Blatant share price ramping and other abuses took place on the Kuala Lumpur Stock Exchange and in
stock-broking firms, with share prices shooting sky-high entirely on the basis of speculation and rumour,
which the Malaysian authorities and politicians were only too proud to point to as being the result of their
new dynamic policies, far from wanting to regulate or eliminate such unhealthy practices. They failed to see
the potentially more dangerous effects of such a situation. Malaysia had now become the fastest growing
investment centre in the region, slightly overshadowed perhaps by Thailand and Indonesia which attracted a
different kind of investor. Many made money in this kind of market, and many borrowed heavily to
speculate, notwithstanding that share prices did not reflect their net tangible assets or earnings per share
ratios or their real values.

In their hurry to show the world that "Malaysia Boleh!" Mahathir, Daim and their cronies became careless.
They failed to take heed of the warning signals. Uncaring and unfeeling foreign investors do not reward
carelessness and would be the first to take advantage of the situation, but they did not seem to realize this,
choosing instead to believe their own hype.

The overall situation was rife for short term investment (or hot money) to make its move to Malaysia, and
the Malaysian authorities being more concerned about sustaining the incredible growth levels of all sectors of
the economy again failed to see this happening. This hot money made a beeline for the stock market,
tempted by the prospects of hefty immediate and short term gains. Local "investors" including many of the
Mahathir and Daim’s cronies were also tempted and thinking that nothing could go wrong, actually
borrowed huge sums of money from both local and foreign banks on the security of their grossly inflated
shareholdings to buy up assets, projects and companies of doubtful worth or potential. They had now really
fallen into the trap of believing their own hype (and that of their government of course).

All this while, both foreign hot fund managers and foreign currency speculators had been watching the
regional markets very carefully for the early signs of decline, with fast exit in mind. They knew (as most
locals did not as yet realize) that the absurd returns bordering on the obscene from these stock markets
were just not sustainable, and when private and government debt in non-productive areas slowly began to
creep up, increasingly became jittery.
 
 
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