June 20, 2021

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MCO 3.0 > 1.0. Deja Vu?

It would appear we are back to square one. How is it that US (under Trump) that was once the world's leader in Covid-19 with President Biden only on the job for 4 months have now been overtaken by Malaysia in terms of infection rate per capita? (Picture source: The Malaysian Reserve)

With the headline figures breaking 8000, death rate at an all time high and more worrying is that ICU patients are at overwhelming levels, I cannot help but wonder where it all went wrong.

Just 1-2 weeks ago, our PM and MOF have made a strong public statement assuring there won't be a total lockdown as the country's economy cannot bear the brunt of a shutdown once again. It was an act of balancing life vs economy. I actually believed what they said and thought that was the end of the matter. Never did I expect a u-turn again so soon. This is why foreign funds have been selling off Malaysia stocks and FDI have been plummeting and going to our neighbouring countries. For the economy, business community or the stock market, what is most important is policy certainty. Uncertainty, flip flops and u-turns causes volatility which is risky for investments.

As I said earlier, I don't envy the position of the PM or cabinet ministers. Whilst I do not have the solution to this problem, I do know that the Parliament should be open in order for all the citizens' representatives to deliberate and work towards resolution. Since your (govt of the day) methods doesn't work and your team cannot win, why not set aside differences and work with your opponents against a common enemy? Going alone and failing, the fault lies with you. Going together, you share the burden.

Coming back to my area of competency, I would like to share that in approaching the market from hereon requires paying greater attention to the macroeconomics forces. For those who have followed my writing, you would have noticed I have been very prudent, reserved for the past 5 months in spite of the market optimism on economic recovery & recovery theme play. I have consistently reiterated to avoid tourism, retail and airlines stocks, to increase cash position to manoeuvre. I definitely didn't foresee such a wide Covid-19 community infection resurgence. The only thing I was certain was some of research houses / agencies / pundits were far too optimistic in their outlook towards GDP growth, economic rebound & recovery play. Counting chicken before it hatch is just as bad as crying over spilt milk.

I also mentioned multiple times and as recent as 16 May 2021, I believe a crash will not happen this year but only a 5-10% correction from the peak. The level to observe would be 1515.

As a purist on fundamental investing, I do think the stock market may very soon present a contrarian opportunity once again for those with the stomach and horizon. This time, the opportunity is one with a tight window. Investors should be prepared. Deja vu? Stay tuned for more to come
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For link to my new book - "Once Upon A Time In Bursa", please click HERE :

Nationwide Total Lockdown Sectors Outlook
Mega First Corporation Bhd - Long Term Value Stock...
 

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