Euphoria, but not in the stock market....yet

As we approach the 3,000 point barrier on the STI, a key question arises- is the stock market peaking? If broad-based sentiment is any indicator, we are getting close. Some troubling observable indications:

• Skyrocketing COE prices (but maybe just a manifestation of the "kiasu-ism" on the reduction in availability) 
• An increasingly excited domestic property market (just count the huge number of ads in the Saturday edition of the Straits Times)
• A huge number of IPOs (11 so far this year, and we're only in April)
• High over-subscription for IPOs (CACHE's placement tranche was 7.2X subscribed, while the public tranche was about 20X subscribed)
• A disconnect between large cap and small cap stock price movements (small cap stocks have recently found favour)

We do not profess to be excellent market timers, but these indications may be seen as "early warning signs". Nevertheless, we note that the largest gains are often had at the later stages of a market rally. Moreover, valuations of the stock market in general does not appear too stretched, which suggests that an impending sell-off (if any) may not be too substantial. We invest for the long-term, and as long as valuations of our holdings remain reasonable, we are reluctant to sell core parts of the portfolio based on any perceived notion of where the general stock market is headed. 

We will be looking to trim positions in non-core holdings should the market display signs of "irrational exuburance", but current conditions are hardly euphoric yet.