After announcing that it has entered into a sales and purchase agreement to purchase Beijing JianXiang Hemu yesterday, China Animal Healthcare released a very good set of results for FY2009 last night.

 I was a bit surprised by the trading halt called by China Animal Healthcare today because Feb 8, 2010 is the date for the release of its FY2009 results.  I am looking somewhere between RMB155-165mn for FY2009.

 In 2009, we saw the possible collapse and eventual collapse of some of the biggest corporate names in the world - Lehman, Merrill Lynch, GM, AIG, Fannie Mae, Freddie Mac, etc.  With that behind us, I was of the view that there isnt another corporate failure/s big enough to frighten and spook markets in 2010.  In my Blog of 4 Jan 2010, I highlighted the risks of the withdrawal of fiscal stimulus and low interest rates and also the burgeoning debt of many economies especially in Europe (the three weakest were Greece, Spain and Italy) and lets not forget about the UK which is not part of the EU.  All the economies in the EU have exceeded that national debt to GDP limits which were conditions of the economic union. 

 MAS has unveiled the members of the new Corporate Governance Council and its Terms of Reference today.  The announcement can be found here.  I was actually hoping that this Council would have more powers and would help restore confidence in the Singapore stock market following a spate of companies involved in corporate fraud.  I was therefore disappointed to note that 

 I am adding Sing Holdings to my stock pick/model portfolio today.  I note Government measures to curb the excessive rise in public and mass market private housing prices either through the release of more land or certain curbs on bank lending.  However, the high end is resilient to this.  In my Blog of January 5, 2010.

 Two weeks ago, one of our analysts asked me to have a look at Jaya Holdings.   After going through the financials, i realised it had large debts, was in some financial difficulty, had engaged N-Tan to advise on a restructuring  hence its poor performance compared to its peers.

 A nice intra-day rebound last Friday helped pare morning losses with the STI Index down a modest 12 odd points last Friday compared to a more than 30 point decline on Friday morning.   The uncertainty and volatility of stock markets will continue but as the uncertainty is being generated by fiscal policy and government decisions on when and how much to raise interest rates, we know that Governments and Central Banks have some room to move viz the eventual withdrawal of these measures.   Mutual fund managers missed the rally in 2009 and many of them had to "BUY" performance and were thus less willing to take profit despite handsome gains they made in 2009.  As we start the new year, they have the flexibility to take some profit and this has resulted in the long overdue correction that we thought we would see in the middle and toward the end of Q3-2009.   Originally, i was of the view that the uncertainty was being taken in its stride by investors.  The VIX index rose sharply but then started to ease despite the sharp falls in the market.  I noticed that over the last three days, the VIX has started to rise again and although still modest at about 24 - we should keep an eye on it to see if continues to rise.  A breach above 30 could signal a more meaningful correction (see chart on VIX below).

 I was a bit surprised by the decline in the STI Index yesterday as it was holding up well until about 3.30pm (see intra-day chart below).

 Most global stock markets are now down for the year by 2-6% with the notable exception of Tokyo.   The falls were triggered by two events - China's credit tightening of bank credit and President Obama's proposed new rules for banks.   In an interview with some journalists yesterday, I was asked whether the Bull rally was over and what was my strategy now.  I thought I would share my views in this posting.

 Even though I said in the middle of 2009 that I would not make macro comments on the market, I think the correction we have seen over the last few days warrants a view.