Well, this week we had not been too correct about predicting market direction, the KLCI moved up by +36.7pts closing 1,141.75 just now. This week we had also turn bullish on the market for the first time since we had started this blog. Although many people that we spoke to did not agree with our view but we are still sticking to our opinion for the mean time. Concurrent with our change of mode, we are putting some investment in equities unit trust to set things in motion so that we have a position in equities if and when the stock market rebounds. We've chose a slightly more aggressive fund (Public Equity Fund) which focuses on KLCI blue chips and growth stocks. From our selection, one can tell that we are not entirely ultra bullish or super conservative, we neither chose a small cap fund/sector funds nor balanced funds. Our selection of stock is purely to gain exposure on the stock market with slight biasness to growth and KLCI-following.
So what went wrong with our prediction? Mainly, the easing of global oil prices. Oil prices are now trading US$135/barrel (-10%) from the high of US$150/barrel in early July 2008. Of the reason given for the easing of oil pressures were [1] higher US$ vs other major currencies, [2] expected global slow down which could soften oil demand [3] no supply disruptions as hurricane Dolly misses the refineries in the Gulf of Mexico (YouInvest feels sorry for those hit by Dolly). [4] US law-makers are setting in more requirements for crude oil futures trading to curb over-speculation.
On the domestic front, although corporate results weren't the brightest of all, but the re-negotiation of IPP (Independent Power Producers) on their power-purchasing agreement has put in glimpse of hope in the power producing industry. Recall that previously IPPs were required to pay wind-fall taxes beginning this month, we believe some profitability will be restored within the power sector following the changes in the new power-purchasing agreement.
Most probably when you read this article, you would have already known the outcome of Malaysian interest rate. However in our opinion, there should be NO rate hike because:
Most probably when you read this article, you would have already known the outcome of Malaysian interest rate. However in our opinion, there should be NO rate hike because:
- The government need to do some "politically-correct measures" to ease burden on general public.
- Oil prices has receeded from its high by almost 12% and potentially could go down even more if US puts additional restrictions to trading activities of oil futures.
- Latest interest rate on mortgages have already priced in the 25-50bps increment, that is to say that the market has already priced inflation ahead of the central bank rates, hence, no point doing it.
- Leaving the interest rate unchanged could be the prelude for potential goodies in the up-coming Budget 2009 announcement in August.
If you read point number 1,2,4 again, that would also give you the reason why we had turn bullish this week. Fingers crossed on Budget 2009 [we are expecting a people friendly budget this time around, fingers ] :) (check out our wish list in the next posting)
Recommendations: For first time investors, we are recommending to allocate 10% of the funds into pure equities unit trust. For those who have already invested and still making losses, we would advise to average down bit by bit.
Strategy: We will be increasing our portfolio in equities if there are any dips. Any dips of -50pts and below will be a good opportunity to buy. We are still waiting for even stronger buy signals and recoveries in the political scene to invest in equities even further than present level.
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