Wednesday, April 3, 2013

Market Strategy

The market's performance has confounded a lot of investors. It is safe to say that the bulk of private investors have largely exited the market, but somehow the foreign funds and local funds are still wanting to play. There is underlying support for indexed counters as I write this, how genuine, and what is that trying to say?

One can argue that a BN victory is being discounted. I think thats a shallow view, it could also reflect a new government. There is nothing to fall back on here. We have never had a government change before, so how can anyone say the current market's buoyancy means one thing or another?

There are more pressing questions we need to ask:

1. There has a significant jump from the 8-9 odd million voters in 2008 to 13 million voters. How many of the newbies are bogus, how many are the youths registering for the first time, how many are the "charged up voters" who have never voted but felt compelled by the winds of change in 2008?

2. We say there has been net buying for Malaysian stocks for the past couple of months, and even as we speak .... just how foreign are the foreign funds?

3. If some of the buying is by local funds, I would like to ask their opinion on why they are buying now and for the last few weeks, what are their justifications?

If you ask me, some of the buying is genuine in that they may correctly assume that listed corporations will not be touched even in a Pakatan victory. If you analyse the rhetoric of Pakatan, there is very little to suggest that there will be corporate witch hunting. It will be a responsible Pakatan government should they get it. You cannot and should not renege on contracts. You may renegotiate on awards that did not go through a transparent tender process. You may renegotiate on IPP contracts.

Puncak Niaga has surged strongly. It is the ONLY true barometer of who will win. If you think Pakatan will win, Puncak will want to be selling to Selangor's generous offer because if Pakatan takes over Putrajaya, the offer for Puncak will be very much reduced. The other stocks are mainly just wayang kulit if you ask me.

Will there be negatives for certain counters if Pakatan gets in? Well yes, I mean MMC, Gamuda and DRB Hicom may see future projects be, how should I put it, more competitive ... and may not be so 'favoured'.

Will the market drop if Pakatan wins? Yes, I still think 1560-1580 is a possibility but I also view a swift rebound back to normalcy as one can expect the new government to say and do the right things, its not like the top few guys do not know what is needed to appease international investments la!