When The Going Gets Tough

OSK Research said, while most of us are highly biased towards the fundamental approach in assessing the market, the prevailing developments may discourage such analysis for the time being.

In this regard, we are making a brief diversion and attempt to look at things from the quantitative and technical perspective. Although our findings may not be etched in stone, nonetheless it at least enables us to gauge the market’s direction and the level at which the window of opportunity opens for investors to accumulate on weakness.

What our models say. Not good, to say the least. The current political developments plus yesterday’s trading glitch certainly do not bode well for the stock market. From the quants perspective, our analysis reveals that the KLCI’s propensity to decline is much higher than that rising.

Technically, 1,090 pts seems to be the immediate support, with a more solid 1,050 to hold the market.

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Unholy Trinity

Suhaimi Alias (Aseambankers) said,
after a sizzling 1Q08, Malaysia’s economic growth is expected to fizzle in the following three quarters.

The culprit is the “unholy trinity” of
(i) a slowing US/global economy;
(ii) prolonged domestic
political uncertainties and risks; and
(iii) rising inflationary pressures externally, which clouds the global and local economic
outlook further.

• Consequently, real GDP growth this year is expected to come in lower at 5.3% vs. 6.3% recorded last year. Next year, economic growth is expected to plod along at 5.1% amid an expected gradual uptrend in quarterly growth. But this projection is contingent on several “no change” assumptions, namely status quo fuel-energy prices and benchmark interest rate.
• Nevertheless, to counter any further downside and damage to the economy, we expect monetary and fiscal policies to be “supportive” and “expansionary” respectively. This will entail an unchanged Overnight Policy Rate (OPR) and the likelihood of people-oriented tax incentives and spending in Budget 2009, plus the 15% increase in the development expenditure allocation following the Mid-Term Review of the Ninth Malaysia Plan.
  

Meanwhile, we see the Ringgit to shaking off its seasonal summer blues since its de-pegging to end the year firmer at RM3.10 per USD.

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KLCI Strong Support 1,067 pts

KLCI Monthly Chart - strong support at 1,067 pts (Waves)

TMC Life on the rebound - immediate target 1.78

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