Since my last article, stocks and commodities have rallied very strongly, Crude palm oil (CPO) has moved up from RM3900 levels to the current RM4170 level. KLCI has also hit multi month highs closing at 1520 versus 1410 levels a month ago. So where do we go from here and what should we do with our investments?
CPO price has another leg down
So we have digested a lot of data last week with regard to CPO and also the US agriculture markets. MPOB released its monthly supply and demand data which was pretty much in line with market expectations. This sparked a nice buy the news rally which saw prices touch RM4495 on Friday before retracing to close RM4420 that day. It has seen pulled back further to close at RM4168 today.
Meanwhile the data released by USDA in its monthly WASDE report was deemed bearish with end stocks higher than expected which sparked a selloff in the US agriculture markets notably in the soybean complex on Friday.
Short term CPO futures is a sell
I have exited all my CPO longs which were initiated 1,5 weeks ago at RM4450(half on Friday) and balance at RM4300 today. Plantation stocks performance have also been disappointing versus the overall market. I believe it is still grappling with peak earnings concern and hence the price reaction compared to the gains in the futures market has been lagging badly too. I have also decided to exit my basket of plantation stocks for a small profit of 7%.
I believe there is another leg down in the CPO futures market with a retest of RM3800 likely in the next couple of weeks. As for plantation stocks, we should see how price reacts to the quarterly earnings reports which are slated to come out by month end starting with KLK reporting tomorrow.
Tech stocks and political stocks are in play
Money still seems to be flowing into the technology and growth sectors .Many of these stocks have outperformed the overall markets with nice gains of over 20% in the last 2 weeks alone. Another sector that seems to be in play is election theme stocks and political linked counters. As with past General Elections, this sector tends to heat up 4 to 6 months before the actual event.
My strategy for the near term
I remain fully invested in technology stocks and have moved my funds from the sale of plantation stocks into some General Election linked stocks like KPower Bhd and KUB Bhd. Sector rotation and thematic plays are key to making the best trades in the current market environment. Also to keep in mind that risk management has to be placed whenever a trade or investment is made and there is no such thing as 'buying and locking it up" for long term as advocated by some irresponsible writers.
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