Valuecap: What Happened in 2003?

Yesterday, the PM announced a few measures to strengthen our economy and the stock market. The summary of these measures are well-captured by the front page of the DigitalEdge below.


via The Edge

The big question for all investors is this: What will be the impact of the RM20 billion fund to support the market? If we look at the inaugural launch of Valuecap in 2003, we would find the answer to our question. With a fund size of RM10 billion, Valuecap was able to stabilize the market in 1Q and rode the rally in the market from 600 to 900 for that year. See the chart for FBMKLCI for 2003 below.


Chart: FBMKLCI's monthly chart from Sept 2002 to Sept 2004 (Source: ShareInvestor.com)

However, if we study closely the above chart - which stretches from September 2002 to September 2004 - we can see that after the initial jump in early January 2003, the index actually dropped back to the low in December 2002.

For many who have missed out buying in the market at the recent low, we can take our time to do our analysis and buy on pullback. I believe that the first test of our current rally will be the neckline of the earlier violated head and shoulders formation at 1680-1690. If we cannot surpass this level, we may see a consolidation in the market. This consolidation will be in line with the current weak global stock market due to economic slowdown in China and the tapering off of Quantitative Easing in America.

With that, I would recommend that all buying should be well-thought out and panic buying should be avoided. As always, good luck...