Tuesday, May 7, 2013

Somebody got it right.....yea it's a relief rally

I told my readers that I will not participate in the rally if BN wins. I just got invitations by  local stock brokers to attend their market outlook briefings. In short, they are saying the retail investors should buy stocks since the big risk risk has been removed. Most also said we are yet to catch up with the regional stock markets. I deleted those invitations without hesitations. It's bullshit and a waste of time.

Somebody got it right called it as a relief rally. There was a huge buying panic when the stock market opened on Monday.  A little bit of today too. That basically because the local fund managers were panic and afraid of being under-perform the index if the stay in cash. They sold down a lot of stocks prior to GE. Their game plan was to buy at lower price. It's turnout that they were forced to buy even at higher prices pre-GE. Smart money? My ass, smart money.  A super high volume spike is not sustainable.

Long term fundamentals are deteriorating.  A few reasons:

1. The foreign funds begin to get worry actually. Credit Suisse for example sounded cautious

Those reforms now seem in doubt, Credit Suisse said in a report on Monday, although Najib is expected to push ahead with $444 billion Economic Transformation Programme aimed at boosting private investment and doubling per capita incomes by 2020.
If there is no follow through buying by foreign funds, who will be the next buyer?

2. Stretched balance sheet

Najib was trying to do window dressing to prop up Malaysia GDP growth by stretching our balance sheet. Debt/GDP has never come down to less than 50% in last 4 years.

It simply cannot continue with this trajectory or else risking our credit worthiness downgrade.

Malaysia economy growth will risk slow down if BN were force to "deleverage" in the first 2 years. 

Najib may be an economist by training but I think his administration has one the worst economy mis-management.  

3. Subsidy cut and widening revenue base like GST may not come true. I won't be surprise if Malaysia gets a downgrade as there were already warnings firing shots last year. We never get serious with what we promised. 1 Janji? Only orang kampung tertipu. 

4. Perceived political stability may come into question. If MCA were to leave BN or no multi-racial BN coalition government is form. O I was wrong, MCA? It's non-existence actually. Eunuch roles suits them better.

The rural/urban divides will continue to expand.  You can see how the kampung folks are so easily bought with RM 500 or easily get intimidated during this round of GE.

The intellectual divide will continue to widen.You can see which side got "brains" by observing how PR components' brains at work during campaign period. Even though they don't have much money, they are really creative and able to connect with people. 

Look at their manifesto. Scrutinize their shadow budget. PRs got more professionals and smart brains. BN got old tired people that keep thinking how to rob people's wealth and share the left over with the kampung folks. They copy unashamedly. 

Premium of safe heaven? Looks pretty shaky to me.

5. It's not peaking yet because no sheep or pigs got slaughtered. True.........small cap is yet to make its all time high. 

6. Najib's position is really shaky. The next successor can be even more radical not moderate. They must be thinking if they have survived "Chinese tsunami" this time, why bother to reconcile? They won't accept it's a Malaysian tsunami. Or what ever lah, menang tetap menang. More complacency will come in. More money will go into Iskandar. Bla...........

7. For many high net worth retail investors, money is already started to leave Malaysia. More soon. Not only Malaysia suffers brain drains, it will suffer capital drains as well. Why Robert Kuok leaves Malaysia in the 70s. A far sighted man like him deserves my respect. He saw what was coming post May 13 1969 and New Economic Policy. We had lost decades. We will lose may be another decade or more........

I personally have started to invest outside Malaysia and that percentage will continue to go higher over time.

I am not a smart man when come to predictions and wanted to be wrong badly with all these arguments.

Bottom line: BN wins the battle but lost the war. Niamah!

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