“Just a note to tell you I thought your commentary on Friday was superb. I have only one complaint and that relates to your unequivocal comment to the effect that the outcome of the recent Malaysian election was ‘good': in fact, unless you support the principle of power at any cost, it was anything but. Gerrymandering tilted the outcome heavily in favour of Barisan National with some rural (and Malay) constituencies having only 15,000 voters and some multi-racial urban seats had almost 200,000 voters. That was only the beginning. BN openly bought votes, one gimmick being to give redeemable coupons to constituents, exchangeable for cash after they had voted appropriately. Another ploy was to pay a person to have his finger daubed with ink indicating that he had cast his vote and then transferring that person's vote to an imported Bangladeshi or other foreigner. In short it was an appalling election. The opposition won over 50% of the popular vote but were left with nothing to show for it except control of Selangor, Penang and Kelantan. The BN is now desperately trying to ‘buy' some of the opposition MPs to give themselves a two thirds majority. In fact, it is all rather sad, not because Malaysia is suffering economically, but because it all could be so much better. I've been involved with Malaysia for over 5 decades so feel quite strongly about the place. The encouraging aspect of it is the increasing numbers of Malays who now have an abhorrence of the sickening corruption practiced by the elite and their increasing prominence in the opposition ranks.

“On a more trivial note, I think I have my share portfolio more or less right except for one rather worrying shortcoming: I still have quite a big exposure to gold miners and basic resource stocks – all quality companies but nevertheless suffering badly. Like a rabbit in the headlights, I'm doing nothing.”

Eoin Treacy's view Thank you for your kind words and this highly informative email. My intent in mentioning Malaysia was to highlight that the election result has been positive for the stock market at least in the short to medium term. Malaysia remains an interesting market not least because of its developing middle class. I agree that governance will need to be seen to improve if the stock market is to continue to be given the benefit of the doubt. In the meantime, a break in the 4-year progression of higher reaction lows would be required to begin to question medium-term scope for continued higher to lateral ranging.

Resources shares have been among the worst performers this year as deteriorating metal prices have put pressure on marginal producers who have not managed their cost of production effectively. At some point, price declines will result in a supply response. Supply and demand will then come back into balance. A process of rationalisation is likely thereafter; where quality companies with reasonably strong balance sheets acquire promising assts. As ever, we will be guided by the price action.