China Minzhong: Gap down black candle day.

China Minzhong's share price gapped down today and formed a long black candle on the back of very high volume.

Apparently, "one party sold 57.23 million shares at S$0.80 each.

"A trader said one of China Minzhong's shareholders had sold its entire stake in the company through a private placement.

"According to Thomson Reuters data, Olympus Capital Holdings Asia, is the company's third largest shareholder, with 57.23 million shares or a 10.3 per cent stake.

Franklin Templeton Investments Corp is the second largest shareholder with a 12.2 per cent stake, or 68.13 million shares." (Source: REUTERS, 6 Dec 12.)

I do not know why the investor decided to sell especially when the fundamentals of the company have been improving. However, if there is no material deterioration in fundamentals, this correction is an opportunity to accumulate shares of the company cheaper.

Technically, the negative divergence between the share price and MACD is playing out. So, it is not as if we didn't get some kind of warning. However, the intensity of the decline has been stunning.

I decided to draw a Fibo Fan and it is interesting to see how nicely the 38.2% Fibo line approximates the rising 100d MA. 38.2% is a golden ratio but with such a high volume sell down today, we could see persistent weakness tomorrow. If immediate support should be compromised, then, we could see a test of the next two golden ratios of 50% and 61.8% for support.

Related post:
China Minzhong: Accumulate on weakness.

Inflation is not going away.

Between inflation and deflation, governments would rather have the former. However, if inflation remains elevated over a prolonged period, then, we will have problems aplenty.

I am not an economist and this is not going to be an economic essay. This blog post is inspired by a report by Bloomberg which says how elevated inflation in Singapore is persistent and unlikely to go away. The repercussions are real and grim.

As the negative effects of inflation would affect middle to lower income earners more than the rich, it is even more urgent that we do something to at least protect our wealth.

Sections from Bloomberg's report:

Singapore is grappling with the elevated inflation that comes with years of economic growth and population expansion on an island smaller than New York City, with rising demand fueling record property and car prices.

Singapore has the highest inflation rate among 27 economies with GDP of at least $100 billion and classified by the International Monetary Fund as advanced. The island’s inflation has exceeded 4% every month but one since November 2010, more than double the 1.9% average in the past two decades.

Singapore, which uses the exchange rate to manage inflation, unexpectedly refrained from slowing the pace of its currency’s appreciation in its October policy review even after the economy contracted last quarter. The Singapore dollar’s 6.4% gain this year has done little to damp inflation stemming from domestic price pressures.
Higher car and property prices and the measures to tighten rules on hiring overseas workers are driving up the “overall cost structure” of the economy, spurring inflationary pressures that are a result of “self-imposed” policies, according to DBS Group Holdings.

I have shared my thoughts on wealth creation here on a regular basis. We want to grow our wealth but for many, taking the step to at least protect their wealth from being eroded by inflation would be significant and, in certain cases, it would be quite an achievement. All of us have different circumstances, after all.

It is more important now than ever before that we make sacrifices and put in place plans to secure our financial future in a world that is increasingly uncertain. People who still think Singapore will continue to do well simply because we are in Asia, the future global growth engine, should hedge their positions. Things could get worse.

Read Bloomberg's report: here.

Related posts:
Go to the right side bar and look for the box with the label "Wealth Creation: Beating inflation" for my earlier blog posts on the topic.