ngguanlim (![[info]](http://l-stat.livejournal.com/img/userinfo.gif){kind=small} ngguanlim) wrote,@ 2008-09-30 11:06:00 |
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How to "fear not"
Wow- big news everyday.
Washington Mutual bank is officially dead and JP morgan succeeds in scrapping another precious cheap junk.
Ok, what's going on people? I've been receiving some questions about how the stock market works. Many of my friends have asked me, why are stocks in hong kong and malaysia plunging although their core business has nothing to do with the sub-prime junk bonds.
Well, let me try to answer this question about why many companies are collapsing day by day.
Yes, we have heard the saying of "focus on the core". It is very important that companies which sells a product stick to that particular product and focus on it.
The saying however is not often practised in today's big conglomerates. Many companies especially huge companies put their extra cash into investments. Take for example DAH SING bank in hong kong (stock code: 440.hk) which is a typical retail bank. Their core business is to serve small/individuals and sometimes corporate customers.
Dah Sing is a relatively small bank which generates an average of 1,250 million hong kong dollars profit after tax. It's a medium sized bank with an annual turnover of around 5 billion hong kong dollars.
Well, here's the Hoo-Haa about Dah Sing Bank. The bank has invested around 300 million dollars in Washington Mutual Bank. Now, their 300 million dollars is gone so hence for the next financial statement they will report 300 million dollars less in earnings.
It thus makes sense why the bank's stock will fall because it is now not as profitable as before with bad investments it had incured.
So my dear friends, if you are very worried about what to buy these days. Please choose co. stocks which are more stable. Of course more stable means less risk =less return.
Cancer stick stocks, electric companies, glove manufacturing, detergent comapanies or just companies which sells daily consumption products are considered safe bets. However beware, not all daily consumption product co.s are safe. Mengniu Dairy, or should i say companies which sells dairy/milk products are beeing squeezed since the outbreak of milk poisoning incidents in China. Since the outbreak of milk powder poisoning in China, Mengniu dairy stocks have fell by more than 70%.
There's no guranteed investment so put your money where you can bare the risk.
Goodluck.
Wow- big news everyday.
Washington Mutual bank is officially dead and JP morgan succeeds in scrapping another precious cheap junk.
Ok, what's going on people? I've been receiving some questions about how the stock market works. Many of my friends have asked me, why are stocks in hong kong and malaysia plunging although their core business has nothing to do with the sub-prime junk bonds.
Well, let me try to answer this question about why many companies are collapsing day by day.
Yes, we have heard the saying of "focus on the core". It is very important that companies which sells a product stick to that particular product and focus on it.
The saying however is not often practised in today's big conglomerates. Many companies especially huge companies put their extra cash into investments. Take for example DAH SING bank in hong kong (stock code: 440.hk) which is a typical retail bank. Their core business is to serve small/individuals and sometimes corporate customers.
Dah Sing is a relatively small bank which generates an average of 1,250 million hong kong dollars profit after tax. It's a medium sized bank with an annual turnover of around 5 billion hong kong dollars.
Well, here's the Hoo-Haa about Dah Sing Bank. The bank has invested around 300 million dollars in Washington Mutual Bank. Now, their 300 million dollars is gone so hence for the next financial statement they will report 300 million dollars less in earnings.
It thus makes sense why the bank's stock will fall because it is now not as profitable as before with bad investments it had incured.
So my dear friends, if you are very worried about what to buy these days. Please choose co. stocks which are more stable. Of course more stable means less risk =less return.
Cancer stick stocks, electric companies, glove manufacturing, detergent comapanies or just companies which sells daily consumption products are considered safe bets. However beware, not all daily consumption product co.s are safe. Mengniu Dairy, or should i say companies which sells dairy/milk products are beeing squeezed since the outbreak of milk poisoning incidents in China. Since the outbreak of milk powder poisoning in China, Mengniu dairy stocks have fell by more than 70%.
There's no guranteed investment so put your money where you can bare the risk.
Goodluck.
