KLSE Trading Notes
Welcome Relief On Iris

Iris has basically corrected from RM1.20 or thereabouts down to RM0.70 in just a matter of days. Despite the strong indications and a good tetsimony by Bernanke to Congress, speculative counters took a backseat for the last 2-3 days of trading. A war that is not ending between Lebanon and Israel is not obstacle but a severe warning by KLSE seems to do the trick.

Malaysia's stock exchange warned investors on Thursday of the perils of investing in speculative stocks after several of them nosedived. Bursa Malaysia did not name any stocks but pointed to some high price volatility in some shares and urged investors to base investment decisions on companies' fundamentals. "Bursa will not hesitate to take appropriate regulatory action, which may include designation or suspension, in the interest of a fair and orderly market". But why say it AFTER speculative counters have corrected??!! It appears that certain bigwigs moving the counters were given a pre-release warning prior to the news yesterday, am I right or am I right??!! Because Iris already started its unusual correction a couple of days earlier. Hmmm!

The warning by Bursa is good, timing could have been battered. You can warn a child about the perils of riding a motorcycle, but not immediately when it took a tumble. The market's hottest stock this year, electronic passports maker Iris Corp, finally showed that it has no superpowers after all. It looks likely that the show is over for Iris. Being the charismatic market leader for the past few months, it is only fair that other top volume counters followed suit, sympathy pains I guess. It is very difficult for the others not to fall in synpathy when the leader goes tumbling .

The correction in Iris is making me very comfortable about the market, at least this time bomb has been largely defused. The other gratifying thing is that other significant top volume stocks, while weaker, have shown very good resilience - thus indicating that the parties involved with Iris are generally not the same for counters like Jadi, Polytower, Tebrau, Oil Corp, Sugarbun or Petaling Tin. I think the stern warning is 99% directed to Iris as it rose back to its highs after designation has been lifted, and to delay the stern warning may mean letting the time bomb go bigger. The act of defusing Iris at RM1.30 or trying to defuse it a bit later at RM2.50 have grave implications the longer you let it mutate and fester. The reverberations at higher levels could bring down even smaller brokers and the ripple effect could have been far reaching. Thus, all in all, good news all around.

I am also of the view that the rest of the trading counters will come back to life very soon. I do not think any of the other trading counters have reached anywhere near danger levels of speculation yet.