Have the Chinese New Year and Election Rally started?

Once every for or five years, Malaysian stock market would stage a rally in anticipation of the general election. The rally could be a mini one or a huge one just like what’s happening now. The daily transaction volume was on plunging mode towards the end of last year, 2007, but suddenly the daily volume sprang to life with the year of rat (2008). The KLCI (Kuala Lumpur Composite Index) is currently inches away from the 1,500 – a level that would put 1993 Super Bull Run to shame.

Traditionally every New Year would start with a bang and if the Chinese New Year is about one or two months away, chances are the pre-Chinese New Year rally could be smiling at stocks investors (though there were minor exceptions). This year could spells double bonus as the pre-Election rally may add more sweet mandarin oranges to you, never mind the Prime Minister still has yet to get his inspiration. Another mini bonus is the rally in crude palm oil (CPO) prices.

In fact it’s not that difficult to push up the KLCI considering the government could “invoke” 15.9% of the Composite Index movement by snapping TMT (TENAGA, MAYBANK and TELEKOM) stocks. Malayan Banking Berhad (KLSE: MAYBANK, stock-code 1155), Tenaga Nasional Berhad (KLSE: TENAGA, stock-code 5347) and Telekom Malaysia Berhad (KLSE: TM, stock-code 4863) each influences 5.8 percent, 5.3 percent and 4.8 percent respectively of the overall KLCI.

Now you have Sime Darby Berhad (SIME: stock-code 4197) and IOI Corp Berhad (KLSE: IOI, stock-code 1961) as the new plantation heroes with a combine 12.9 percent weighting to KLCI – the task could not be easier. To add cheers to the crowd, Public Bank Berhad (KLSE: PBBANK, stock-code 1295) and Genting Berhad (KLSE: GENTING, stock-code 3182) could add spices to the celebration. So you shouldn’t be surprise when the talks of KLCI reaching even above 1,600 within 2008. But the above heavyweights are not everyone’s cup of tea.

Most season investors are looking for this signature (already started?) before start pinching the politically-linked stocks such as MRCB (KLSE: MRCB, stock-code 1651), Time DotCom Berhad (TIMECOM: stock-code 5031), UEM World Berhad (KLSE: UEMWRLD, stock-code 1775) and others. With the current KLCI defying Wall Street’s movement, any one-eye remisiers, dealers or analysts will have a common agreement – the Chinese New Year rally just started. The Election rally and the strong ringgit are the icing to the current rally. I’ve yet to see more than 80% of the stocks in the green contrary to what I’d seen during the 1993 Super Bull Run though.

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