Friday, November 20, 2009

Hoopla Over Maxis & Market Mood

I am happy that Maxis did not get whacked by retailers to stratospheric levels. I really think private investors have grown up a lot. They listened, they read, most of them know this Maxis is not the Maxis of old. I hope they also appreciate that the mobile penetration rate is vastly different from what it was ten years ago. I also hope they did not get fixated at the previous privatisation / sale at around RM15 (I think, I forgot). Most importantly, they refused to pay above fair value (deemed as having a properly competitive dividend yield) for what is basically a 70% dividend stock. By that, I mean they did not "take out the institutions" or gave them more gains than necessary. We all deserve a pat on the back. The players have grown up - if you lose enough money, you will learn, we all do.

What about the liquidity drain that Maxis was supposed to effect on the bourse? Yes, I have heard some selling their other shares to ready funds to buy Maxis, thankfully they have been few and far in between. Is there liquidity being soaked, yes of course, its not a small issue. A lot of funds had to rebalance their portfolio to accommodate Maxis. Due to the very tiny issue to the public, not an excessive amount of funds was tied up. In fact, the sluggish markets over the last ten days can be attributed to this liquidity being drained, or it actually scared many players into not participating in the markets owing to the fear of a possible down trending market.

So, if the US and China markets continue to behave, will the next few days be OK for local bourse? Most would believe that with Maxis out of the way, the markets should resume its uptrend to try for 1,300 ... will they be proven right. The markets have reached my target of 1,280 for the year. To me, it could overshoot that but it will be difficult to breach 1,300 this year, regardless of how well the US and China markets are performing. To conclude, the risk-reward is not particularly attractive. I have been scaling down holdings, and sticking to very selective stocks with near term catalysts only - in other words I would stay very selective and stick to diligent stock picking. As it is, I am finding it increasingly difficult to pick stocks to feature - the markets is trying to tell me something.

I do think there will another good round come January/ February 2010, but it will have to come down a bit first for that rally to occur. You cannot possibly have a good run for more than 3 months, it will over extend itself and be tired. One should always read markets like they view an athlete, they will show signs of fitness, strength, confidence, or weakness, tiredness, sluggishness etc. They way to read the signs is to monitor the top volume and top gainers, is there constant rotation or the same names, are the leaders moving with good catalysts or just simply goreng stuff. There will always be goreng stocks, the stronger they can do it, the stronger the underlying willingness of the market to participate, but when these stocks fail to attract followers, the answer is obvious. I would stick strictly with stock picking mode only and reduce mid-term or long term stocks.

p/s photos: Jessica C. (Wacoal's top model)

No comments: