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WHEN it comes to property, what counts is location, location, location. And when it comes to stocks, what matters is timing, timing, timing.

For the hundreds of contra players who took the plunge last week, timing was a major consideration. If you were late in latching on to the momentum of China stocks like Celestial or Cosco, for example, you would have been badly burned when both came under heavy pressure on Friday.

If, however, you bought semiconductor stocks Utac, Chartered Semiconductor or Global Testing when they weakened earlier in the week, you would have enjoyed good contra profits had you sold on Friday.

Indeed, there were indications towards the end of the week that punters could be switching out of China stocks into tech counters, possibly thanks to brokers switching focus in terms of reports being issued.

Close watchers of the local market might have noticed a sharp drop in the number of ‘buy’ calls on China stocks and a concurrent increase in ‘buys’ on the tech sector. This is perhaps to be expected, since China stocks can no longer be considered cheap, having doubled and tripled in a few months while the tech sector has under-performed.

This could soon change. Memtech, for example, sprang to life on Friday after a JP Morgan report. Indeed, the entire semiconductor sector rose en masse on Friday, while several other tech counters such as Eucon have been quietly been rising to highs of their own.

Of course, trying to get the timing right through chance, luck or skill would be superfluous if one had advance knowledge of the release of an impending broking report, and it’s disconcerting to hear talk that retail punters are now trading based on rumours of upcoming research.

Possibly because of the confidence that such advance knowledge can bring, or because of the complacency that a bull market engenders, brokers last week reported normally conservative clients doubling and tripling their exposure to stocks in the hope they can get out with a suitable profit before their payment due date.

Shades of a speculative bubble? Yes, without a doubt. Then again, punters are merely playing into the hands of the syndicates, who at these levels and given this much liquidity, must surely be unloading as quickly as you can say ‘timing, timing, timing’.

Whatever your perspective on current developments, there’s no doubt the timing of the announcement of a general election was spot on insofar as the stock market was concerned, coming just after the release of the US Federal Reserve’s March minutes, which the market interpreted to mean that the interest rate hikes of the past two years may end soon.

Whether this pans out, or turns out to be another case of false optimism, remains to be seen. It’s worth remembering that the last time US investors ran away with the idea that the rate hikes were to end soon was back in December 2005, following the release of the Fed’s November minutes. They were wrong.

It makes more sense to assume that the Fed is not the omnipotent, all-knowing body that the market thinks it is, and is, in fact, as much in the dark as anyone else on the true state of inflation.

Given that Iran’s nuclear ambitions are now pushing oil prices up, and given the slide in the US dollar, it is by no means certain that the Fed will stop its tightening after one more 25-point hike. In fact, some US analysts warn that there could be as many as four more hikes of 25 basis points each which, if they do materialise, would take the short term rate to 5.75 per cent.

Source : Business Times - 24 Apr 2006