Saturday, August 1, 2009

Bad news over the weekends

According to my finance lecturer, the worst performing day of equities for the past 100 years is not Friday, but Monday.

Apparently, the worst news are released when market closes on Friday as companies hope that investors have a nice weekend to enjoy thus mitigating the sell down that will happen on Monday.

It rarely works.

Perhaps this is why Great Eastern reported the “good news” that it will take a hit of 250M for its Q3. This is a significant payment as the profits for its Q2 is only 97.7M. Understandably, OCBC will also be dragged down on Monday when market reopens as it expects to take a 218M hit on its books in 3Q.

Of course it is no mere coincidence that OCBC will be reporting a decent set of 2Q results on Monday (3rd August) to mitigate the negative news.

I am not sure how market will react on Monday, but I do feel puzzled that GE and OCBC are not acting on shareholders interest, but on customers’ interest.

The objective of all (for profit) firms, theoretically is to maximize shareholders value. Considering DBS who have paid out only 10% of its earmarked impairment fund for DBS High Notes and Minibonds, it has incurred the wrath of many except the stakeholders.

I presume that GE is expecting this move to increase its image and translate to better sales and maximizing shareholders’ value in the future.

That said, GE and OCBC are great companies to own and if their stock prices dipped to an attractive level of $10 and $6 respectively, there is no harm picking them up for long term investment.