CIMB Investment Bank Berhad claimed that foreign investors returned in droves bringing in their hot money as if they have no where else to park their money. The funny part is CIMB can only target the KLCI to reach 1,060 points by year-end, another 20 points from today’s index of 1,040. Why not 1,200 or 1,300 or even 1,600 points by year-end? What’s wrong with a higher target if CIMB and other researchers or analysts for that matter are freaking sure Malaysia stock market is a honey-pot that it would be stupid for foreign funds to ignore? Furthermore when the Dow Jones jumped the KLCI happily jumped with the same quantum but when the Dow Jones plunged miraculously the KLCI staged a very high resistance in following suit.
Can you tell me the level of KLCI if the DJIA were to jump to 9,000-points by year-end, since the Americans are very optimistic of their economy based on the latest U.S. consumer confidence barometer? I would be very surprise if KLCI couldn’t even breach 1,200 by then judging from the current overall bullish sentiment on the local trading floor. Unless the market-maker decided to push the “game over” button, the speculators or punters can still happily punting and dancing to the tune of the music. As long as the volume is high and the composite index is above 1,000-points you can bet your last dollar that the top-20 active counters are all penny stocks. And you don’t think foreign funds, if they indeed have returned, are scooping from the same penny-stocks pool, do you?
There’s no doubt that the current bear rally or suckers rally is one hell of a good rally, if you believe the current trend is a suckers rally in the first place. It’s hard to justify that the current rally is a bull rally because corporates’ quarter earnings are still plunging. But why the bullish trend when the earnings are going south? Sure, you may argue that people are buying in advance because the bull will report to work end of the year and you don’t start buying only when that happen. You buy in advance because traditionally that’s how it works. You do not want to miss the boat because you believe you should maximize your profit by being “kiasu” – buy at the lowest. That’s the basic mentality of most of the punters and to a certain degree analysts of the day. But do you have a plan to lock in your profit now since analysts are getting nervous that the market is getting too hot and a major healthy consolidation should kicks in anytime soon?
When even “Big Boys” such as Genting knows when to close their gaming tables and take profit elsewhere, you would be slaughtered left, right, top and bottom if you do not have an exit-plan. It’s no-brainer that Genting Singapore Plc. was deliberately pushed up so that family trusts of the late Lim Goh Tong could unload their 8.8% stake or 853.88 million shares and in the process raised S$615 million or RM1.47 billion in order to purchase MGM Mirage’s 50% stake in MGM Grand Macau. MGM Mirage may have problem with Stanley Ho’s ties with organized crime but not so with Genting’s Lim family. Furthermore it’s a smart move not to put all your eggs in a basket, not even if your business interest is in the hand of a “clean” government such as Singapore. So what does this got to do with you?
What if the current bullish sentiment in the local KLSE was deliberately pushed up to attract local punters such as you? Every Tom, Dick and his cat knew the quarter earnings were going to be bad so to see the local stock market defying the gravity is simply breathtaking. But Najib’s administration needs to show that he’s a better PM than Abdullah Badawi. It’s strange that Abdullah didn’t think of using stimulus package stunt to push up the stocks. Indeed Abdullah Badawi was the weakest and lousiest prime minister so far. If the current bullish sentiment was the result of government-link-funds leveraging on the stimulus packages, can you imagine what it could do to the local stock market if foreign investors were genuinely pouring their hot money into the country? Of course that will take time and Najib’s administration needs to do more than lips service to ensure the blatant day-light robbery of NEP is history.
The other day we were having discussion with another Singaporean who had just arrived. We agreed that despite the big hoo-haa about the global recession, it seems Singaporeans and Malaysians do not see this recession as bad as the previous 1997-98 Crisis. Surprisingly we even suspected that many employers were actually using the recession as an excuse to retrench their staffs hence exaggerated the situation. Except for manufacturing sector, people are still shopping like there’s no tomorrow and Friday and Saturday’s happy hours are still as bustling as before. However there’re some key differentiators between now and 1997. Now we have China to cushion most of the impact and most of the people who got burnt in the stock market during 1997 are still licking their wounds.
What we’re seeing now are “new-birds” eager to try their luck on the gambling table, at least majority of them. At the same time the “old-birds” are getting smarter and place their bets in phases. Can you see the report that the country’s first quarter contraction of 6.2% has relatively no effect on the stock market? You may argue that investors had taken that into consideration since the report is outdated because we’re now into second quarter. But the Central Bank Governor also said the second quarter will have little difference from what was revealed so what gives? Meantime watch out for Vincent Tan’s Berjaya Corp because it has been more than a year since the stock was fried *brings back sweet memory of 100% profit*. Happy Dumpling Festival !!
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