Monday, June 9, 2008
Impact of Oil on KLSE performance
After went through pages of brokerage reports on recent petrol price hike impacts on stocks, I made one simple conclusion - watch oil. Those bet on stocks now are almost like "shorting oil", shorting at the wrong time could be expensive because stocks prices may go down further. If I want to short oil, wait till it goes below 200 days moving average to be certain the bull run is dead.
After running year-to-date price trend on a few stock leaders in different sectors - consumer: BAT, bank: Public Bank, airline: MAS, plantation: IOI Corp, gaming: Genting, property: SP Setia and Oil and Gas: KNM. I concluded that those buying defensive stocks probably ended up with even, others will be losing money even they are in favorable sector like plantation and O & G. Those were brave enough to buy during major correction(March) and sell on rebound(early May) made 20 - 30% profit. Those reentered market again recently probably sitting on losses.
Last Friday was a bloody day on Wall Street with 3% loss but on relatively thin volume. They reacted to 5.5% unemployment data reignited the fear of recession and oil surged about 8% to US $ 140 in one day. $ 150 is just $ 10 away.
Volatility is back - actually started from mid May - signify correction is coming. However, it will be a better idea to put together a buy list that badly hit by crude oil and wait for the oil bull run running down the hill; avoid stocks that get tail wind from crude oil.