Monday, April 26, 2010

KLCI Sell In May And Go Away

The stock market has a famous saying of “Sell in May and go away”. Should you be doing it this year?

A look at the KLCI index from 1994 to 2010 shows that there is a 50-50 chance that the market will go down from May to Oct. The performance of the KLCI index is shown in the table below


Entry DateEntry PriceExit DateExit Price% Change
4-May-941040.444-Oct-941126.348.26
3-May-95944.553-Oct-95983.754.15
3-May-961184.972-Oct-961135.53-4.17
5-May-971099.392-Oct-97794.10-27.77
5-May-98627.562-Oct-98366.88-41.54
4-May-99681.754-Oct-99680.33-0.21
3-May-00900.143-Oct-00704.24-21.76
3-May-01615.982-Oct-01613.00-0.48
3-May-02795.122-Oct-02648.53-18.44
5-May-03627.622-Oct-03738.9817.74
6-May-04845.744-Oct-04855.741.18
4-May-05895.504-Oct-05924.983.29
3-May-06950.993-Oct-06968.931.89
4-May-071346.372-Oct-071361.031.09
5-May-081274.136-Oct-081013.39-20.46
4-May-09999.442-Oct-091204.2020.49
-76.74


If you buy into the KLCI on May 2009 and sell on Oct 2009 instead, you would have seen gains of 20.49%. However if you sum up the performance from 1994 to 2010, you will be down 76.74%.

So should you be a buyer this May or seller? Personally, I will not be a buyer as my feel is the index will not see double digit percentage gains and the risk of a correction is high.

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