PETALING JAYA: Emerging market investors may have less of a response to the “sell in May and go away” adage this year as markets have been down in the past three months, suggesting that investors will hold on to their current holdings and buy more shares when opportunities arise amid generally positive prospects.
According to data provided by Citi Investment Research, markets have been weaker (minus 3% in the past three months) compared with the same period during the big “sell in May” years (average 3-month gain of 5%).
The research house remains upbeat, telling clients in a report: “We stay positive. There are many risks notably Europe but China is picking up and emerging market equities are attractively valued.”
In the same global equity markets strategy report dated May 2, Citi said the most successful examples of “selling in May” were in 1998 (when the MSCI Global Emerging Markets (GEM) Index fell by 27.3% in the next three months) and the financial crisis year of 2008 (when the index fell by 56.6% in the next six months).
The years when “sell in May” failed most emphatically were 2009, when the index rose by 21% in the next three months in the wake of a recovery from the crisis and in 1993, when emerging market equity markets rose by 37% in the next six months as asset classes opened up and investing appetite increased.
In the report, Citi also pointed out that Asia was the most defensive region in a “sell in May” period.
The most defensive countries were generally in Asia, especially Malaysia, while the least defensive were Brazil and Turkey, it said, citing healthcare and telecommunications as among those most defensive and industrials, materials, energy, and utilities as most vulnerable.
Still, UOB Kay Hian Research, in its recent note specifically on the Malaysian market, said it expected market sentiment to remain cautious through the third quarter amid uncertainties in the political scene, given the impending General Elections.
It said the latest economic development the introduction of minimum wages in Malaysia (RM900 for Peninsular Malaysia and RM800 for East Malaysia) was neutral for its market growth forecasts of 12.9% and 9.9% in 2012 and 2013 respectively.
Investors, meanwhile, will get an idea on the health of Malaysian companies when the reporting of financial results for the January-to-March period goes into full swing starting next week.
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