answering a bloggers question: "is it a good time to enter the market when the foreigners are out or just follow their lead?" -salve

Generally, Yes, but not for the faint hearted and impatient. It makes for a good medium to long-term strategy if its well thought out and researched. Note that there's a huge caveat.

Two main points.
1) Don't dare to do so, unless you are well informed.
2) Be ready to wait. This strategy is a double edged sword

Discussion:
1) Re: being well informed
a) the creation of bargains: As long as you're sure about the stock's value, then I think its a good time to buy when foreign buying is low. Foreign buying adds to the competition among buyers and pushes prices up.


b) computing the value: Without foreign buying we may find more bargains. But the tricky part is knowing the value of the companies. That may take some serious pencil pushing and number crunching. Luckily there's plenty of people doing that out there already, like brokerages and the business media.

c) the goal: We'll have to sift through the stocks to see which ones are "cheap" but have good value so we can avoid the ones that are "cheap" simply because the companies are no good.

2) As re: being ready to wait
a)few buyers means a time for easy buys but also a time for hard sells:
When foreign buying is low, people rarely want to buy. You may get good value, because not many other see it. But that same advantage may be your undoing if your not patient when looking for buyers. Big rallies in our market happen when foreign buying is high. When that will happen is something hardly as easy to determine as finding out which stocks have value.
b) relatively longer-term strategy:
The constraint in buying like this is that it could possibly entail a longer term. This won't work for short term trades.

---------------------------------------------

In an earlier post, I mentioned in passing that we may see good bargains as businessworld pointed out that foreign buying is on the wane.

I got a really good question which lead me to this new post.

"Blogger Salve said...

hi, i like what i'm reading. do you think its better to enter the market when the foreigners are out or just follow their lead?"

Comments

Salve said…
hi, thanks for answering my questions. over at my blog in MoneySmarts (http://blogs.inquirer.net//moneysmarts) we have had quite a discussion on whether its time to buy when the market is down or cut your losses and get out of the market. I've seen both strategy work, and i've also seen them backfire. Tough calls require tough people -- and in investing, people can't be wimpy. :) great stuff here. will visit more often. regards
February 12, 2008 at 11:20 AM
Benjamin said…
You're welcome and thank you also. I'll check out your blog as well. Trading is my favorite hobby, second only to futsal..hehe and I love learning more about it.
February 12, 2008 at 4:27 PM
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