Monday, 4 May 2015
Sell in May And Go Away - A Myth of Guidance?
This phrase is one of the longest saying on Wall Street. Does it apply to Malaysia as well? The truth is that the market doesn't crash during that period. The returns are just not exciting. In this article, we are sharing some of our input that might cause the lackluster in the stock market during May to October (no one has the right answer for this myth by the way).
November ~ December (Portfolio Restructuring Period)
After a full 10 months of managing the Funds (Jan to Oct), generally the Fund Managers would do Portfolio Restructuring / Divestment of 'losing counters' so that their year end report card would look better. Those 'Winning Counters' or 'Average Counters' may be carried forward for year end reporting. Those cash from selling the stocks will be carried forward to next investment calender year.
Jan ~ March (Stock Up for New Portfolio)
Old saying, early bird gets the worm. During the first and second month of the year, the Fund Managers / Institutional will be buying new shares with the cash they have. It is a brand new year for new report card. That is where some of the old uncles saying 'Chinese New Year Angpau' or the Ang Mohs saying 'January Effect'. It is not because the Government wanted to give you CNY monies. It is just Portfolio Management.
Do you know that generally Institutional / Fund Managers participation rate in Bursa is around 70% to 75%. That make our Retail Participation rate around 25% +- . Now you know who make the call for the Equities Market?
March ~ April
The Listed Entities report card for the 4th Quarter and Full Financial of last year will be reported by End Feb (unaudited) . While the full audited financial statements to be announced by End April (audited). For those Fund Managers who did not manage to accumulate, they still have room to buy and restructure their portfolio on Mac / April.
Why Sell at May?
As the Portfolio Management by Fund Managers has been done throughout Jan to April, for the month of May, it is the time for them to wait and see the 1st Quarter Report of the current Calender Year Result. If the Quarterly Report it is favorable, they will continue to invest, if stagnant or lackluster, they will choose to wait and see before making the next move. Generally the 1st Quarter of every calender year send the message/benchmark of what will be happening next for the full calender year for the particular Equities Market.
As we do not have the crystal ball to know what will happen next, let's wait and see the upcoming Report Cards from the Bursa Listed Entities. Of course our understanding and theory of 'Sell in May and go Away' might differs from others. It is just for sharing purpose. Personally we would wait and see the result from 1st Quarter 2015 before deciding our next investment strategy.
Till then, Happy Trading!
Disclaimer and Declaration
The full content of the article is for educational purposes only and should not be used as investment recommendations. We are not responsible for all investment activities conducted by the participants and cannot be held liable for any investment loss. Examples of specific shares may be citied for illustration purposes.