Bursa is Hot

Hot Hot Hot! With all the good news surrounding Bursa, buyers flock into the stock market. This is similar to when our Ex Prime Minister Badawi announced the NEP (New Economic Plan) a few years back. There are also rumors before the NEP back in 2005. He visited a lots of countries and received a lots of support before the announcement. Stock market shot up after that. (We also know how the stock market plummeted in 2008)

Will this time be the same? It all depends on the PE of Bursa. I don't have the number with me. It can be calculated by averaging all the Blue Chips' PE.

The market is very hot now as many stocks can give more than 10% return at any time due to speculations and syndications. My experience tells me to watch the market closely and cut loss if there is any correction anytime. "Be Fearful When Others Are Greedy" is always the best motto in stock investment. But I think the rally may last for while until there is a very bad news from oversea stock market. We'll see.

I recently purchased 10 lots of TITAN and looking for more potential good stocks to jump into in order to take advantage of this rally. This rally may be short-lived or last for a few months. Nobody knows. The best strategy is to buy good company stocks as foreign investors like: Good Management, Daily Consumption or Gaming. For Malaysia, plantation companies are of good selling point given the geographical advantage of this country.

Woody Monday

After Malaysian prime minister visit to Hong Kong, there is a small rally in the plantation and steel sector today:

Wood: WTK, PWORTH, LEWEKO, ...
Rubber: LATEXX, ADVENTA, SUPERMX, ...
Steel: LEADER, CSCSTEL, ...

What's next? Since there is a NEP announcement tomorrow, the market should look bullish today unless the sunken South Korean naval ship found the unfavoring as the cause: North Korea.

Last NEP announcement by ex prime minister Badawi put Bursa in a frantic buying mode. All the plantation stocks soared like crazy in 2006.

The Bull Mentality

After a week of school holiday, all traders are back with all the good news surrounding Bursa. First of all, the foregin fund (fun) manager upgraded Bursa. The stocks surged. Then Nanyang Siang Pao was sweet talking about REIT stocks that can promise a return of 8.7%, all the REIT stocks went up. Now Malaysian Bank Negara revised Malaysia GDP up to 5% by the end of the year, the stocks go up like crazy today. Everything is so hot and I am a bit suspicious. Maybe I think too much. What if they announce all these good news last when everyone was in holiday mood? Just curious.

Rich Dads and Moms are Back!

My theory is proven right today with all low PE and rubber stocks being "cooked" up today. My conclusion: syndicates are rich dads and moms. They are just back from last week holiday with kids.

Stocks I'm watching: Titan.

Stocks I'm giving up: Pelikan. It has announced more takeovers last Thursday. The list is very long. There is a high chance that there won't be any dividend this year. A classic example of company that ignores the shareholder's benefit. Just like Astro.

Hey kids, back to school and study hard! Your dads and moms are making easy money waiting for your next vacation!

Missed a Golden Opportunity

My several recommendations of Astro in the past few weeks did not come in empty handed. Although I did not buy before the announcement, at least I made the right call. I congratulate to those who bought before the announcement of privatization of Astro. Kudos!

Good Bye Astro!

Banking Stocks are in Trouble Again

As Bank Negara Malaysia (BNM) is signaling possible further interest rate raise, banking stocks will be hit until the rate hike is realized or the call to raise rate has been withdrawn. Banking stocks will be volatile. Be careful.

Update: If US Fed signals a possible interest rate hike in the horizon, stocks will go down especially the banking stocks.

Crazy Rich Dad Theory

Malaysia is having a school holiday week for a week from March 15 starting today.

From the recent past school holiday, I notice one stunning phenomenon: rich dads are going to holidays. Please look at the following recent KLCI chart. You'll see this stunning discovery:

One crazy observation is that whenver the rich dads are going to holiday with their kids, the KLCI was stagnant or dropped slowly. But when the rich dads are back from the holiday, the CI surged. It has been quite consistent for the past few recent holidays.

One minor exception is the CNY 2010. Since everyone needs money before the CNY, the sell-off starts two weeks before the new year. The last few days before the Chinese new year, the CI surged due to the fact, selling at those time won't see the cash due to the T+4 cash release hold period. One consistent observation is that there will be a surge after the school holiday. Will it happen to this one week short holiday? Will dads sell their shares last week and come back to buy back shares they sold next week?

This is just a common sense. Whenever there are more people buying stocks, the stock price will go up and vice versa. That explains why CI surges every time the school holiday is over as rich dads buy stocks when they are back to work or to invest in stock market to earn back the money they spent (poor dad).

Since this week is a holiday week, will volume drop to indicate good buying opportunity? Will CI go back up next week if it drops this week? We'll see. It's just a crazy theory.

Profit Taking

Bursa is heavily hammered by profit taking yesterday and today. I also sold off my Pelikan @ RM1.31. Profit is around RM450. I missed my target by much (@RM1.50). I planned to buy back Pelikan if it drops further. I need to find out what caused the heavy profit taking today before buying back the stock as the condition is nowhere near sanity.

Something is fishy about this profit taking Friday as the world markets are still holding up well. Probably it is due to conservative mentality or political rumors that are spreading around out of my radar. As Greece problem may be worsening due to strikes, I think everyone feels safe to keep cash for the weekend.

This is not a good day and my profit taking is immature. Bank stocks are heavily beaten after the explosive rally on Monday. In the long run, banks are still the winners of the increase in BLR unless the policy changes again. Maybe it is time to buy some Public Bank stocks. CIMB fundamental looks strong too but its political ties could be a threat to the bank someday.

Winners & Losers

The recent bank policy changes (Saving Rate 2.25%, BLR going up) in Malaysia shake the stock market with the following winners and losers:

Winners:
1. Banks (only if Housing Loan is abundant)
2. Banks
3. Banks

Losers:
1. Property Markets
2. Construction Companies
3. Test for Property Bubble in Malaysia
4. Furniture Companies
5. Renovation Companies

Stock to Watch?
I only like Public Bank (I also recommended last Wednesday before the surge) as it is clean and doesn't need government's support or backing. No hanky panky to play with numbers or to acquire other banks using tricks.

What does it mean?

The US unemployment rate for February 2010 is finally out last night: 9.7%, the same as last month. Here is the chart from 1997:

If the rate keeps stable, it doesn't give much signal whether the economy is recovering or getting worse. In fact, for such unemployment rate during winter time, it is possitive as the rate could have been more optimistic if it is in spring or summer. To me, I still cannot make a conclusion as we are having a slow business period throughout the world in March.

My strategy:

Buy Astro for mid term investment. I haven't bought yet as the price is still not attractive enough.
Buy Public Bank for long term investment. I haven't bought yet as my fund is too small for long term investment.
Buy Pelikan for mid term investment. I bought 5 lots using my MBB account @RM1.21. I will post the slip soon. I would expect good earnings from this aggressive yet defensive stock in the quaters to come. My target sell price is around RM1.50.

For short term investors, they are plenty of choices. Xinquan can be a good candidate as there will be another new China shoe IPO coming and also the dividend is going to Ex soon. Other counters include XDL, ETI TECH, etc., can be a good choice for short term investment as these counters are selling at a significant discount. (ETI TECH is being sold down by Dubai investors and syndicate recently; XDL being sold down by faulty Bursa earnings report and the mistake has been corrected and addressed in Bursa website. The EPS was earlier reported 100 times less! It's 1000% undervalue.)

Bulls and Bears of the coming weeks

Bulls
1. Greece problem has been actively resolving by EU members especially Germany and France
2. US economy is improving
3. Global economy is improving except Portugal and Spain
4. World cup is coming soon
5. Malaysian economy is improving like many other countries

Bears
1. Bubble in Portugal, Spain and Dubai may surface soon or anytime
2. Malaysia possible interest rate hike today
3. Malaysia possible petrol price hike these few days
4. Greece rescue may not come as soon as everyone expected
5. George Solos comment: "Gold is the ultimate asset bubble"

Uncertainty
1. USD direction

Stock Choice
1. Astro
2. Public Bank (After interest rate hike)
3. Pelikan

I wish everyone happy investing!