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Olam May Rally Despite Muddy Waters

Olam traded fairly well last week considering the ongoing attack by Muddy Waters.

Certainly Friday there was an uptick in selling, possibly Muddy Waters shorting trying to close the stock in a weak position Friday afternoon. However, Olam hung on exceptionally well and as far as the chart goes, managed to form a strong buy hammer, so if you are short it may be time to rethink your position.

This is an encouraging sign for this weeks trading.

In Olam’s favor also is an improved outlook for the sector in 2013, food prices are expected to rise and regionally ASEAN +6 will speed up local GDP.

Of Muddy Waters seven attacks on companies in China, they all have a common theme, fraud and “accounting anomalies”, as I have said before they tend to feed off the Western view that those of us in Asia are somewhat less sophisticated, or more sinister than our counterparts in the West. Muddy Waters attacks work best when the shareholders are foreign entities, and Muddy Waters gets to cash in on their existing mistrust of China/Asia. Of course this is completely untrue, America most definitely has proven to be the country that produces corporate fraud at a level so vast it has more than once impacted the global economy.

It is important to remember when reading all the Muddy Waters press that not all of his targets have collapsed, and fraud has not always been proven, the Muddy Waters strike rate in relation to sinking companies or proving criminality is pretty low. What the Muddy Waters press machine does is create doubts on a company, without proof or accountability for a quick buck, while there is nothing wrong with making a quick buck, the Muddy Waters approach is beginning to wear thin, there are now a trail of innocent investors and managers whose businesses suffer lingering suspicion but with no proof of having committed any accounting breach.

But I do think it is harder to scare Singapore investors, wherever they are from. Singapore has a stellar reputation and rightfully so, that is why I predict that the Muddy Waters attack on Olam is a strategic error, Muddy Waters will lose this battle.

Olam PE against Industry PE

Our Next Olam vs Muddy Waters Chat Room will be open Tuesday, US Market Open 22.30 Singapore time, if you would like to join us, click here