Choosing the Right Investment Tactic

2008 share market around the globe had fallen 30-80%. Lately, market can't wait anymore, and had started to point the opposite direction instead. Given the vast investment opportunities, which are the best options for you to choose from?

First of all, investors must know the first-mover in-case market rebound. First-mover here refer to those companies which benefit when economy recovered. Blue-chips stocks are what you should focusing on because of the following reasons:

1. High Liquidity, where foreign or institutional investors can buy or sell their shares easily, without controlling too much of the share price.
2. Good Reputation, like Genting and IOI, are well-known in the market, which always fall into the radar of investors globally.
3. Industry's Icon, like Sime Darby which is an iconic company of Plantation sector. Should plantation sector revive, you can't deny it.

Secondly, choosing the right sector.

Some will come first, some will come second, and some will come last.

Sometimes it's hard to identify the prefer sector to invest. Choosing the wrong sector could jeopardise your investment return given a certain time-frame.

So, select carefully.

Hints: Which sector will benefit most from a series of measures taken by Central Banks and Government?

Rules for Investing in the Next Bull Market

Recently, i came across an interesting article titled above.
And, i totally agree with what was written. Here, I would like to high-light to you these "profit-able" rules (if you believe...)

1. Go Global
Most investors prefer to stick to their "home" market. It's a mistake. Are you sure your country will gave you the best return? So, spread your bets across the board.

2. Avoid big moves
You probably won't catch the bottom or peak. Then, what's the rush? Why buy or sell heavily in one shot?

3. Remember the market is just "us"
Shares rose when everyone was buying, fell when they were selling. And when everyone is trying to predict the market, they are chasing themselves through a hall of mirrors.

4. Don't get fooled by the wrong tense
People (even economists) tends to say: "these shares have risen", "these shares are rising", "these shares will rise". Past...Present...Future tenses. Do not get suckered.

5. Pay no attention to TINA
Sooner or later someone will urge you to buy shares, even at very high prices, because There Is No Alternative. Especially at the peak of the market. There are always alternatives -- like holding cash.


6. Be truly diversified
Here means investing across a spread of different asset classes and strategies. Not, "large cap value" and "mid cap blend". Think carefully, it's Asset Classes and Strategies.


7. Treat forecasts with a grain of salt
Economists and analysts always found the reasons and predict the market direction, even if their views are wrong. So, do not take their forecasts the only source of information.


8. Never invest in what you don't understand


9. Ignore what everyone else is doing
It's natural to want to "join the crowd" and avoid being "left behind". When it comes to investing, do what's right for you.


10. Be patient
Do not rush into or out of the market. But, it doesn't mean patient enough to miss all the opportunities (see rule 11).


11. Don't sit on the sidelines completely until it's too late.
If you are afraid to invest, do it early, little, and often.

Rally in the Bear Market + Swine Flu

Last week, KLCI showed signs of weakness initially. Somehow, "brave" investor storming into the share market to provide buying support. The benchmark index recovered nearly all the earlier losses to post a positive figure.

Fear vs Greed.
Hope vs Denial.

There are two type of investors here:

1. Thinking of a reversal is already overdue
2. Believers of a sustainable rally

Anyway, the optimists appearing to have won the match of emotional market place. Daily average volume of 1.5bil shares and RM1.3bil value make Bursa the direct beneficiary of the game.

Nevertheless, in spite of the prevailing market resilience, the underlying sentiment will be very much event-driven, in which the market could swing either way in respect of investors' mood. Let's wait for the results of:

1. US banks stress tests (revealed on Thursday 7th May)
2. A H1N1 flu pandemic treat, seriousness of it, spread or under-control?

Starting of a Bull-Run ?

For the past few weeks, Equities Market around the world had rally 20% in average.
Will it be sustainable?
Question in most of the investor's mind could be:

1. Was Recession Ending?
2. Should I Accumulate or Take-profit now?
3. Then, what should I do instead?

And, I would say that: "Watch-out for the next few weeks!!!"
Reasons:

1. Beware of Corporate Earnings. (Q1) / (FY08)
   - further write-down from banks/financial institutions
   - lower sales volume (etc. electronics, automobile, housing...)
2. Beware of Deflation
   - high base effect set in 2008
   - lower CPI due to lower oil, commodities prices
   - deflation could happened in Q2/Q3 2009
3. Beware of GDP contraction
   - not only no GROWTH, but Contraction "Again"

Anyway, Do Not be so disappointed with the facts.

The good news is this could be the last correction before pathing the way for recovery.

In other meaning, this could be the last chance for investor to accumulate shares at the most attractive price.

The ONLY way towards Recovery

After some massive layoff of workers around the world, especially in the manufacturing, banking, automobile sector, the pain of economy seems unstopable. This could continue for weeks or months - hopefully not years.

As a "cure", governments around the world had come out with some brilliant ideas - though effectiveness still waiting - to combat the crisis. From bank bailouts, numerous stimulate programs, lowering interest rate, to share market stabilization/rescue plan. However, does this really works?

Let's take a look at the basic fundamentals of real economy. What I'm saying here is the Demand-Supply. Please do not forget, economy indicator like Gross Domestic Product (GDP) measures the national income and output. Take note: Output.

What we are preventing now is the contraction or decresing GDP. For your information, U.S and EU consumes > 50% of world's GDP growth. Since U.S and EU are facing wealth destruction problems, how are we going to prevent GDP contractions? Instead, we should ask ourself the following questions:

1. Are U.S and EU consuming less? --- YES
2. Are we keeps on producing to maintain the GDP growth, at least? --- YES
3. Then, who is going to consume the products that we are producing?

To answer the questions, or in other words, to offset the declining purchasing power of U.S and EU, we must have a substitute(s) here. The candidate should be having a huge domestic consumption power, enjoying wealth creation, and, still having the growth engine.

Potential candidates: Brazil, Russia, India, China
Best candidate : China

Undoubtedly, China is in the best position to withstand the current crisis, due to its strong fiscal position and healthy banking system. However, the domestic consumption of China still very much lesser if compare to U.S. So, China should find ways to spur their domestic consumption in order to consume outputs produced around the world. Instead of as an exporting country, China should became an importing country. If not, we could not solve the equation: Demand = Supply.

Falling GOLD prices ???

Normally, Gold prices will advance whenever USD weaken. However, the scenario is different for the past one month.

And, WHY ?

As we all know, USD had weaken for the past one month due to lost of confidence arising from the credibility of U.S governement to revive their economy. Thus, questions on the ability of highly-debted U.S to trim down deficit in the medium-term arosed. Even though, President Obama's assurance to China that their investment in U.S treasuries papers are secured, people around the world seems had lost faith in USD for the short-term (if not long-term).

Instead of preserving their wealth by investing in gold, people are taking a higher degree of risks now. They are moving out from gold investment into equities around the world, especially Asia-Pacific. This could be proved by the evidence that gold spot price had fallen to around $870 from over $920 a month ago. And, in the same time, MSCI Asia Pacific Index had increased 23%.

So, should you invest in Gold or Equity now?
Pretty hard to answer, right?

Staggering US unemployment rate

03-April-09

US are haunting us with its unemployment rate for March-09.
Guess, Guess, Guess... Its 8.5% !!!

Guess what???
This is not the end of the story, because April most likely would be the same (if not worse).

Anyway, this is not suprise for us as an investor. Even after annoucement, Wall Street still holding very well (for the time-being). For the past one week, Wall Street had shoot up 10% due to over-optimism on G20 summit.

However, I would like to remind everyone here. The 8.5% is meant for unemployment rate, not GDP growth (hahaha). Thats why nothing to celebrate. To make thing worse, we expect that US 1Q09 GDP growth would be in the red too.

Take care !!!