Investment Insight: Fact and Rumous In stock Market: Plywood Companies Case

Previous information in stock market:
The orders of plywood and construction materials will be increased due to re-construction in Japan after the tsunami disaster.

Current Fact:
The orders of plywood and construction materials will be reduced due to over-orders and overstock-ing of materials immediately following the earthquake in Japan and the slower than expected re-construction exer-cise.

Current information in stock market:
"The manufacturing sector slowed to 2.1% (1Q 11: 5.5%) due mainly to the weaker global environment and the pro-duction disruptions following the disaster in Japan in March 2011. For example, orders for plywood and construction materials reduced in 2Q due to over-orders and overstock-ing of materials immediately following the earthquake in Japan and the slower than expected re-construction exer-cise."(Source: IM BizWatch 8/2011)

Now, if we think critically, the previous information in stock market is not totally a rumous, but simply an "incompleted information". Yes, the orders of plywood and construction materials will be increased due to re-construction in Japan after the tsunami disaster is just the half of the story. The critical point is: When re-construction in Japan starts?

When another "half story" came out, that was, " the orders for plywood and construction materials reduced in 2Q due to over-orders and overstock-ing of materials immediately following the earthquake in Japan and the slower than expected re-construction exer-cise.". Does it mean that it is a good time to invest plywood companies or get rid of them? Actually, it depends on your belief. If you believe the re-construction will start sooner or later, why not "cheap buy" some more plywood companies' shares when it got "offer price"? If you believe the problems of over-orders and overstocking of materials will continues never ending, then you should get rid of plywood companies. But which belief is correct, I don't know, but the time will tell us with few quarters later.

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Written by: Xaivier Chia

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