Dow up, KLCI down; Dow down, KLCI down even more?

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Mar 03 2008
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In the past whenever the Prime Minister announced the dissolution of Parliament, the stocks would experience sudden spike as if it were given Viagra. Political-linked stocks would be thumping their chests as the stocks became hot-commodities. This time around the 12th general election fails to show the fireworks though the stock market saw the pre-election rally. In fact the reverse was what happened and this had some investors (not all) jaw dropped.

If you look at the technical chart, the KLCI (Kuala Lumpur Composite Index) appears to be having fun with the bungee-jump. Well, sort of free fall instead of bungee-jump. One may point the finger at U.S. stock exchange. Now, where are those people who screamed the local market is immune from Wall Street? What I can hear now is people who joked that when Dow Jones goes up, KLCI drops but when Dow drops, KLCI drops even more. After breached the 1,425 level, KLCI is heading towards the dangerous 1,335 level. Interestingly as of writing the KLCI is licking the 1,335 after tumbled more than 20 points.

KLCI falls since Parliament dissolvedWhat really happens? It could be related closely to the current election campaigns. The fact is the Abdullah Badawi’s (previous) administration is facing tough fights, thanks to Badawi’s own weakness over the last four years. Promises made four years ago still remains as empty promises and collecting dust. It’s a rare sight to have Badawi’s coalition party candidates being booed and jeered during their campaign. Internal fighting amongst Badawi’s own UMNO party could cost the party even more seats. Already speculations are rife that hundreds of millions are being poured to jack up the machineries.

The coalition party candidates are said to be selling like mad their stocks after the recent rally in order to cash-out. Contrary to public’s perception that every coalition party candidates are allocated unlimited funds, the fact is these individuals need to source huge amount of money (this time around) to cushion their respective constituency. There’s difference between voluntary workers for both coalition party and oppositions. While coalition party’s voluntary workers generally expect some sort of payments, the oppositions’ are not paid a single cent. Hence mountain of money are needed to maintain these workers and to buy fish votes.

There’re also speculations that investors are selling off their stocks looking at the high possibility that Badawi’s team might lose enormous amount of seats, although it’s near to impossible to unseat the coalition party. Just how serious could be the risk that the oppositions might maintain Kelantan, recapture Trengganu and possibly deny Badawi’s coalition party two-third majority in states like Penang or Kedah, not to mention the possibility of giving the sleepy PM a run for their money in Perak, Federal Territory and Selangor?

Nazir Razak campaign for Lembah PantaiWhen was the last time you see corporate figures such as group chief executive of Bumiputra-Commerce Holdings Berhad (KLSE : COMMERZ, stock-code 1023), Nazir Razak, gets his hand dirty and start campaigning for coalition party? He’s campaigning for Lembah Pantai imcumbent Shahrizat who won with 5-figure majority back in 2004, mind you. And that’s not the end of it. AirAsia Berhad’s (KLSE: AIRASIA, stock-code 5099) boss Tony Fernandes will make his appearance as well. Doesn’t that blow your mind away? Doesn’t that shows desperation?

The history of 1999 election could repeat itself if only Malay voters who voted Badawi in 2004 chose to stay back at home watching their favorite TV programs as sign of protest due to escalating high cost of living. The only stocks worth monitoring are palm-oil related counters after the benchmark May CPO futures contract rose to a record RM4,173 a tonne today. I guess Syed Mokhtar’s previous offer of RM3.79 a share for Tradewinds Plantation Berhad (KLSE: TWSPLNT, stock-code 6327) is way below attractive level considering the stock is trading at RM4.00 a share now.

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Thanks for the update. You confirm my suspicion of possible reason(s) for KLCI slide.

you’re welcome encikwan … happy investing/trading …

cheers ..

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