Contrary to last friday's recommendation, we are beginning to turn bullish on the market again. However, this time it could short term and for trading and positioning purposes. Unit trust investors should take opportunity to slowly accumulate or build positions in anticipation of any potential rallies. Investing all at one go (lump-sum) should be avoided as doubts on political stability and inflation scares are still not iron out yet.
Malaysian stocks rallied today as global oil price retreated from US$150/barrel to US$135/barrel (-US$15/barrel) due to the recent strenght of the US$ against other currencies and slower demand for oil globally. This week in the US also staged a series of heavy corporate performance reporting. Generally investors in the US stock market felt more bullish in the financial sectors than before as several banks like Bank of America, JP Morgan, Wells Fargo and Citigroup reported results that were better (less poor) than earlier expected by analysts.
The KLCI was up by +29.84pts, closing at 1,139.4 today. Stocks that led the KLCI to moved up were Bumiputra-Commerce (+50sen), Tanjong (+50sen), Genting (+40sen) and Resorts (+13sen). Sign of recoveries in the Malaysian stock market was defintely in sight, as volume expanded to 656mn shares traded vs average of 250-300mn level in the last 2 months. However, we understand that most of the buying is done by foreign hedge funds, so we have to be cautious not to be trapped. Hedge funds traditionally have short investment horizon and usually very gutsy with their buying and selling pattern, so markets are expected to be volatile when they buy or sell.
RECOMMENDATIONS: Since we are beginning to turn bullish, we recommend investors to take a small position at current market in order not to miss out on any potential market rallies.
Our bullishness is prompted by:
1. Increase participation in the stock market (shown by higher trading volume)
2. Lower oil prices.
3. US banks reported results better than expected.
4. Investors thinks that political risk at current market level is all in the price. So, limited downside to political risk (for the mean time).
Model Portfolio Strategy: We are releasing 10% (amounting RM10,000) of our model portfolio to Public Equity Fund to gain exposure in the Malaysian equities market.
General Strategy: Investors might want to take position at current level with some exposure in equities through your unit trust investment. The more equities exposure your unit trust fund has the higher the potential returns, however, you should always understand that if you want higher return than you need to expect higher risk.
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