ZLBT Forward Views >>> MYR, Economy and all that jazz

Economic Revival & Corperate Earnings To Drive FBM KLCI
The KLCI is likely to open higher taking cues from the strong U.S. markets overnight, a local dealer says. "The sentiment remains positive, but we are still likely to continue to trade in a range in the near term in absence of any local leads," he says, adding that the market will look to Malaysia's monetary policy meeting on May 5 for cues on the local economy. He tips a 1530-1550 range after the KLCI ended 0.4% higher at 1535.30 Thursday. Axis-REIT may rise on strong 1Q results; Hong Leong Bank (5819) may rise after the Malaysian High Court dismisses a suit by private equity firm Primus Pacific Partners to declare illegal the planned takeover of EON Capital (5266) by Hong Leong Bank.

Ringgit Rocks On
The USD/MYR is higher at 2.9700 vs 2.9640 in late Asian trade Thursday, as the local currency takes a breather after its recent winning streak, hitting multi-year highs along the way. The pair touched a fresh 13.5-year low of 2.9610 Thursday. "There is some short covering which is supporting the pair at the moment," a local trader says. Still, he reckons the pair could turn lower later in the day and tips support at 2.9650.

The Malaysian economy likely grew at least 4.5% in the first quarter of 2011 compared with the same period last year, a senior cabinet minister was quoted by state news agency Bernama as saying Thursday.

"Based on the data compiled in the first two months, the growth is seen not to be less than 4.5%," Nor Mohamed Yakcop, minister in charge of economic planning, was quoted as saying.

He said the trade-driven country may grow faster in the second half of 2011, with gross domestic product likely expanding 5%-6% for the full year. The economy grew 7.2% in 2010.

The official numbers for first-quarter GDP are due out next month.

HAPPY TRADING

Is Dow 5,000 a Possibility?

Is Dow 5,000 a Possibility? The stock market is still in panic mode; investors have lost too much and are dumping their stocks in an attempt to salvage what little money they have left. The more they sell, the worse the market gets. The worse the market gets the more they sell. It’s like a nightmarish game of dominoes.

Granted the new giant stimulus package, a bigger round of rescues, and the largest deficit financing of all time are going to have an effect on this economic crisis. Some of these policies will help, but they may also backfire and aggravate the crisis. Just don’t count on the government to bail YOU out.

Unfortunately, it looks like the stock market will actually get worse before it gets better. Please don’t try to pick a bottom, bottom picking in this bear market is extremely risky so be careful. Wait to see a sustained recovery before stepping back into stocks.

• Here are a few reasons to be bearish:
  GDP declined 6.2% in the fourth quarter and GDP will probably have a similar decline in the first quarter of this year. This is a much bigger drop than most experts were forecasting. And there is evidence that the decline is accelerating
  
• U.S. consumer spending is dropping like a rock and this is killing the economy. Consumer spending accounts for about 70% of total economic activity in America.
  
• The media is extremely negative. Every time you turn the nightly news on, you see financial disaster everywhere. The news loves to report that more people are being laid off, more businesses are going bankrupt, real estate is going lower, etc. All this negativity scares people into selling their stocks and spending less.
  
• Government borrowing is exploding and this will have dire consequences including higher inflation.
  
• We are witnessing the collapse of a mountain of debt in the private sector and the public sector may be next. Many governments around the world could end up defaulting on their debt, which would have severe economic repercussions.
  
• The number of troubled banks is increasing and the amount of toxic assets on their books is continuing to expand rapidly.

The bad news is there is no growth engine, at the present time, to pull us out of this economic slump.

So what are we supposed to do now?
You need to protect your nest egg and protect yourself against further losses. Get your money growing again and protect your capital by cutting your losses. Lower your exposure to the stock market by selling off the poor performers and diversifying into contrarian investments like natural resources including gold and silver. Just use common sense and stay flexible with a well-balanced portfolio.

You should have at least 10% of your assets in gold and silver as an insurance policy. All of my indicators suggest these hard assets will soon move to new record highs. In fact, I think gold and silver are in for an extended bull market even as most stocks face an extended bear market.

You should also think about doing put options or shorts on weak companies. You can make a tremendous amount of money as a company’s stock declines.

This economic crisis may not be over for years, but after the selling wave in stocks is over — I expect to see a major rally take place, with the Dow gaining back 50% or more of its losses in just months. So be prepared and I will keep you posted on how to play it.

(***This article is contributed by courtesy of blogger Rocky)

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!!!

KLCI And FKLI Market Outlook 24/02/09

KLCI & FKLI TODAY 240209

The Asian market closed in mix note after Dow futures rebounded on nationalization of CitiGroup Inc. lead to reducing the risk of bank failures. KLCI eased 1.88 pts or -0.21% to settle at 887.83, STI gained 37pts or +2.33%, HSI added 475 pts or +3.75% while Nikkei 225 shed 40 pts or -0.54% on financial services company SFCG filed for bankruptcy protection. Meanwhile, the FKLI gained 6 pts or +0.68% to settle at 884. The basis narrowed to 3 pts discount from 11 pts against cash. Given the weak momentum reading on RSI-14 days at 48 and unable to sustain above SMA 20 at 885, we expect the market to have further downside potential.

In addition with overnight loss in Dow Jones, sentiment would be further weakened today and lead to more sell off on shares, recent performance in US and regional market is giving more pressure on KLCI. While economists in different financial institutions in Malaysia are giving various 2009 GDP growth forecast for Malaysia to be 1-3.5%, market is fundamentally weak and hence doesn’t give much chance for upside. Investors may Short at 890 level, more downside is expected if breach the support level at 870.