The markets (both KLCI and US S&P) experienced a wild swing in October, with KLCI dropping to as low as 1767.77 in mid of October while climbing back to level higher then October opening of 1855.15. Reason for the swing could be due to strong sentiments as i highlighted in previous post.
The absolute magnitude of current swing is still within 6% - 7% variation range. In fact, that is the range of change that KLCI had been experienced within this year. Thus my guess is that while emotional sentiments will send the index up & down more often in wider range, uncertainty of the future (positive & negative) will keep the KLCI within the range bound of 1765 - 1890 recorded this year.
Current Return and performance
Obviously, the most profitable way to operate within this KLCI range bound is to sell when KLCI near peak (1860-1890) and start buying when KLCI near low (1760-1790). However, due to wrong bet on market reaction on CIMB-RHB merger trade, I end up with no enough cash when some of the stock's price drop to attractive level.
The estimated holding period return for KLCI in the past period (1st October 2014 - 31st October 2014) is 0.74% (with dividend included). Holding Period return for my portfolio, is -3.71%. Total holding period return for my portfolio since the inception is 19.98%, annualized to be 8.77%, this lag behind KLCI total return of 21.25% (annualized, 9.30%).
Trading Activities
1. Selling of Maybank (1155) and addition back, pure operating technique in anticipation of wild swing, netting me about RM 150 in the process, but the cash obtain during the period is not utilized wise.
2. Selling of Harrison (5008). Its FY 2014 account is expected to end in red despite healthy core operation due to recent tax issues with Custom. Hence limited upside potential until mid of next year. However, my valuation and market valuation are differ.
3. Addition of Public Bank (1295), Symphony Life (1538) , MNRB (6459). Typical actions of buying low. just that the low is not low enough.
4. Addition of MSports (5150).
Recent development of the stock is puzzling,
Underlying operation remain profitable, cash level remain high. Company is giving out free warrant to current shareholders. But,
The major shareholder (Lim Huo Zhi) is trimming his stock holding down from near 45% level to 34% level.
There could be three possible explanations
a) The company is a fraud, soon accounting scandal like CSL will break out thus making share of company worth nothing. Thus major shareholder is cashing out now even though shareprice is trading below NAV.
b) The company is fine, but major shareholder need cash. A less likely explanation as the easier way to go will be just declare of 4/5 sen dividend which will give the major shareholder enough cash.
c) The company is fine, and major shareholder is selling to those close to him. For example, to loyal employees, or to the govt officer for bribery purpose. (Unlikely to his daughter Lim Li Ying as she also a director, change in director holding will need to be disclose).
The fact that most of the selling is done outside dealing period to parties not disclosed, add possibility to third explanation.
Unfortunately until next financial year auditing results coming out, we wouldn't know which explanation is actually happening.
