We were writing stories, but before we could even finish, the counter would have hit the target price – research head
Fortunes were virtually made overnight on a stock market that was so hot it just about sizzled. Nothing it seemed could go wrong, and caution was happily thrown to the wind.
“As an analyst, you were rendered useless,” says a veteran analyst of that bygone year. “People were not rational then. They were buying stocks that were trading at ridiculous price earnings (PEs). You could tell them a company was trading at price earnings of more than 30 or even 200 times versus the market's 21 times, and they would still want to buy. It was the fear of losing out, not making money, that triggered the bull-run,” she says.
“Dealers were not interested in listening to analysts because we were always wrong. If we thought valuations were expensive and recommended a sell, they'd say “stupid recommendation” because the stock would still reach the rumoured price.”
A research head at a stockbroking firm tells a similar tale. “We were writing stories, but before we could even finish, the counter would have hit the target price.”
Everything, he says, was based on the “greater fool” theory – “I buy at 20 times PE but reckon I can flog it to someone else at 25 times PE.”
K&N Kenanga head of research Seow Choong Liang reckons the size of the stock market in 1993 to the country's gross national product (GNP) of about RM200 billion was 3.2 times, versus 1.3 times now to a GNP of RM300 billion. Even at its most bullish, the US market is unlikely to have exceeded 1.8 times GNP.
Retailers were initially more driven towards fundamental stocks, but after the blue chips became less affordable, succumbed to chasing second and third liners. Funnily enough, desperate investors even pursued listed bonds beyond their par value.
In those days of T+7, many transactions were done on contra trade and without money upfront. In other words, one didn't need money to trade on the Kuala Lumpur Stock Exchange (KLSE). Any uncle or aunty or office boy for that matter, could call his remisier and put an order through for 100 lots of this and that, and the trade would be transacted.
Needless to say, productivity was not at its best.
A fund manager recalls: “I still remember. The market stretched and stretched and nobody worked. Everywhere I went, everyone was talking about the stock market. Shangri-La had to allocate special lifts for customers of TA Securities then, as there were so many of them. All the Ah Sohs were eating kueh in the lobby of the hotel because if you didn't book in advance, there were no tables available.”
Remisiers' phones would ring non-stop and if you were one of those still cautious one-to-two lot buyers, remisiers made sure you kept it short and sweet so as not to tie their lines up if the bigger fish wanted to call.
A dealer says the constant jangle of phones made toilet breaks difficult. And the daily hive of activity and excitement meant that one often lived it even during sleep time. “I used to dream I was executing trades, and have nightmares about whether I'd forgotten to execute a trade or executed it wrongly,” she says.
In hindsight, it is easy to be objective and dispassionate about the bull run. But when crowds at viewing galleries of stockbroking companies are spilling out on the roadsides and so many are agog about how well their shares are doing, how does one not get swept along?
A market player recalls a typical anecdote.
“I knew a friend who with a capital of RM20,000, turned it into a million. He started driving a Mercedes Benz. (The friend subsequently lost it all in the market downturn, and is back to driving a Kancil, but as the market player says, “At least he can say he was once a millionaire.”)
Another concedes to being caught up in the hype even though she knew the market was walking on thin ice in the last 30 per cent surge. “I lost a Honda Civic, and ended up with a lot of stocks with no fundamentals.”
Lessons have been learnt, however, and each time she has to cough up more than RM10 for a share, she does it with great contemplation.
Seow says the new rules and regulations now governing the KLSE bring the market more in line with capital market objectives of providing liquidity for companies to raise funds. It also makes the market less of a casino.
More rules usually equate to less fun, but greater security for all. Everyone will just have to learn to play by the rules.
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