Monday, March 10, 2008

Political Tsunami Swept KLCI Along

I can't stop myself from taking a time off my lunch to drop an article. The historical event on 8 March 2008 is a day of political tsunami as voters in the country voiced their dissatisfactions over the ruling Barisan Nasional by voting for the oppositions. The swing was so great that the oppositions themselves did not expect such outcome.

On the very first trading day of KLCI after the election result, KLCI fell by 7.24% to 1,202.51 at 10am. Most government related stocks went for a bungee jump, only that it is without the rebound at sight as yet. A classic example of fear, investors can't help but to sell before the rest do, hence triggering selldowns in non-government related stocks.

Should investors go into the market now? Not at the moment. The drop in KLCI will trigger some margin calls and sell-down limits of institutional investors and may drag the selling further. Tomorrow or the day after might be the day Hengdai Equity Fund IV ("HDFIV") makes its first acquisition. So far, HDFIV has been outperforming KLCI since the inception of the fund on 1 March 2008 just by not investing at all. KLCI was at 1,330.61 (as at 3 March 2008). It has since dropped to 1,202 (10am today), representing a 10% drop. Our fund is still registering nil return at the moment but has outperform the KLCI by 10%.

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