SOS Real Economy Vs Financial Market

When we talk about an Economy, we must separate it from the Financial Market.

One is talking about the real demand and supply of goods and services, while the financial market is the manifestation of the real economy. A genuine purpose of a financial market like stock market is meant for raising equity and allowing the public to participate the growth of the Real Economy. However, this genuine purpose, as usual, being mixed with greed, turn mostly into another casino.

An example would be, a company is financially distressed, auditors qualified its report under going concern, announced a debt raising proposal, the share price increased 2.5 times, and then drop back near its original price before the announcement. While investors, speculators, day traders, play the shares up, the said company is still financial distressed, waiting for the "proposal" to be materialised. So, the real economy reflect the financial state of the company (financially distress) and the stock market reflect what "people" perception of the stocks, which is far from the "real fundamental" of the company. From this observation, we can say that the stock market is basically a reflection of all the participants perceptions (based on so called fundamental news or insider trading news or other) and act upon those "misguided" information. So, we can safely conclude that the actions by the participants are irrational.

MyView

There are many of such thing happens in the KLSE or other markets, it basically become a casino for many. The real fundamental of the companies is based on the guessing game of the participants or perception. So be very careful when we invest, speculate or gamble, there are simply too many variables that beyond the fundamental analysis. It is called Emotions, which, many have a hard time measuring it.