Tuesday, September 21, 2010


Today is D-day. Dow broke out from 10,700 trading range yesterday and managed to hang on to it. The bull wins. Why I say today is D-day? It's a day to see whether KLCI is getting the tail wind from the US market. I have asked the question whether KLCI will get supercharged if Dow is heading north.

I also posted yesterday retail investors need to be convinced of this rally. For them to be convinced, it has to go through a longer period of time that the market can stay above certain level so that they get a sense of security(often false security!).

For institutional investors, all they are doing now are chasing after relative return. It's like an ugly beauty contest, picking the most beautiful among the ugly ones. That means only two things - yield or/and currency appreciation. Judging on yield and currency appreciation alone, there is a limit it can go.

If we look at dividend yield S & P index 500 as a whole, it is already below 2% but perhaps it is more attractive than short or long dated treasuries. The question is what is the value of S & P 500 when yield is dropping to 1 - 1.5%(1,143 = 1.93% yield)?



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