Saturday, 21 December 2013

2013 coming to an end but not the stock market

There are 10 more living days remaining before 2013 is out. For stock market players, there are 6 more market days remaining before 2013 is out.


Perhaps, it is time to plan your investment for next year. How is the stock market going to be in 2014 with the KLCI index is at all-time high at the moment? We cannot look at the stock market in isolation. Thus we ought to ask the question of how is the property market going to be in 2014 when all the dampeners start to take effect from 1st Jan 2014. The next important question is how are the currency and the country economy going to be in 2014 when the tapering story in USA starts to tickle comes 2014?


For a start, local property market will be hit in 2014 due to the dampeners announced in the Budget 2014. It is my believe that the effect will carry into 2015. However, the local property market will start to pick up and improve in 2016. Having said that, the property prices will not necessary come down a lot in 2014 and 2015. Prices at hot spot areas will still hover at high level which is unreachable by the majority of the working class people. Sales volume will come down considerably as more speculators will have to halt their buying spree appetite. The genuine buyers buying for own stay will have to get used to the high price and start to think of a way to buy, at least their first property for own stay. And the rich will, well, continue hunting for value buy and quality properties. They are the least affected by the dampener measures introduced in 2014 onwards. Ultimately, it is the genuine buyers buying for own stay will be at the losing end. Property prices will continue upward trend again in 2016 after the brief hiccup in 2014 and 2015. That's my prognosis of the property market for the next 3 years.


So, how does this affect the stock market?


With the property market turns unfavourable, money will pour into stock market to seek for better returns. It is well known that property market is very much illiquid compare to stock market. However because of property is much safer, we have seen substantial money have been poured into the property market since 2009. Things will change in 2014. With lower demands are anticipated in 2014 onwards, many have or will stop doing what they have been doing for the past few years. But still, they have to park their money somewhere. And stock market will be the top choice for many of these people. With the current buoy sentiment in the stock market, things will be even get better for the coming months into 2014. Tapering issue has since tamed with Fed's announcement few days ago. Brilliant strategy by the Fed I must admit. While i believe the whole of tapering issue is blown of out proportion, but that is another story for another day. Now, what should ordinary investors do in view of the current situation? Any weakness created by the tapering effect will be great opportunity to pick up some quality stocks. The question is will you able to pin point the exact timing when the weakness in stock market presents itself. Could it be Jan, Feb, March or even June 2014? If one stay sideline to wait for the weakness in stock market to happen, chances are one may have missed all the rallies in the stock market which may runs into several months before the tapering effect actually takes place. Say, you have been patience to have waited and are so good to able to get the timing right and get in just when market is at its weakness period. But the buys at that time may not guarantee the returns you would expect as the weakness in the stock market may drag on for several months more. Thus not only you have missed the chances to make profit for the several months rally in stock price prior to the market weakness due to tapering effect but also have to hang-on onto the stocks you have just purchased during the weakness in the stock market for several months more. Isn't this call double whammy.


To avoid the above scenario, picking a correct stock is utmost important. The stock must able to give you decent gains within the next 3 - 4 months. When the tapering effect do really takes place and created market weakness, at least you have buffer to withstand the onslaught of price volatility. Normalising will take place eventually, after the tapering effect ends and stock price will eventually go back to its original position if not better. Therefore, pick a correct stock is the key and pick now. Take Datasonic for example. If one had bought at RM6.00 and now is about RM9.90. It is expected that it will rise further for the next 2 months. So, if the tapering effect do really takes place, say in Mar 2014, the share price will come down but I doubt it will go back to RM6.00 level. There is already enough buffer to take care of the volatility. When the tapering effect period is over, I can bet my last dollar that the share price will normalise and go back to its previous level if not better. I always say, unless you can time the market, there is no way you can beat the market volatility and make big and good money. The best way is plan for long term in stock market. Short term play and contra play are just to boost and satisfy short term excitement. Never forget your long term goal is always to make big money and stay ahead in the game.


Believe me, if you have sold your stocks to realise some gains, you will find yourself to have pour back the money into the stock market eventually. In other words, you will be sucked back into the stock market knowingly or unknowingly. The only time I see people not pouring back into the stock market is when he or she wanted to buy new houses, to use it for some avoidable medical expenses, children education or well, for some very personal endeavour desire.

Parting shot, despite the stock price has increased, there are still substantial upside among the small and mid-cap stocks as their growth prospects remain very promising. However, you must be prudent and be able to pick the better managed ones.


Do take note of what the PM said in June 2013 where he had urged the government-linked investment companies, especially the EPF, to play a more prominent role and increase market vibrancy by investing in good quality mid-cap stocks.


"It is time for EPF to step up and play a prominent role as this will increase the velocity of shares traded and make a significant contribution to the overall market vibrancy. Their (GLICs) participation will provide another avenue for companies to access primary and secondary funding and bring their businesses to the next stage of development," PM Najib said in his keynote address at Invest Malaysia 2013 here yesterday. - The Star 14 June 2013

Invest wisely. Stay invested. Good luck.

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