Master Rider Blog

Last Trading Day of 3Q07

September 28th, 2007 NW Teong

Yes, today is the last trading day for 3Q2007. What will fund managers do on the last day of a quarter? Normally, fund managers will need to monitor their portfolios very closely especially when a quarter is coming to an end. This is obvious as their performance is most likely reviewed on a quarterly basis (some on monthly basis). Common sense will tell you that for those fund managers that already enjoyed good out-performance in their portfolios, they will try their best to enhance that performance. In short, they can choose to sell some of their portfolios so as to lock in the performance if they feel that the valuation is rich and have little upside from now. Alternatively, they can do what is known as window dressing (i.e. push up prices of their key holding stocks) if they intend to hold their portfolio for quite some times. Of course, which action fund managers take will have to tie-in with their investment strategy for 4Q2007, i.e. the coming final quarter of year 2007.

With the regional stock markets at record high, we are more likely to see some profit taking than window dressing. However, with the bullish view in stock markets in the 4Q2007, fund managers are likely to re-allocate funds into the stock markets again. This is also a time for them to re-balance their portfolios. Hence, any proceeds from the profit-taking activities today (if any) are likely to flow back into the markets when 4Q07 starts next week. In fact, some funds have started to re-balance their portfolios few days before the quarter ends. Please note that funds may take one day or up to one week to execute their 4Q investment strategy. In short, we might see some increase in market volatility in the next few trading days. Of course, like you and me, fund managers are also mindful of the jinx month next month (Black Monday 19 Oct 1987, its 20^th anniversary this year!).

Continue to ride on this liquidity play which of course was mainly triggered by the aggressive interest rates cut by US Fed. Short-term (three month’s view) positive, long term still need to stay cautious. Cheers!

Master “The Essence of Stock Investment” and ride towards the journey of your financial freedom to be the “Master of Your Own Destiny”!Disclaimer: Investors are investing at your own risk. Please read full disclaimer at the end of the blog or from the main page of the website.

Entry Filed under: Macro, Stocks, Singapore