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Thursday, August 11, 2011

Rollercoaster ride for Wall Street continues

And the rollercoaster ride for Wall Street continues. Extending their recent volatile swings, key U.S. equity indices jumped between 3.9% and 4.7% last night following news of a drop in jobless claims.

The positive overnight lead should calm investors around the region today. Back home, the benchmark FBM KLCI could stage a technical rebound but may struggle to cross the immediate resistance level of 1,495 ahead. In terms of news flows, Prime Minister Najib Razak is scheduled to make an investment announcement in East Coast this morning while on the corporate front, Alam Maritim has secured oil & gas services contracts worth RM20m and Catcha Media has served up a negative surprise after amending its strategic alliance agreement with Microsoft to less favorable terms. Later in the evening, Genting Singapore (a subsidiary of Malaysia-listed Genting Bhd) is due to release its latest quarterly earnings.

Wednesday, August 10, 2011

FBM KLCI could tumble towards the support zone of 1,415-1,435 ahead

Yesterday’s market rebound might be a short-lived one as our Malaysian bourse is likely to surrender all its gains and more following Wall Street’s overnight collapse. Its benchmark FBM KLCI could tumble towards the support zone of 1,415-1,435 ahead.

Investors will be looking to dump shares across the region today after major U.S. equity indices plunged between 4.1% and 4.6% last night. Essentially, market sentiment was hit hard amid mounting worries that there would be spillover effects from possible fallout from the prevailing European debt crisis. With the number of declining stocks set to overwhelm advancing ones back home, hoping to buck the bearish trend is Malaysia Airports. The stock may react to a media report that airport taxes could be raised from next month.

Tuesday, August 9, 2011

Technical rebound

Our benchmark FBM KLCI recovered from a low of 1,423.47 during the morning session yesterday to close at 1,472.14 (-24.85pts). Technically speaking, the benchmark index is likely to showcase a technical rebound, pulling away from its immediate support level of 1,465.

Sentiments could be further boosted by the overnight gains in the Wall Street with the US key equity indices rebounded strongly between +4.0% and +5.3%, after the worst drop since Dec 2008. The Fed has vowed to keep interest rates near zero through mid-2013 which could be seen as a temporary respite for the regional markets today.

Back home, counters that are likely to garner increased trading interest today include: (a) Malaysia Airlines and AirAsia, after Khazanah agreed to swap 20.5% of its ownership in Malaysia Airlines for a 10% stake in AirAsia, and (b) Hartalega, following its best quarterly results with RM55m net profit which came better than expected. Meanwhile, industrial production statistics for June will be on tap later in the evening.

Monday, August 8, 2011

Capital preservation will be the priority of most investors for now

After recovering from a low of 1,476.24 to close at 1,496.99 yesterday (which represents a 27.4-point decline), the key FBM KLCI is expected to plunge deeper on persisting selling activities today. Technically speaking, the benchmark index may fall towards the next support level of 1,465 ahead.

Essentially, investors will be more inclined to sell rather than buy equities following Wall Street’s extended freefall. Major U.S. stock bellwether tumbled further last night (down between 5.5% and 6.9% at the closing bell) in the aftermath of S&P’s downgrade of the U.S. sovereign credit rating. And more downside could be in store when trading resumes today, as the Dow Jones Industrial Average futures contract was hovering at a 157-point discount to the spot rate this morning. Given the prevailing jittery market mood, it seems too early to bottom fish at this juncture.

Capital preservation will be the priority of most investors for now.

From HWangDBS

Sunday, August 7, 2011

When the U.S. sneeze the rest of the world catches the cold.

Our Malaysian bourse could carry on marching to the beat of its overseas peers as volatile external forces continue to dictate investors’ sentiment. Its benchmark FBM KLCI may gyrate with a negative bias, probably falling inside the support zone of 1,465-1,495 ahead.

The key market barometer reached a low of 1,509.37 before settling at 1,524.43 last week, down 24.4- point or 1.6% from where it was two Fridays ago, its fourth consecutive week of declines. Both the FBM 70 Index (-2.8% week-on-week) and the FBM ACE Index (-1.7%) were hit too. Trading activity rose to a daily average of 1.2b shares valued at RM2.0b, compared to the 1.0b units worth RM1.6b traded a fortnight ago. When the U.S. sneeze the rest of the world catches the cold. And this was what happened last week. Although the legislative approval for a raise in federal debt ceiling was granted, worries over the U.S. economy losing steam and sovereign credit rating downgrades spooked investors.

Consequently, Wall Street’s equity indices dived sharply to close with a weekly drop of between 5.8% and 8.1%, thus wiping out their year-to-date gains. The bears also crossed over to the other parts of the world, trampling on Asian equities to leave behind a trail of destructions. For the week just ended, the worst hit stock markets in the region were Taiwan (-9.2%), Korea (-8.9%) and China shares listed in Hong Kong (-7.6%). With the economy being the salient talking point these days, the U.S. Federal Reserve will come under greater scrutiny this week. At the Federal Open Market Committee meeting on Tuesday, there could be added expectations for the policymakers to announce fresh economic stimulus initiatives, or at least prevent
confidence from tanking further by spelling out contingency plans should the world’s largest economy threaten to slip into a double-dip recession, while keeping interest rates low for an extended period. Realistically speaking, it will take time for sentiment to pick up again following last week’s global equities rout. This should apply too to our local bourse as its performance will still be subject to foreign fund flows (and any redemption impact). According to the stock exchange, foreigners were net buyers for the fourth straight month when they posted a surplus sum of RM0.6b in Jul (versus +RM3.2b in Jun). The amount of foreign money in Malaysia equities, therefore, could have increased slightly (from our estimate of RM290b based on a foreign ownership of 22.0% as of end-Jun), notwithstanding last week’s market sell-off.

Meanwhile, in the month of Jul, local institutional funds were equally balanced in terms of buying and selling (versus a net selling figure of RM1.9b the previous month) while retail investors were net sellers to the tune of RM0.2b (-RM0.8b in Jun). For the coming week, our domestic stock market may continue to take the leads from overseas developments, which will make local news less relevant. On tap are: (a) the index of industrial production report for Jun, due for release on Wednesday; (b) plantation statistics for Jul (to be out on Wednesday); and (c) isolated material corporate events such as a possible share swap pact between the substantial shareholders of Malaysian Airline System and AirAsia.

On the chart, the FBM KLCI – after a pullback of 72.7-point or 4.5% from its peak of 1,597.08 – has dropped to where it was three months ago and is now hovering just marginally above last year’s closing level of 1,518.91. The bearish momentum generated from the aggressive selling last week suggests that the benchmark index is expected to remain under pressures going forward. A further sell-down could then send the bellwether to test the first two support lines of 1,495 and 1,465, respectively.

While a sustained market rebound appears less probable in the short run – as a trend reversal may only be in the offing if and when the FBM KLCI crosses above 1,575 – it is still premature to jump to conclusion that the bull run that started in mid-Mar 2009 has already ended as we anticipate probable interventions from policymakers around the world to check the slide. Let’s keep our fingers crossed that this will be done sooner rather than later.

Report From HWangDBS

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