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| July 25, 2000 |
East is east, west is west and never the twain shall met
Technical analysis continues to be a subject of intense debate in the never-ending quest for stock market profits.
There are essentially two ways of analyzing investments: fundamental analysis and technical analysis.
With the former, investors try to calculate the value of an asset, asking questions like what is the present
value of the likely future cash flows I am going to get from it, and how does that compare to its current price.
With the latter, they focus exclusively on the asset's price data, asking what does its past price behavior indicate
about its likely future price behavior.
Firstly, most people start off accepting the basic premise of what is called "fundamental analysis", that a financial
security has what is called an "intrinsic value". However, a little experience in the markets soon shows that this intrinsic
value is difficult to determine and that expert analysts are often in disagreement about it. The reason is that such valuation
is very subjective.
On the other hand, technicians, chartists or market strategists, as they are variously known, believe that there are systematic
statistical dependencies in asset returns - which history tends to repeat it-self. They make price predictions on the basis of
published data, looking for patterns and possible correlations, and applying rules of thumb to charts to assess 'trends',
'support' and 'resistance levels'. From these, they develop buy and sell signals.
Technical analysis continues to be a subject of intense debate in the never-ending quest for stock market profits. Dismissed
as voodoo by some, embraced as a crystal ball by others, critics argue that its claims to offer insights into investor psychology
are absurd. In this edition of zoomFinance's
Round Table Forum, we will attempt to demystify the controversy surrounding this issue.
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THE PANELISTS
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Woo Mun Thye [WMT] is currently the Senior Economist of KAF Discounts.
Prior to this he was an analyst with Dresdner Kleinwort Benson serving
on both the regional banking and consumer research teams. He started
his career in the financial services sector with Arab-Malaysian Securities
as an Economist in 1990. |
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Lee
Cheng Hooi [LCH] Currently, Cheng Hooi is Senior Technical Analyst
at Jupiter Research. He graduated from the London School of Economics
in 1985 with a M.Sc. in Statistics. His wide and varied work experience
ranges from IT (MUI Bank), Treasury (MUI, Lee Wah and Perwira Affin
Banks) and Fund Management (BBMB Unit Trust). He has many years of
experience in Technical Analysis (since 1989) and was the writer of
The Right Timing column (Feb. 1995 to Nov. 1999) for The Edge. Cheng
Hooi is very fluent in many technical analysis tools and software,
and is a fluent exponent of Elliott Wave, Candlesticks, Fibonacci
and Financial Astrology among others. His current technical calls
on the KLCI and stock picks are much sought after on Jupiter Research's
web-site - www.jetfm.com.my. |
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Chris Gan [CG] has had a varied career in finance. He spent part of
his time lecturing firstly in New Zealand at Lincoln University and
more recently at Monash University Malaysia. His area of expertise
is in investment valuations and has published his research in academic
journals overseas. He is also a columnist for The Edge, Malaysia's
prominent weekly financial newspaper, where he contributes regular
commentaries on current capital market issues. His experience extends
beyond academia having previously worked as an investment analyst
with HSBC James Capel in Kuala Lumpur and as a corporate advisor.
Chris holds a Masters degree in Finance from Lincoln University, New
Zealand. |
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Phua Kwee Hock [PKH] graduated from University of New South Wales,
Kensington, Australia, with a Master degree in Commerce. His career
path in Australia had always been related to technical charting in
the financial futures market where he was the resident chartist for
an investment banking house and forex broking firm since early 1980s.
He joined TA Securities in late 1993 as a senior analyst covering
warrants and charting. He was seconded briefly to TA Futures to help
in the setting up of the department. He was the Malaysian Business
columnist for 2 years. He collects car models and enjoy reading. |
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MODERATOR:
Rajen Devadason
[RD], (RD Book Projects) Rajen Devadason is an award-winning journalist.
As staff writer, of Malaysian Business magazine, he won the Malaysian
Press Institute's award for best economic journalism in 1992 and the
Citibank Pan-Asia business journalism award, which included a stint
at New York's Columbia University and visits to the White House, World
Bank and the US Federal Reserve. His first book "Your A-Z Guide to
the Stock Market" was published in 1997 and since then he has seen
a new book out each year. Rajen holds a Bachelor of Science (Honours)
degree in Physics and Computing from King's College, University of
London, and is a member of MENSA UK. He currently writes two distinct
financial planning columns - a print column for Malaysian Business
magazine and an online one for ZoomFinance - and is overworked as
a financial planning trainer-cum-consultant. |
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Click
here for the full transcript. |
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