Tuesday, June 26, 2007

Further obstacles up ahead

June is usually not a favorable month for investors in the KLSE. If we revisit previous years, we will see that shares prices usually drift lower or fall in June after the sell off in the May rallies. A good example will be that of 2006. However because the May rally started later than usual this year, the momentum of the belated rally help some speculative stocks and the KLCI to rise higher.

The small rally allowed yours truly to reduce the gearing over the past fortnight. Realizing some gains and cutting small losses along the way to preserve capital. In case some readers want to know my current strategy, I am still holding on to a few resilient low liners and two second board counters waiting for their announced dividends to go ex div. And there is more than enough cash in the margin account to pick them all up.

One thing good about the dividends receivable right now is that two of these profitable companies are paying a tax exempt three percent dividend. Since the market price of their shares remains below par value and if investors have bought them just a couple of months ago, the rate of the dividends works out to be more than twice of the prevailing interest payable on fixed or term deposits held with banks. Capital gains and income are what investors look for in their investments, yes?

While the KLCI has touched a few records high last week, liquidity in the KLSE has not improved much. The falls in the KLCI the past two days was caused by foreign funds selling or profit taking. And according to Reuters, Citibank has just come out with a report advising clients to sell Singapore stocks and switch to Taiwanese stocks. I wonder if the foreign funds will also switch some money out of Malaysia to Taiwan too.

According to the Yi chart, the KLSE has just started to face bigger obstacles – which explain the past two days fall - and more lies up ahead. These big hurdles have proven difficult to cross where many a good horse has stumbled or fallen, since the Bull Run in 1993. The Yi had earlier reminded me with two mild warnings about this dangerous month. And a group of my Daoist friend’s fellow disciples have already gone overseas last weekend. (Refer to earlier entries, if interested.)

Coincidence, some may say. But one would not try to second guess the Zhouyi and/or the Daoist heavenly immortals! A good hindsight cannot help anyone preserve capital or make more money from their investments. The Yi invariably teach students how to use their foresight!

Well, if regular readers who are also investors in the KLSE have reduced their gearing or are holding back some cash as suggested in my last entry on the stock market, they could be in the best of both worlds to watch at the sidelines while the bulls and the bears fight. If their stocks rise, they can take profits and if the stock market falls further or plunge, they can bottom fish or buy more of their favorite stocks. Again, do not forget about the laggard second board counters.

Perhaps, these particular investors with minimized risk can also sleep safe and sound like me every night. There is no more need to worry about interest rates hike anywhere in the world or what damage has been done to the financiers of the sub-prime mortgages in the US. Things will always be taken care of and blow over, it is just a matter of timing. And timing is what we have just discussed.


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