most stocks have broken key support levels today, and before we dive into our watchlist of stocks, we must first understand what's triggering this widespread sell off, and the more important question would be: could this spark another market crash?

What first sparked the sell off in the US market was actually unemployment rates during last Friday that showed US jobs weakening. This is a crucial indicator for recession as loss of jobs would only mean 1 thing = reduced economic output, and hence a very important recession indicator.

Furthermore, disappointed corporate earnings from tech giants like INTEL, AMAZON, TESLA, and GOOGLE, coupled with concerned over soaring valuations which had prompted investors to shift their focus away from the earlier hyped up AI sectors.

Middle Eastern nations are actually bracing for a potential widening of the Israel-Hamas war due to threats by Iran to avenge the killing of 1 of Hamas' top political leader in its Tehran's safe house last week. It's also worth to note that the figure that Israel killed played a key role in negotiations for a ceasefire.

With all the potential ceasefire possibilities looking dim, things aren't looking to good here. Both Israel and Iran are said to be Nuclear Armed.

This is the more interest thing that actually caught most people, including me off guard. Long story short, when the Fed had increased its interest rates over the past 2 years, Japan refused to follow the same path and as such, it made it cheaper for investors to take out loans in Japan, then using the funds to make investment in another country where investments provided a higher yield.

With Japan rising interest rates for a second time during its latest meeting, it served as a signal for more to come. As such, major global investors were starting to sell off their investments to repay its debts.

With all of the above happening at once, the market saw a huge sell down throughout. Do I believe the market will crash? Not necessarily at least for now as most economic indicators are still looking fine, especially for Malaysia.

This sell off should be a short term knee jerk effect and once most of the carry trade positions have been unwound, the market should start to rebound soon.

However, concerns over the rising unemployment rates and tensions in the middle east is still something that we should be monitoring closely.