The so called annual Chinese New Year rally ran only for the first few days of January. So, what can we expect for the rest of the quarter? Now, with news of the big factories start laying off workers, we don't expect much. The coming event that shouldn't be ignored is the UMNO election, coming this March (24th to 28th). Now, the big question is: will there be a market rally prior to that? Or perhaps after?
Below are what Aseambanker's research says:
The UMNO election which is scheduled in Mar 09* could also form another important market catalyst, as previous UMNO elections have historically been associated with rising KLCI values in three out of the last four UMNO elections, with the exception being in 2000 after the bursting of the technology bubble. Should an UMNO election rally materialize, we reckon that at least a handful of GLC stock prices could rebound meaningfully, along with past favourites like MRCB, KUB Malaysia and Puncak Niaga. Aseambanker 1Q09 quarterly outlook. *typo in the report corrected
So, will this time be a market rally? Seeing what happened to UMNO since March 08 General Election, I think this coming UMNO assembly will not as glorious as before. Don't forget about hundreds of money politic reports made to the disciplinary body. Also, with the current economy, government spending is limited. So, fewer projects to be distributed to GLC.
The climax event should be when Pak Lah will pass the baton to DS Najib. Will he? Pak Lah has change his mind before on other matters so you do not need to act so surprised, in case. In February, DS Anwar Ibrahim sodomy case will be heard. Saiful is said to met Najib several time before he made the famous police report and even before he was last been sodomized.. Also another case to be heard in February; toothed and nailed Raja Petra will try prove in court that his allegations on Najib (or is it Rosmah?) are true.
Many images may be tainted. This give Pak Lah good reasons and he may be holding the last trump card close to his heart, waiting for the right moment. In Kuala Terengganu's PAS winning speech, Haji Hadi Awang said Pak Lah should stay on and continue with his corruption fightting as he promised before (that's a smart political speech by Hadi). That should be a morale boost to Pak Lah to stay on. Preferring to have Pak Lah rather than Najib, other opposition leaders and Pak Lah's supporters will start saying the same.
That can shock the market though. The market expect a smooth transition. Anyway, it's just a political speculation. Let's speculate on the stockmarket.
Below are the statistic of KLCI performance prior to UMNO elections
Period before UMNO Election1-week 2-week 1-month 2-month
2004
KLCI -0.5% 0.6% . 5.9% 2.0%
2ndB -0.9% 0.2% 1.2% -6.8%
2000
KLCI -1.4% 1.6% . -3.0% -2.5%
2ndB -4.2% 2.6% -7.3% -2.4%
1996
KLCI -0.8% 0.9% . 2.8% 3.4%
2ndB 1.5% -2.7% 2.3% 22.0%
1993
KLCI -2.8% 1.2% . 9.1% 11.4%
2ndB -0.5% 4.6% 17.2% 35.8%
I think it's better for you to see the charts in order to visualize it. You also can see before and after (not shown in the statistic above) the election. See the 4 KLCI UMNO election charts at the bottom. Click the image for a full view in a new window.
Except for the year 2000, all the others shows a rally a month before.
Except for the year 2000, all the others shows a rally after (allowing 1 or 2 months).
With that, I expect a rally prior to the event and more after (with smooth power transition) but not too high due to some reasons as I have already mentioned. I will still stick to my earlier KLCI target of 990 pt. Allow it to happen within few months period, say until end of May. The keywords are 'GLC' and 'commodity'.
Who said 2009 going to be boring?
KLCI chart: performance prior to and after UMNO elections 24th Sept 2004
