KLSE Market Opening Comments
Wednesday 17 May - Its Generally Good
Global equity prices reveresed path slightly over the last few days thanks to a correctional phase in commodity prices (please read blog on commodity price bubble below). The scare lightened up the load on equity bull runs, at least a potential bubble in one asset class has been pricked slightly, and the market is able to wave it away well. The last thing we need is too many bubbles in a few asset classes. Shares of the commodity stocks climbed too fast, which were mainly boosted by the rise of raw materials. However, the stocks didn't have much positive fundamental change to support such shares price increases. The market has mixed views on whether commodity prices will rebound. Morgan Stanley sees a "bubble," while wealth management company UBS remains bullish on commodities. On April 28, UBS raised target prices for aluminum, copper, nickel, zinc, gold, platinum, coal, steel and a host of other materials by an average 20% for end-2006, and nearly 50% for end-2007, due to strong underlying demand, high portfolio inflows (exchange traded funds largely) and continued supply constraints.
Asian market will open much better. Stay with better second liners and large caps for the time being as the third liners will need time to lick their wounds. "Better second liners" mean companies that you know what they are doing, not losing money for the last couple of years and has a market cap of at least RM100m-500m, certainly not Mesdaq counters. Many investors are counting their lucky stars that they did not get scalded this time by Mesdaq counters, plus the episode on Iris is not entirely over yet, so beware.