Malaysian GDP Bears

Malaysian GDP Bears

KLCI 890 support in jeopardy this week; exports data awaits

While Malaysia has managed to stave off recession for one more quarter. 4Q09 GDP was +0.1% vs. +4.7% in 3Q08 and disappointing economists’ expectations of a +1.5% growth. In our view, the market has partially priced-in expectations of moderating growth of 1.5% (KLCI down 2.1% over the last two weeks) but we believe the disappointing GDP results may have created more downside for the KLCI.

As of now, the psychologically crucial 890 support level has yet to be convincingly broken
despite three recent attempts by the bears. However, with negative GDP news and more
possible bad news when exports data are released this Friday, there is little odds of the 890 level surviving this week.

Bears watching March 6th and 10th with glee
On the 6th of March, the Government will release the Exports data for the month of January. While on 10th of March the Deputy Prime Minister will release the latest Government estimates for the country’s projected 2009 GDP growth.

Taking into account the latest downward trajectory of the GDP and Exports data of the nation, it is safer than not to assume that local traders will be pricing in negativity into the KLCI in the coming days. We think that this downward pressure will likely push the KLCI
beneath the short term and mid term MAV lines in the next few days.

Strategy : Watching 890
Though we are very wary of the direction of the KLCI, we are still watching the 890 support very closely. If a convincing break of the 890 support occurs, we may be revising our view of the KLCI downwards. The next support level for the KLCI lies at the 867 level.

HAPPY TRADING!!!