Sunday, March 02, 2008

Reduction of ‘troops’

No, I am not discussing the reduction of US troops in Iraq, but it is good to hear that some are finally going home to their families. This entry is on the reduction of my ‘troops’ fighting in the Kuala Lumpur Stock Exchange.

Things took a turn for the worse on February 13th, when the Malaysian Prime Minister announced the dissolution of Parliament for an early general election. Voting in members to Parliament and state assemblies will take place next Saturday, March 8th.

Politicians and their supporters are on the road, busy canvassing, instead of buying they could be selling stocks; owners of public quoted companies may also sell to raise sufficient cash for big political donations; lots of stale bulls still want to get out of the market; with local and foreign funds waiting at the sidelines for the election results, who will be out to absorb the ‘relentless’ selling?

Therefore, instead of following the rebounds of global stock markets, the KLSE headed south and drifted for the next couple of weeks. The daily traded values had also dwindled. The expected Chinese New Year rally had failed to materialize. Forced margin selling of second and third liner stocks were particularly evident. Otherwise, who would want to sell stocks at their fifty two weeks or year lows?

In line with market sentiment and because of the timing, I have reluctantly withdrawn half the ‘troops’ from battle by cutting stocks on Thursday and Friday, taking some hits. A painful choice but it could turn out to be wise. Why?

Because according to the Yi chart for 2008, the KLSE and the Chinese stock markets will face major obstacles next week. With the Dow Jones’ plunge of 315 points or 2.51% on Friday, February 29, it looks like these stock markets will head for a big fall on Monday, March 3rd. Let us just hope that Dow Jones will not suffer a Black Monday crash since things look increasingly complicated and uncertain in the US, but not totally unforeseen by analysts and experts.

If things go further awry, I may withdraw the remaining troops from the battlefield. No point for the army to ‘wait in blood’ and get massacred by free falls in the KLSE. Holding a 100% cash position can turn out to be a good strategy, at times, especially under extreme circumstances. Think of the havoc in the KLSE and the Chinese stock markets since November 2007 where many an investor including owners of low liner stocks and syndicates has lost huge sums of money.

Apparently, the aftermath of the implosion of the mountain has yet to touch rock bottom. Most readers cum investors had not listened that October and November. Perhaps they thought I was joking or had misread the Yi. Or perhaps they were guided by the real and/or the false ShenXian.

It is rather unfortunate, but every investor has to learn to live with uncertainties unless they are constantly guided by the Yi. Even then, Yi diviners still have to learn how to determine the timing. Since a good prognostication on an investment can sometimes take years to unfold. But that is a story which had been told.

Take care.


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