Thursday, June 5, 2008

Main Street: Panic Buying, KLCI Street: Panic Selling?

It took me a lot longer to get home yesterday because of traffic chaos. Most people were panicked queued up to fill up their cars. I never see such a buying panic in my life. The line was as long as 1km. People were willing to show their ugly faces for RM 25 - RM 40 savings, assuming their car tanks were empty. I'm sure most people will not have empty tanks but they are willing to wait for 30-60 minutes for that last cheap RM 1.92/litter savings. Was the savings significant? See what emotions can do to brains. So long buying panicked for the main street.

RM 2.70/litter arrived on 5 June 2008, the next day, KLCI Street headed for a panic selling. This fuel subsidy restructuring announcement caught many by surprise. Was the selling justifiable? I would be real careful not to step into buying yet until I fully understand the impacts. Or unless I'm buying the whole KLCI index, stock pickers need to sort through all the implications.

We are talking about fundamentals change and not sentiments change unlike regional contagion effects or political Tsunami right after Barisan Nasional lost 5 states. We are talking about serious inflation landscape change, from 3% to probably 5-6%. We are talking about manufacturers conversion costs will go up - electricity, transportation, etc. Soon will wages chase after price stability? Will private sector RM 900 minimum wage will be a reality?

As usual, by just looking at top volume, top gainers and top losers will tell me a lot of things. Like a conductor reading scores, they are beautiful notes to me. Looking at the losers, investors believe consumer disposable incomes will be reduced significant - they will give up premium cigarette ( BAT was the top loser) and go for cheaper alternative ( JTI was the winner of the day);

Big ticket items will be hold back or cancel: banks, cars, property counters got whacked!;

Industrial counters that uses significant natural gas got hit - Top Glove, Supermax and etc;

IPP - I saw Tanjong in red;

Plantations - windfall tax - yup I saw KLK and IOI - most still try to sort out the impact on locations;

Forget about holidays - Genting, Resort, AirAsia can go to hell!

Global crude oil down - O & G leaders got hit - I saw KNM covered that face avoiding punches from investors.

Overall volume was not that heavy - 500 million shares changed hands. Have sellers done with the selling ? Just wait for a week from now. The consolation, institutional funds will try to support because most of them are loaded with cash and avoid wraths of fund holders (quarter end reporting). Relatively mild selling volume also indicated Foreign players already exited earlier?

I'll have to sit down very calmly on this weekend to sieve through all the reports.

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