Well, my last post was in November! I need to be a bit more pro active whilst bloggin eh? Well, since I last wrote, things have totally had a U turn. As I mentioned in my previous post nearly 4 months back, liquidity is to be handled with care. Notice how it has swept most people off their feet when it evaporates. And evaporate it has! But there is a reasoning behind most things. FIIs are the deal makers and breakers for a large part of our market, last years record inflow of $29bn was, as most people believed, difficult to follow up this year. So they are net sellers to the tune of $1.5bn as of date, due to better prospects back home and cheaper and more attractive emerging market options in Korea, Russia etc. Face it, with shoddy governance, sticky inflation, domestic liquidity tightening and unforgiving valuations, our market was ripe for a correction.
What now? There continues to be a lag in policy implementation, to put it mildly. Commodity pressures would continue which would mean lower OPM for most companies. Financing is not easy so capital charges would hit the bottom line. There do seem to be lack of positive triggers for the interim. However, valuations have cooled off to a large extent, the corporate earning structure remains intact. My view would be to ride out the storm by picking up some Warren Buffet style blue chips, one which are not heavily swayed by commodities or regulations and have the staying power for a bad cycle.
Cheers!
