Friday, February 02, 2007

Don't Look Down!

There are bull runs and there are bull runs. The ones in HK and Singapore have been very exuberent, carrying one and all along with them. A fellow commentator added that it may be due to their vibrant derivatives market - totally agree - which leads me to conclude that "although you may not agree with the current stock prices, you cannot but participate with the leveraged gains via derivatives".

The big picture is relentless, it causes institutions to keep parking their funds in stocks, plus its the usual 1Q, and everyone will jump in because they always expect the 2Q and 3Q to be quite quiet. Brokers worldwide will be pumping up the good news to get in a solid 1Q and hope to end with a solid 4Q to maintain appearances. For a strategist to call a sell or reduce now would be tantamount to career suicide.

Hence we can say that liquidity is ample and having a faster velocity in HK and Singapore, while the situation is quite different in Malaysia. We do not have as much derivatives and liquidity. Local funds have been gradually selling down and not willing to repark funds into the rally. We must be fair, most local funds registered annual gains of between 15% to 30% in 2006. In the first month of 2007, they are already up 10% for the year, what would you do if you were them? Lock in profits for most counters except the very solid dividend yielding ones. Wait for better entry prices.

In KLSE, its mainly foreign funds playing among themselves. They have gone through the plantations, the solid blue chips (Maxis, gaming, YTLs, and even the construction)... now they are really rotating out of ideas to include my prediction... the GLCs or near GLCs such as Maybank, TM, Tenaga, UEM World, MRCB, etc... Even so, you still do not find local funds or retail in the market currently in a similar big way. While Yusli has been trying to bully retail players to join in now, its not a convincing storyline.

So, what we have now are foreign funds playing a mini musical chair, passing blocks of good shares at highish prices to one another. The music is still playing and the person who is supposed to stop the music has temporarily left the room - but its not an exactly comforting scene, is it?

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