Hidden inside every chart is a story. A story about where the price has been and where it might go in the future. Some stories are obvious. Others are a little more difficult to figure out.
Indices Updated : 06:59:05
Monday, March 31, 2008
dead-cross
KLCI ends down 0.9% at 1247.52 in moderate volume, snapping 8-day rally, as some investors bet recent gains in government-linked heavyweights have outpaced future earnings potential. Market breadth negative with losers outpacing gainers 509 to 230; index tipped to head towards 1226 support (8-day moving average) tomorrow in absence of positive catalysts. Local end-1Q window-dressing is likely to have been completed today. The market is turning bearish (breached 1250 psychological support) and the 'dead-cross' at the 50- and 200-day moving average marks a potential turn day.
KLCI ends +0.3% at 1258.41 in heavy trade; buying interest in stocks across sectors on end-1Q "window dressing" by local funds. Some 949 million shares change hands, market breadth positive with gainers outpacing losers 498 to 237. Retail interests concentrated more on speculative lower liners and the select heavyweight stocks that had encountered sharp falls. Investors are expected to continue increasing their exposure for a further technical rebound ahead, before the current rally shows sign of exhaustion, likely near to the 1,300 psychological level or the 40-day SMA near 1,325.
March 27, 2008 -- ANOTHER day, more bad news for the stock market. That's been the pattern.
Yesterday it was a surprisingly bad drop in sales of durable goods, plus speculation that giant bank Citigroup might have a frighteningly big loss this quarter.
On Tuesday, the gloom was caused by a collapse in consumer confidence and news that home prices were sliding quickly.
Tomorrow it'll be something else. The day after that, thankfully, will be Saturday - so maybe nothing bad will happen.
It's all enough to make an investor turn tail and run.
But what if you still have some money left after paying the outrageous price of gasoline and filling your bags with overpriced groceries at the supermarket?
What if you still have the nerve to invest in something - anything - even though your house didn't turn out to be the deal you thought it was?
Normally I'd call folks on Wall Street for advice on investing in this environment, but I already know what they'd say - buy stocks and hold them for the long term.
How long? Just long enough for the person giving that advice to be out of sight if the move doesn't pay off.
If you missed it, The Wall Street Journal did a fine front-page piece yesterday about the stock market's "lost decade," when Treasuries did better than stocks.
Not surprising, but it's nice to see someone else holding their nose.
So here are some ideas that might protect you in a bad economy and might even make you a few bucks.
Let's start with stocks - although they are not the safest investment for these times.
Let me state very clearly that stocks are likely to be the most dangerous and volatile investment over the next few months.
This is another warning - stocks could drop precipitously.
Prices of equities haven't retreated nearly as much as they should have, maybe because - I suspect but can't yet prove - the federal government is holding a safety net under them.
That being said, this should have been a fine year for stocks. And it still can be if you pick your spots.
It's a well-reported fact that the stock market historically does well in the last seven months of a presidential election year like this one, up 13 of the last 14 times.
That means the rally should begin in June.
There are several other favorable trends for stocks, like prices rising during options expirations week and at the end of each month and quarter.
Last week options expiration helped the market. This week professional money managers wanted the market up so they could show clients better results.
But all of these patterns could - and probably will - be interrupted by more bad news.
First-quarter profits that come out in a few weeks aren't going to wow anyone. Projections for the rest of the year could also sting.
Oil companies should keep earning well, especially since Washington is ignoring their excessive profits.
And companies involved in agriculture and commodities might also thrive.
Safe plays would be companies that produce the staples of everyday consumer life.
So walk around you supermarket and see what people can't do without - and then buy stock in the manufacturer. That gets us to more conservative and sensible stuff.
Treasury securities and certificates of deposits - as boring as investments come - will let you sleep at night, but maybe not so well.
CDs are paying next to nothing. And you can lose money in Treasuries if the bond market sinks and interest rates climb.
And that could happen, especially if I'm correct that economic statistics, like the nation's payrolls, make the economy look stronger than it really is over the next couple of months.
If you're worried about the US financial system, then you'll want to look at assets that aren't denominated in dollars.
Buy some diversified foreign bond funds. Stay away from any one particular currency - especially the euro - because the US could easily drag Europe into a recession that'll hurt those investments.
Buy into some precious metal funds, or Exchange Traded Funds that specialize in gold, silver or other commodities.
You could also do what I recently did - bank hop.
In desperate need of capital, many banks are now offering multi-month premiums to new customers.
Chase gave me a 4.5 percent annual rate; an annuity from Allstate 7.5 percent.
Not exciting, but I'd rather get my excitement at the amusement park than in my portfolio statement.
KLCI ends +1.3% at intraday high 1245.42 in moderate volume of 751.1 million shares; market breadth positive with gainers outpacing decliners 402 to 298 with buying interest from both local, foreign funds across all sectors providing market buoyancy. Sustained buying interest may help benchmark index test psychological resistance at 1250 tomorrow but most expect profit taking to narrow gains. The market has enjoyed a healthy rally over the last 6 trading sessions, partly supported by the Invest Malaysia 2008 conference. Some value hunting emerged over the last few days but it may be a struggle for the benchmark to overcome the gap down on March 10 (1283.19 to 1242.64). Notes KLCI March Futures +7 points at 1230, but at discount to cash market.
Most Asian financial markets rose in thin holiday trading Friday after a turbulent week. Japanese shares were buoyed by gains in property developers and financial issues. The Nikkei 225 index climbed 222.13 points, or 1.81%, to close at 12,482.57.
South Korean shares extended their winning streak into a fourth session amid easing concerns about global inflation after commodities prices declined. The Korea Composite Stock Price Index, or Kospi, added 22.30 points, or 1.4%, to 1,645.69.
Trade was also subdued because many markets in Asia, Europe and the Americas were closed for Good Friday. Regional markets that were off included Hong Kong, Australia, India, Indonesia, New Zealand, the Philippines and Singapore.
It was a quiet end to a week that began with global markets plunging on news that JPMorgan Chase would buy troubled U.S. investment bank Bear Stearns, which had been battered by the subprime mortgage crisis.
Asian markets rebounded Wednesday after the U.S. Federal Reserve cut rates by a hefty three-quarters%age point, sparking a huge rally on Wall Street.
Worries linger about the outlook for the American economy and much of Friday's gains in Tokyo were from a short-term adjustments. In Thailand, the key index rose 0.7%, while Malaysia's market inched up 0.2%.
Chinese stocks were mixed, with the benchmark Shanghai Composite Index edging lower as market heavyweight PetroChina fell 4%, outweighing gains in steel makers.
The benchmark Shanghai Composite Index fell 0.2%, or 7.47 points, to 3,796.58. The smaller Shenzhen Composite Index rose 1.4% to 1,173.14.
The Shanghai index was up over 2% at one point yesterday afternoon after plunging more than 6% in mid-morning, a sign that institutional investors were already beginning to bargain hunt.
In currencies, the dollar was trading at Y99.60 at midafternoon, down from Y100.00 late Thursday in New York. The euro rose to $1.5444 from $1.5433.
In Asia, markets in Australia, Hong Kong and New Zealand will remain closed Monday.
On Friday KLCI ended +0.2% at 1189.06 in razor-thin volume. Late buying interest from local government funds on government-linked stocks helped offset retail investor sell-down, subdued trading interest also due to Easter holiday closure in some regional markets. Market breadth ended negative with losers outpacing advancers 376 to 285. Index tipped to trade in 1170 to 1200 (psychological resistance) but government funds may lend support in view of country's annual investor conference next week. The market may be propped up to make it pretty for fund managers to look at and it will be interesting to hear the PM speak amid the unfolding political drama, which may drag on for some months.
(From THE FAR EASTERN ECONOMIC REVIEW) By Simon Montlake
In the United States, a nation that likes to see itself as a color-blind meritocracy, debating the electoral prospects of Senator Barack Obama, an African-American, can be a delicate matter. No such decorum applies, however, in multiracial Malaysia, where federal and state elections take place this month. Race is the electoral x-factor, and it doesn't whisper: it screams. To cast a vote along racial lines is expected. Such habits are hardwired into a race-based party political system that has endured, almost unaltered, since independence in 1957. The country's current prime minister, Abdullah Badawi, who scored a big win in 2004, is betting that this system can deliver another victory on March 8. The question is at what cost to Malaysia's long-term prosperity and dynamism?
In Malaysian elections, ideological differences and personal mudslinging are secondary to communal and religious loyalties. Each party seeks to corral its racial constituency into the ballot box. Ethnic Malays are urged to support the Malay-led National Front coalition, lest the other races squeeze them out. To the outsider, such a scenario is farfetched: Malays, the dominant race by dint of population and native roots, command the heights of public life. Mr. Abdullah, like his predecessors, is a Malay-Muslim. Senior ranks in the civil service, judiciary and security forces are overwhelmingly Malay. But in the zero-sum game of Malaysian politics, to assert forcefully the rights of non-Malays is to challenge the political and economic status quo.
This explains the recent uproar over the emergence of the Hindu Rights Action Force, or Hindraf, an Indian activist network. Its ability to mobilize tens of thousands of angry Indians last November was a challenge to Mr. Abdullah. In response, the courts jailed five Hindraf leaders. Hindraf has also turned the tables on the Malaysian Indian Congress, the junior partner in the governing coalition. Its veteran leader Samy Vellu knows that his position in the cabinet is contingent on delivering the Indian vote. Hindraf supporters are likely to desert his candidates, though. That puts a question mark over the mic's bargaining clout in a future coalition.
Yet far from forcing the government to address their long list of grievances, particularly economic marginalization, a protest vote by Indians may simply further weaken Mr. Vellu, their lone ethnic voice in the cabinet. Some Malaysian-Indian intellectuals even warn that Hindraf's tactics are election fodder for Malay politicians who seek to exploit and prejudices of their followers. In this scenario, a collapse in the government's Indian vote may be matched by a strong turnout by Malays.
Government aides defend the decision to imprison Hindraf leaders as necessary to prevent violence that may have resulted in another high-profile rally in Kuala Lumpur. Hotheaded Malays had threatened to take the fight to Hindraf supporters, these aides say, raising the specter of race riots. Such a risk cuts deeply in Malaysia, particularly for Mr. Abdullah's generation who recall deadly postelection racial clashes in 1969. So the price of stability and social harmony, to Malaysia's governing elite, could be the curtailment of civil and political rights.
But to some observers, the government's handling of Hindraf and other protest movements underscores Malaysia's leadership challenge. Malay politicians only know how to posture, heckle and, when in doubt, send in the riot police. The kinds of protests that pass off peacefully in Manila or Jakarta, where security forces have learned from experience how to contain crowds, are liable in Kuala Lumpur to end in chaos. Last November, while Malaysia's state broadcasters stood clear, foreign networks carried powerful images of columns of riot police breaking up the Hindraf rally with cannons and tear gas. Information Minister Zainuddin Maidin's response found its way to YouTube. The opinion of some was that any defiance of a government order --protests are routinely ruled illegal -- could be regarded as treasonous.
This mindset is increasingly prevalent among Malay politicians who tune out dissenting voices, says Bridget Welsh, assistant professor of Southeast Asian studies at Johns Hopkins University. A longtime Malaysia watcher, she argues that Mr. Abdullah has allowed Malay chauvinism to choke off the pragmatism that has long guided the country's policymakers. Instead of trying to tackle worsening race relations, the government is taking the opposite tack. "When they use force, it only backfires. Using force is all they know. Malaysia's government doesn't realize that criticism can be a good thing," she says.
Race determines much more than whom Malaysians elect to parliament. It determines where they live, pray, eat, socialize and school their children. The fault lines have hardened in recent decades, particularly in education and public service. Malaysia celebrates its diversity, slickly packaged for tourism, but social integration, it seems, isn't on the menu. Some analysts blame the spread of conservative Islam teachings that stress the separation of Muslims from non-Muslims. Once secular public schools now have Muslim prayer rooms. This trend began in the 1980s, when former Prime Minister Mahathir Mohamad tried to outflank pas, the Islamic opposition party, with more overtly Islamic policies. The current debate over the erosion of secular legal rights for non-Malays as Shariah courts assert their primacy on family law can also be traced back to Mr. Mahathir's office.
The foregrounding of racial politics over national identity isn't new or unique to Malaysia, of course. But a recent national youth survey conducted by the Merdeka Center, a nonpartisan organization, suggest that the views of young Malaysians are skewered by race, to an extent that a previous, less segregated generation probably didn't share. Asked whether they thought that Malaysia's government treated everyone equally, 58% of ethnic Malays agreed, while 37% disagreed. For Chinese and Indians, the answers were reversed: 59% and 58%, respectively, disagreed with the statement. Another question evoked a similar cleaving of youth opinion: Are Malaysians free to speak what they think without fear? While 67% of Malays agreed, only 44% of Chinese and 56% of Indians concurred. The polling was carried out before the Hindraf mass protest and subsequent crackdown.
Managing race relations is a challenge in any multiracial, multifaith society, and even countries that actively promote communal integration, such as the U.S., often stumble over racial and religious fault lines. Simply tag Senator Obama as a Muslim and watch sparks fly. For all the heat and passion generated by Hindraf and other protest movements, as well as the cut and thrust of electoral politics, Malaysia isn't a racial tinderbox. On the streets of Kuala Lumpur, ordinary Malaysians rub along, with their divisions oiled by humor, shared interests and pragmatism. As a former British colony, and reaching back earlier to the 16th century heyday of Malacca as an Asian trading hub, Malaysia shares with Hong Kong and Singapore a mercantile, secular openness and respect for diversity. Indeed, this treatment of different races might be the secret of its success, both as a colonial state and as a modern Asian nation. It's an old story: absorb the talent and energy of newcomers and harness them to the common good. Then watch the economic transformation.
But can this openness survive the political forces roiling modern Malaysia? As one government aide put it, the country has done reasonably well for the more than 50 years since independence. The next 50 will be more challenging, though. One reason is demographic: Malays have larger families than other races. Moreover, immigration policies favor arrivals from Muslim countries, both for migrant labor and permanent settlers. Minorities in Malaysia who complain about economic and political discrimination are convinced that Muslim migrants will be absorbed into the Malay voting bloc, further relegating non-Malays. Far from embracing openness, Malaysia is playing politics with immigration. In January, stricter rules were imposed on overseas Indians working in Malaysia in the wake of the Hindraf rally.
Fed up with second-class treatment, minorities are voting with their feet. The brain drain is hard to quantify, as many white-collar Malaysians emigrate to Singapore and elsewhere without giving up their passport. Time magazine reported last year that around 70,000 mostly Chinese Malaysians had renounced their citizenship over the last 20 years. It's not only the children of the privileged who move on. An Indian taxi driver explained that his university-educated daughter had moved to Singapore after failing to land a civil service job in Malaysia. She is now stamping passports at Changi Airport, he related proudly. That such a position was denied to her in Malaysia speaks volumes about how public jobs can be allocated, and the difficulty of reforming such a system.
The heart of Malaysian politics, beating away after nearly four decades, is the New Economic Policy adopted in the wake of the 1969 race riots. The NEP laid out affirmative action for Malays, who resented the Chinese for dominating the private economy. Privileged access to government contracts, privatized share allocations, civil service jobs and university places has created a Muslim-Malay middle-class. Foreign analysts draw comparisons to South Africa's pro-black policies since its democratic transformation, while pinpointing the same structural weakness of such a system, namely the risk of political corruption. While ordinary Malay bumiputras, or native sons, have reaped the benefits of the NEP, Malay politicians are the biggest winners, since they are the gatekeepers. Companies succored by such largesse are unlikely to compete on the global stage. It's also proven an impediment to negotiating a bilateral trade deal with the U.S., which wants to include government contract biding in any final agreement.
Such criticism is unpopular in Malaysian government circles, though. To question the NEP is to arouse the fury of Malay firebrands. Former European Commission Delegation head, Thierry Rommel, has been among those vilified for labeling bumiputra privileges as protectionism. In 2006, academic Lim Teck Ghee was forced to resign as director of the Center for Public Policy Studies after it released a report that claimed the NEP had already achieved its goal of lifting Malay corporate ownership above 30%. This figure is hotly disputed in Malaysia. The official figure in 2004 was 18.9%, but Mr. Lim and others believe it's much higher, given Malay control of government-linked companies. In 2006, Mr. Abdullah effectively reset the longstanding target of 30% bumiputra equity to 2020 as part of a five-year economic plan. Non-Malays suspect that the economic playing field will never be leveled, though. Only by converting to Islam, they joke, can they hope to get a seat at the table.
The NEP was devised as part of a broad antipoverty policy. Government officials say goals aren't race specific, and point to higher incidences of poverty among Malays, particularly in rural areas. Mr. Abdullah has sought to spread wealth into these areas by promoting economic zones, such as the Iskandar Development Region in Johor Baru, across from Singapore. Such projects are getting a full airing in the current election campaign. After decades of oil-fed expansion in Kuala Lumpur and Penang, spreading the growth more widely is a wise move. But the NEP means that government contracts to build the zones are awarded based on race, not competency or price. If the ultimate goal is to overhaul Malaysia as a competitive economy, such embedded cronyism has its own built-in limitations.
Debunking the NEP is easy. Voting it out will be much harder. Why would a majority dismantle its own privileges? Perhaps this is the ultimate handicap of Malaysia's race-based coalition and the zero-sum game of racial politics. Only Anwar Ibrahim, the former deputy prime minister cast out in 1998 by Mr. Mahathir, dares oppose the NEP. Given that his audience is largely Malay, credit is due for challenging dogma. But Mr. Anwar is still hostage to racial politics. His efforts to engineer a secular opposition don't convince non-Malays, who remember Mr. Anwar as a firebrand Muslim.
In opposition, as in government, the same rules apply in Malaysia: race comes first. It will take a visionary leader to balance the demands of Malay privilege with the long-term needs of the country. So far, Mr. Abdullah has shown that he is not that leader.
---
Mr. Montlake is a free-lance writer based in Bangkok.
KLCI ended +0.6% at 1186.54 in moderate volume, rebounding from an intraday low of 1179.09 on mild bargain hunting from local funds. Firmer regional bourses and DJIA's 3.5% overnight gain spurred buying interest in early trade, lifting the benchmark to intraday high of 1206.84 but profit-taking weighed on stocks. Some 694 million shares changed hands; market breadth ended negative with losers outpacing gainers 431 to 312. Benchmark tipped to trade in 1170 to 1190 band Friday (market closed Thursday for Muslim religious holiday); KLCI March Futures ended down 20 points at 1163, reflecting weak underlying sentiment. RHB Research takes contrarian view; says in a note, "the index may have a chance to rebound towards the 1200 psychological level and the 10-day SMA near 1,224 in near term on value hunting. "Strong follow-through buying momentum may push the index to close part of the huge 32-point gap near the 1251-1280 region," RHB says.
KLCI ends +0.2% at 1180.02 in moderate volume, reversing intraday low of 1166.83; this after Prime Minister announces his new cabinet line-up, which eases political uncertainty; some 700 million shares changed hands; market breadth positive with advancers beating losers 413 to 360. The fact that some old names weren't retained on the list was heartening. Now it remains to be seen if they (the newly appointed ministers) can do a good job and make a real change to become more transparent and efficient; market to trade within 1170 to 1190 range tomorrow, depending on outcome of FOMC meeting later today.
That's the only way you can describe what the Federal Reserve faces as it meets today to discuss interest rates.
There's no doubt that Fed chief Ben Bernanke will again try to lower borrowing costs in light of the virtual collapse of Bear Stearns over the weekend and rumors yesterday of a similar fate for several other Wall Street firms, including Lehman Brothers and MF Global.
But there is also very serious doubt that this next rate cut will be any more effective in propelling the economy forward than the five others since last summer.
One Wall Street veteran put the problem, or rather problems, succinctly in perspective: "There really is no solution from the Fed. It's all about time. There's really no quick fix," he said.
Time may heal all wounds, but right now the Fed and the Treasury Department are just trying to stop the bleeding.
The Central Bank can't just do nothing, although all its usual potions have proven ineffective to this point.
Cuts in the few interest rates that the Fed controls haven't spurred people or companies to borrow, or petrified banks to lend.
And precedent-setting interventions in the markets, like the Fed's active role in JPMorgan Chase's purchase of Bear Stearns, have only made the financial world wonder why Washington is so jittery.
So the Fed has had to resort to the unconventional, like throwing huge amounts of monetary support into the teetering financial system.
And perhaps even propping up the stock market - again.
Stock prices were down sharply yesterday morning, which wasn't surprising, considering that markets around the world had already sold off.
But then suddenly, with President Bush publicly talking about his meeting with the Treasury's Plunge Protection Team (PPT), stocks rallied nicely and even closed with a little gain for the day.
That's one thing off the mind of the Fed, which has scheduled its rate announcement at about 2:15 p.m.
But there are bigger issues involved.
Each time the PPT - formally known as The President's Working Group on Financial Markets - makes a move to intervene in a financial crisis, it places the government at odds with the free market system treasured in this country.
This wouldn't be the only new ground broken by the Fed in recent weeks.
The Central Bank has essentially underwritten the financial errors in judgement made at Bear and a host of other banks and brokerages while placing the US government right smack in the middle of perhaps the greatest money mess since 1929.
The trouble is that this aggressive Fed action has stoked increased speculation in commodities like oil and Treasury securities.
Wall Street calls the current scenario "stagflation" and if you didn't live through the last time it happened in the 1970s, you are in for a really big treat - oh, make that threat.
Last Sept. 18, when this column was headlined Why an interest-rate cut is the last thing we need, you only had to pay $1.38 for one euro, the European currency.
Today, the dollar's value has depreciated tremendously and you'd have to give up $1.57 for a euro. For eign investors are starting to fear dol lar-denominated investments, like I feared would happen in that September col umn. And that has changed the dynamics of rate cuts. By the way, back in Feb. 2007, when Bernanke took over the Fed, you only had to pay $1.21 for a euro.
While Malaysia's government has prolonged its pitch to sell a 10% stake in the Kuala Lumpur exchange to NYSE Euronext and Middle Eastern exchanges -- in hopes of getting a better price -- Bursa's trading volume has plummeted, and the shares (ticker: Bursa.Malaysia) have been in freefall.
After March 8 elections, in which the government nearly lost the reins of power, shares in Bursa plunged by more than 10%; they're down nearly 50% since an October '07 peak. The benchmark Kuala Lumpur Composite Index fell 9.5% on March 10 alone, shedding $30-billion-plus in market capitalization -- its worst showing since October 1987. And with political unrest plaguing other corners of the region, "the environment for listed exchanges in Asia is rapidly deteriorating," says Arjan van Veen of Credit Suisse in Sydney.
Malaysia, however, may not stay down for long. Morgan Stanley and Goldman Sachs now see emerging value in Malaysia, whose economy is growing almost 6% a year. It has amassed foreign-exchange reserves near $120 billion, is a net exporter of oil and gas, and is the world's largest producer of palm oil, increasingly used for biodiesel.
Goldman economist Michael Buchanan remains "positive" on Malaysia as its currency, the ringgit -- up 16% in the past two and a half years against the U.S. dollar -- could rise another 10% in '08.
Asia has seven of 22 listed global exchanges: Australia's ASX (ASX.Australia), New Zealand's NZX Regulation Exchange (NZX.New Zealand), Japan's Osaka Securities Exchange (8697.Japan), Singapore's SGX (SGX.Singapore), Hong Kong Exchange (HKeX.Hong Kong) Malaysia's Bursa and Philippine Stock Exchange (PSE.Philippines). Two of the region's biggest bourses, Tokyo's and Korea's, are unlisted, but aim to list this year. Also toying with listing: Jakarta and Karachi, following demutualization.
For five years, Asian bourses had produced spectacular returns, as volume and velocity grew, with most stocks clocking seven- to ten-fold rises from their '03 lows. They "have monopolistic positions, are cash-rich, charge some of the highest fees for exchanges anywhere in the world and [have] a pipeline of pending IPOs and secondary issues," says analyst Andrew Hills of Sydney brokerage Wilson HTM. Until a year ago, there was lot of talk of mergers and consolidation of exchanges in Asia following NYSE's acquisition of Euronext. But as global markets reel, investors must wonder: Is the exchanges' party over?
"Far from it," says analyst Bob Leung of Citigroup, Hong Kong, making the case for Asia's potential by noting it makes up just 9% of total global market capitalization, whereas Asian economies produce nearly 30% of the world's output and companies are still mainly private, family-owned or state-controlled.
And there's no shortage of exchanges trying to get a piece of the action. Shanghai threatens to take away the shine of Hong Kong, whose stock has plunged 48% from its November peak and still trades at more than 20 times this year's prospective earnings. Shanghai is aiming to turn itself from an alternative-listing destination for Chinese corporations to a preferred one. Meanwhile, trying to figure out when to buy Singapore-bourse stock, says Merrill Lynch's Andrew Maule, "is like catching the proverbial knife." SGX plunged 9.8% on March 12, after several brokerages cut target prices. SGX stock is down nearly 70% from its October highs.
Yet a future, key growth driver for Asia could be derivatives markets, Leung says. Also, exchange-traded funds are only now starting to take off in Asia, and warrants and options trading have only recently started gaining momentum.
Question mark over RM35.9bn worth of jobs on the west coast. The outcome of the recent general election has cast a pall over the infrastructure sector. Progress of approvals and implementation of the projects could be at risk for jobs in the states of Penang and Selangor, which fell to the opposition. We identify five mega jobs totalling RM35.9bn in Penang and Selangor which could be at risk. Separately, about 30% of overall 9MP allocation has been spent thus far.
NCER could fall behind other growth corridors. The NCER is likely to take off later than expected as most of the planned infrastructure projects are located in Penang. RM50bn or 28% of the RM177bn allocation is earmarked for infrastructure works. Expectations of greater transparency on the part of the new state government could put the planned projects on hold temporarily.
Emphasis on companies with growing overseas exposure. Although we are turning cautious on the prospects for the local construction sector, we still like companies that offer greater overseas exposure. We remain positive on the prospects for Gamuda and WCT Engineering as they offer 50-65% earnings exposure to the Gulf states as well as long-term exposure to Vietnam.
Sectors that could lose out. Concerns will emerge over cyclical sectors such as construction and property due to possible disruptions and weakening sentiment. Investors are also likely to fret over sin sectors like gaming, NFO and brewery in view of the opposition’s control over several non-Malay belt states. Another concern is the opposition’s economic policies which include minimum wages, lower petrol prices via higher subsidies from Petronas as well as a socialist safety net.
The key concern would be the impact on implementation of various long-term projects, especially the Northern Corridor Economic Region, with Penang falling into the opposition's hand and Kelantan becoming a much stronger fort of PAS. As it is, the incoming Kedah Mentri Besar has already said that he will review the implementation of NCER, including the Yan Petroleum Industrial Zone project. This development may have some negative effect on share prices of stocks like MRCB, Scomi Group, Scomi Engineering and UEM World. Concerns may also arise about the implementation of other projects like the Ipor-Padang Besar double tracking and Pahang-Selangor Interstate Water Transfer, which may exert selling pressure on share prices of companies like MMC, Gamuda and Kumpulan Perangsang Selangor.
The construction sector will be most affected by the changing political landscape. We are concerned over implementation delays for yet-to-be awarded 9MP mega projects, as resources could be geared towards: (i) an overhaul of the government’s machinery and delivery system, rather than project implementation, and (ii) socioeconomic causes such as maintaining subsidies. Likewise, some state projects now under opposition rule could be sieged by concerns on land alignment and transparency of project awards. The implementation of the NCER development initiative may also see some setback. We expect near-term prospects to be unexciting and challenging in terms of margins compression.
If you ever wondered why the market heading south since January 08, instead all the historical bla bla achievements by the Goverment. By now, we already knew the answer... so get ready for another huge fall tomorrow.. Salute to all the Fallen Bursa Warriors!!
Abdullah Must Take Full Responsibility For Defeat,... I think the Japanese would have committed harakiri. - Dr M
KUALA LUMPUR, March 9 (Bernama) -- Tun Dr Mahathir Mohamad said Sunday his successor, Datuk Seri Abdullah Ahmad Badawi, must take full responsibility for the major defeat suffered by Barisan Nasional (BN) in the just-concluded general election.
"He should accept responsibility for this, just as in 2004 the huge victory was reportedly due to him, 100 per cent, and that was said by the then secretary-general of Umno.
"But now also he should accept 100 per cent responsibility. He has destroyed Umno, he has destroyed BN, and he should be responsible of this massive defeat," he told a news conference held hours after the polls results were announced here.
The former prime minister said it was shocking that the BN had been trounced in five states and the federal territory due to the same signal sent by all the three major races -- Malay, Chinese and Indian.
"I think the Japanese would have committed harakiri. But I think Malays are not up to this yet. I think he should consider stepping down," he said, adding adding that he would have done the same thing if he was in Abdullah's shoes now.
To a question on whether the BN had miscalculated in holding the general election early, Tun Dr Mahathir said he doubted that postponing it another year would make any difference in terms of results, as "the people's dissatisfaction against Abdullah's administration was already boiling over."
"Four years after the last election, he has done so many things which were wrong but these people (media) keep on reporting how the people loved him," he said.
Issues leading to the dissatisfaction against the government included the perception that despite high figures on economic growth announced by the government as well as the launch of development corridors, the people on the ground did not feel anything (its benefits).
"They have observed that this government is run by one family for the family. As long as you have that kind of arrangement where family takes precedence over Cabinet, over the government itself, I think people would want to go against them," he said.
Answering another question, he said it was up to Umno to decide on Abdullah'successor should the latter step down, or probably Datuk Seri Najib Tun Razak could take over.
"Datuk Seri Najib has scored an amazing victory, more than the 2004 result when it was the best year for BN. His majority increased while Abdullah's decreased quite significantly," he said.
Dr Mahathir said a government formed with a simple majority was a weak government, especially in a multi,racial country which could cause instability, among others, and later affect investors' confidence.
He, however, said there was hope yet for the BN to rectify the damage, provided it took note of the signal sent by the people.
To another question, Dr Mahathir said he believed it would be difficult for Abdullah to step down voluntarily as, until now, Abdullah still did not comprehend the ramifications of the losses and put the blame of the defeat on the people instead.
Expressing his sadness over the losses, the former premier said he did not expect BN to lose to such an extent.
On the resurgence of Datuk Seri Anwar Ibrahim in this election, Dr Mahathir said he believed that Anwar was still "relevant" but he would never become the prime minister of this country.
Asked about the possibility of the Opposition keeping their promises as stated in their manifestos, he said: "They simply made such promises as they did not think that they would form the government but I doubt they could deliver their promises when they gained control of five states."
Dr Mahathir said he would countinue to play his role as a citizen by voicing out his opinion as well as sharing them if needed.
"I don't want any official title, senior minister or advisor, but if they come to me and ask my advice, I'm willing to share it for the benefit of the country," he said.
On his son Datuk Mukhriz's victory in the Jerlun parliamentary constituency, he said it was just a normal success, albeit with a bigger majority.
KLCI ended +1.5% at 1299.69 in thin volume, ending an 11-day losing streak, as recent selldown lowered valuations and made some stocks attractive relative to earnings potential, dealers said. Market sentiment also lifted by gains in regional bourses, boosted by overnight advance on Wall Street. Volume thin with 571 million shares changing hands; market breadth ended positive with advancers outpacing losers 481 to 239. Index tipped to trade in 1290 to 1310 band tomorrow as local funds help lift index-linked stocks and shares of government-linked companies in a show of support ahead of March. 8 general elections. The market is on a technical rebound because it's been extremely oversold. We expect some profit-taking to emerge ahead Saturday's general election but local funds may actively support the market.
Malaysian shares ended lower Wednesday, dragged down by selling pressure from foreign funds who offloaded stock following recent market downgrades by several brokerages. The Kuala Lumpur Composite Index closed at a five-month low, dropping 33.79, or 2.6%, to 1280.23, after falling to 1277.69 during the day. Trading volume was moderate with 810 million shares changing hands. Decliners overwhelmed advancers 672 to 160. The shares were affected also by regional markets, which dropped on continuing concerns that the subprime crisis would trigger a recession in the U.S. and hit global economic growth. Foreign funds Wednesday continued to pare their holdings in large-cap index-linked heavyweights ahead of Malaysia's general elections Saturday. However, a technical rebound is expected tomorrow due to oversold position.
KLCI ended down 1.2% at 1314.02 in thin volume, off intraday low of 1311.98. Rising concerns U.S. economy may slip into a recession, coupled with CLSA's downgrade on Malaysia late Monday weighed on investor sentiment with foreign funds leading the selloff. Market breadth negative with decliners outpacing gainers 521 to 218. Th benchmark index expected to trade in 1300 (psychological support) to 1320 range tomorrow. The global financial system is at great risk; investors are naturally wanting to move from equity holdings into cash and we've not seen the end of bad news from the U.S.
BRDB Expected to rebound toward 2.30 (resistance level - Cut loss level at 1.50
(Pix: Courtesy from AnakPerlis.com - Datuk Seri Shahidan Kasim welcomed Datuk Seri Najib Razak - his willingness to suck not just limited to hand, but also ass in order to stay as Perlis Menteri Besar)
KLCI ended down 2% at 1330.61 in thin volume, off intraday low of 1329.17, led by declines across all sectors with decliners trouncing gainers 587 to 171; Falls in regional markets and drop in U.S. market Friday exerted selling pressure domestically. Volatile trade expected to persist tomorrow with benchmark index tipped to trade in 1320-1338 (neckline of bearish Head & Shoulder formation). The market is not stable. Any rebound is a selling opportunity. It's difficult for local funds to defend this kind of market with regional selling pressure. The U.S. economy is in bad shape. We are likely to see big drops in the market with the U.S. economy possibly slipping into a recession.
Oil Record High US$103
Crude oil futures have topped the inflation-adjusted high set in April 1980, as the U.S. dollar's descent continues to send investors into the commodities markets. Light, sweet crude for April delivery traded as high as $103.95 a barrel on the New York Mercantile Exchange, topping a 1980 trade of $103.76 in 2008 dollars. The April contract recently traded at $103.59. Brent crude on the ICE futures exchange was trading up $1.72 at $101.82. The 1980 record predates the creation of the crude futures market on Nymex, and represents a deal on the cash market. Oil began to take off Monday morning after the U.S. dollar fell from a stable position overnight against the euro. Shortly after 9 a.m. EST, the dollar hit a new low, and oil began to rise rapidly. A fresh record for crude in real dollars came minutes later, and deals above the 1980 high were completed at about 9:55 a.m. EST. The dollar's decline makes Nymex futures, priced in U.S. currency, appear relatively cheap. The U.S. Commodity Futures Trading Commission reported Friday that net long positions in Nymex crude futures held by large speculators hit a seven-week high last week. After hitting the inflation-adjusted record, futures traded slightly lower, as new data showed the U.S. economy in worse shape than expected. Spending on construction in the U.S. fell by 1.7% in January, the fourth drop in a row. The U.S. manufacturing sector also shrank in February, the Institute for Supply Management reported. - Dow Jones Newswires
KLCI ended down 0.8% at 1357.40 in thin volume, off intraday low of 1354.79, led by declines in blue chips and index-linked heavyweights, as recent economic indicators from the US raised concern on economic growth of the world's largest economy. Market breadth positive, with gainers outpacing decliners 383 to 357, as local funds lent buying support to some stocks. Benchmark index tipped to trade between 1338 (head and shoulders neckline) and 1368 (200-day moving average) next week. Recent economic indicators from the US suggest there may be more negative surprises and this is likely to weigh heavily on trading sentiment.
YOU probably can't hear Wall Street saying this, but I can: "Damn, why does this have to be a Leap Year!?"
And the annoyance is understandable.
It just so happens that the stock market is on pace - oh, so barely - for the first monthly gain in its major averages since last October.
And the darned calendar had to toss an extra day into February this year.
Right now the stock market is up 0.35 percent this month as measured by the Dow Jones industrial average.
But it has only been in the past half week that the Dow has moved into the black - in what is a very suspicious occurrence that I'll get to in a minute or so, depending on how fast I can type.
My advice to you: Beware!
In fact, double Beware!
The stock market's sudden euphoria this week smacks of the glad tidings that Wall Street was belching out at the end of 2007.
We all know how that turned out - the Santa Claus rally in stocks may have improved the bonuses of those on Wall Street, but it turned out to be a lot less merry for investors who unwittingly bought into the hype.
This week we had the February version of the Santa rally - the bulk of the disclosures on the economy are not just bad but awful, yet investment professionals are latching onto questionable good news to talk up stocks.
Beware! Beware! Just like in December, Wall Street looks like it is trying to gun the market higher so that it can, for a change, report a good monthly performance to its customers.
Let's rewind and look at how we got most of the February gain.
It all really started with a rally in the final minutes of trading last Friday, Feb. 22.
At that point stocks hadn't been doing much of anything for the month and were facing some impending bad news this week.
Late Friday afternoon, a rumor spread the Street that Ambac Financial Group, which is in trouble because it insures bonds that aren't doing so well, was thinking of splitting itself into two parts to preserve its credit rating.
After this was reported as a certainty by CNBC, the Dow index did a 225-point reversal to close up nearly 97 points.
Investors should always be wary of these final-minute rumors. They often smack of someone trying to manipulate stocks higher at a time of day when there is very little chance of refuting the "news."
Such was the case last Friday. Ambac has never announced a rescue plan and stocks - it turned out - rose for absolutely no reason. Still, the market never gave back the gains. But there was a little bit of genuine good news this week.
Credit rating agencies have looked foolish for their part in failing to see problems with insurers like Ambac and MBIA. Even so, this week the agencies reaffirmed the Triple-A ratings of these firms, though they left open the door to a downgrade later.
There have been plenty of rumors of bailouts by the government and banks. But little has actually happened - just like last December.
Oh yeah, there was one other thing that could be construed as good news.
IBM announced on Monday that it would begin a major share repurchase that can be seen either as good or bad news.
Does the computer giant think its stock is very attractive at current levels, or is it concerned that business prospects are so weak that only the trickery of a buyback will keep its per-share earnings at levels acceptable to Wall Street?
While the good news could be fit into a thimble, there was no shortage of bad things happening.
And as happened previously, Wall Street is choosing to squint when looking at it.
For instance, oil prices stayed over $100 a barrel even though there seems to be enough of the glop around. And that has sent gasoline prices sharply higher, even though there seems to be no shortage.
The rising price of oil and gasoline is horrible news for an economy that's already suffering.
Oil has become the new way for investors to keep their assets from being ravaged by inflation, which as a result is also going up sharply.
Meanwhile, the dollar continues to hit all-time lows against the euro because investors are afraid that the Federal Reserve is turning a blind eye to inflation in a desperate effort to get the economy growing.
Consumer confidence is at a five-year low. Home prices are declining steadily, even for those lucky enough to find a buyer. And the Fed is really in a tough spot - perhaps the toughest ever.
As I've been worrying would happen, the current economic downturn is not being helped by moves to lower interest rates.
In fact, Fed Governor Fred Mishkin said the other day that what the Fed is doing "might lead to higher, rather than lower, long- term" borrowing costs.
To sum this up in cliches - the Fed might be "pushing on a string" (getting nowhere) in its fight against stagflation (stagnant economy and rising inflation).
If you get the feeling that this isn't a very good time to buy stocks, you are probably right.
It's December, 2007. It's like the year 2000. And it's the next-to-last day of an extra-long February. Caveat!
I'm a hardcore Technical Analysis Trader in the Malaysian stock-broking industry. This is a personal weblog, reflecting my personal views and not the views of anyone or any organization. THIS BLOG ALSO DEDICATED TO MY SUBSCRIBERS WHO HAVE ENCOURAGED ME AND TO THE THOUGHTFUL TRADERS WHO DESIRE TO FOLLOW PRACTICAL RULES FOR TRADING INSTEAD OF GUESSWORK AND GAMBLING METHODS.
