Bursa Chat

Further upside for FBM KLCI

2009-11-09T07:50:00.002+08:00

Steel- and construction-related stocks like Sino Hua-An, Kinsteel and MRCB may outperform blue chips in the medium term, says a research head

Last week, shares on Bursa Malaysia recouped most of the previous week's fall with financial stocks leading gains for the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) after some banks increased mortgage rates to improve profitability.

As a result, the FBM KLCI rose 17.53 points, or 1.4 per cent, for the week to close at 1,260.76, with CIMB (+30 sen), Maybank (+17 sen), Public Bank (+18 sen) and Hong Leong Bank (+61 sen) contributing more than half of the index's gain. Average daily traded volume and value improved to 1.31 billion shares worth RM1.34 billion from 917 million shares worth RM1.2 billion in the previous week. Daily average volume surged to the highest since the last week of June.

Market movement this week will continue to be news driven. On the economic data front, industrial production and manufacturing sales figures are due tomorrow. They are expected to mirror September trade numbers, which fell 0.9 per cent month-on-month and 22.4 per cent year-on-year.

China now ranks second in the list of our top 10 export destinations and is the largest source of imports. The fact that China has overtaken the US as the second most important market for our exports underscores its importance to trade-oriented nations like Malaysia. Thus, the Chinese president's visit to Malaysia this week is an important milestone. This could lead to vital bilateral trade and investment agreements. This in turn could trigger market speculation on companies that can benefit from agreements at government-to-government level.
There are many Malaysian players that have exposure there through their own manufacturing facilities or joint-venture agreements with local Chinese companies. Some of the listed players are MPI, Unisem, UMW, Sino Hua-An, Top Glove, Proton and Goldis.

Stocks like Sime Darby may also come to investors' minds due to talk that a Chinese state-owned company would be taking a 10 per cent stake in the plantations giant that could open up huge growth opportunities in the downstream palm oil industries in China. Little-followed Lityan Holdings, which became an instant hit on speculative interest at its relisting after freeing itself from PN17 status, may draw some interest again due to its tie-up with China's leading telco Huawei Technologies to bid for contracts under Telekom's high-speed broadband project.

Externally, the 0.5 per cent fall in US consumer spending for September, the first fall in five months, has rekindled worries about a double-dip in the economy. A 3.1-point fall in the Reuters/University of Michigan final index of consumer sentiment to 70.6 reflected the current mood of US consumers, who are becoming increasingly thrifty on the back of a poor job market, no pay increase and potential pullback in government emergency relief measures.

While this is a temporary setback, manufacturing numbers are still pointing towards a healthy recovery and the expected continued weakening in the US dollar could lead to sustained expansion in the sector that would be vital for job creation and a recovery in consumption.

Maintain a bullish view on the local market and expect the FBM KLCI to hold up well ahead of the Maxis listing next week. A healthy consolidation around current levels can prepare the index to test new highs real soon as local institutions seize the opportunity to dress up their books. More positive news flows from the private financial initiative front, infrastructure contracts, and oil and gas projects are expected to sustain the positive momentum for the next six months that will give the FBM KLCI more clout to test 2010 index target of 1,370.

Technical outlook

Shares on Bursa Malaysia recovered from early losses on Monday triggered by the 250-point drop in the Dow Jones Industrial Average the previous Friday, encouraged by regional rebounds due to keen buying interest from retailers. The domestic stock market ended mixed the next day, tracking the showing on the external front.

The market ended significantly higher last Wednesday, shored up by strong gains in banks on reports of better margins after they raised mortgage rates, causing the FBM KLCI to gain 11.5 points or 0.9 per cent for the day. The market again ended mixed the next day as blue chips consolidated gains while rotational plays switched to spark strong gains in the ACE market. Stocks gained further last Friday, lifted by the overnight 200-point rally in the Dow average to close above 10,000 due to improving economic data from lower jobless claims and higher productivity numbers.

The FBM KLCI rose from an intra-week low of 1,233.45 Monday morning to peak at a high of 1,263.03 by mid-morning trade last Friday, contracting mildly to a 29.6-point trading range last week, against the 31.2-point trading range the previous week.

A buy signal was triggered on the daily slow stochastics indicator for the FBM KLCI late last week, paving the way for further short-term upside bias. However, the weekly indicator stayed flat at the highly overbought region. The 14-day Relative Strength Index (RSI) indicator has rehooked upwards for an improved reading of 65.03, but the 14-week RSI rehooked up for an overbought reading of 72.45.

On trend indicators, the daily Moving Average Convergence Divergence (MACD) has levelled off to indicate lessening downward momentum after the previous week's sell signal, but the weekly MACD signal line is still declining to suggest further consolidation ahead. Meantime, the ADX line on the 14-day Directional Movement Index trend indicator has levelled for a reading of 33.95 as of last Friday, but the +DI and -DI lines have expanded outwards, signalling an uptrend resumption.

Conclusion

The marked improvement in momentum and trend indicators for the FBM KLCI suggests further upside room for the local stock market this week. Nevertheless, investors should look for profit-taking and selling opportunities as market conditions could quickly turn overbought if sharp rallies sustain.

For this week, the October 21 pivot high of 1,270.44, which matches the significant pivot low on May 5 2008, will be the critical level to break to improve upside chances towards the next significant resistance coming in at 1,305, the April 29 2008 pivot high. The next higher hurdle will be at 1,340. On the downside, immediate support is upgraded to 1,243, the 38.2 per cent Fibonacci Retracement of the breakout rally from 1,200.65 low of September 30 to the recent pivot high of 1,270.44.

Stronger retracement supports are available at 1,235, 1,227, and 1,217, the respective 50 per cent, 61.8 per cent, and 76.4 per cent retracement levels, which provide stronger support platforms.

As for stock picks, chart wise, continue to favour blue chips such as AMMB, Axiata, CIMB, Gamuda, Public Bank, Sime Darby and Tenaga as the recent market correction has fully neutralised overbought technical conditions. Meantime, steel and construction related stocks like Sino Hua-An, Kinsteel and MRCB may outperform blue chips in the medium term. As for the ACE market, IRCB, Vastalux, Malaysia Steel, Notion VTEC and Carotech are expected to attract buyers looking for medium-term gains.

The subject expressed above is based purely on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

Bursa Chat - News Highlights 23.10.09

2009-10-23T08:36:00.002+08:00

IJM Corp Bhd (IJM MK, Hold, TP: RM3.64) hopes to win more highway jobs in India under the recently announced new national highway programme for roads, said Datuk Krishnan Tan. “(Under the new programme), the packages are going to be substantially larger and we will be bidding for some of them”, he said. Indian road, transport and highways minister Kamal Nath this month set a target of 7,000km per year across all states, which translates into roughly 20km per day. Kamal Nath was quoted as saying that in the next 10 months, there will be about 11,000km of roads and contracts costing Rs1 lakh crore (US$20bn) to be awarded. (BT)
* * * * *
Digi Telecommunications Sdn Bhd, unit of Digi.Com Bhd (DIGI MK, Hold, TP: RM20.10).has committed RM75m to roll out its Turbo 3G mobile and broadband service in Sabah over the next 3 years. Digi said that so far, coverage has been expanded to cover some 95% of the population in Kota Kinabalu. The company expects to progressively activate existing mobile subscribers on Turbo 3G, starting with Sabah and Penang yesterday, followed by Klang Valley at a later date.
(Malaysian Reserve)
* * * * *
Telekom Malaysia Bhd (TM)(T MK, Buy, TP: RM 3.98) is on track to commercially launch its high-speed broadband (HSBB) retail service in the 4 initial areas of Taman Tun Dr Ismail, Bangsar, Subang Jaya and Shah Alam by the end 1Q10. TM said to date, physical work had been completed at four exchanges and in progress at 44 exchanges, out of 95 exchanges to be covered by the initial rollout. It said by the end of 2012, about 1.3m premises would have access to HSBB services, in accordance with the completion of the first phase of the project agreed by the government. TM group CEO Datuk Zamzamzairani said as at end of 2Q09, the government had reimbursed it a total of RM665m work completed. He said the retail service trials were scheduled to begin with 150 households involving TM employees residing in the 4 areas by mid-
November 2009. Following that, in January 2010, additional 300 selected households within the same area will be involved. (Financial Daily)
* * * * *
Malaysian Airline System Bhd (MAS MK, Sell, TP: RM2.00) and Hainan Airlines Group (HNA) have signed a strategic cooperation framework in order to strengthen their business relationship. MAS managing director Tengku Datuk Azmil Zahruddin said the collaboration would lead to better resource sharing, multi-hub network as well as expediting their international development progress such as enabling MAS to reach those destinations that it doesn’t fly to (in China). He said the collaboration would also enable its cargo arm, Malaysia Airlines Cargo Sdn Bhd (MASkargo), to have access to HNA Group’s global network and increase its market share. MASkargo managing director Shahari Sulaiman said MASkargo and HNA would start discussions to explore each other’s networks. (Financial Daily)
* * * * *
Malaysia Airports Holdings Bhd (MAHB) will give incentives in the form of cash to airlines that continue to bring in additional passenger traffic to Malaysia. The quantum of the monetary incentive is still unclear but MAHB managing director/CEO Tan Sri Bashir Ahmad is looking to announce details before the year is out. The suggestion to reward airlines in search of new growth by MAHB appears to be timely as it will not just make airports in Malaysia more competitive but also allows them to attract more airlines to operate in the country. It also helps airlines that are struggling due to the economic downturn. This monetary incentive proposal is being considered despite the fact that Malaysian airport charges are already the lowest in the region. The new cash incentive is meant for all airlines that operate from the country and from all the 39 airports in Malaysia but it is for new business only. All the existing incentives will also remain intact, such as the waiver for landing charges for new flights for 3 years. (Starbiz)
* * * * *
Maxis Communications Bhd to double its wireless broadband user base by year-end, following the launch of its new broadband campaign, Something for Everyone. “Our sales have improved more than 100% year-to-date compared with last year. Next year, we expect to outperform this year’s performance,” senior general manager and head of broadband said. According to the draft prospectus lodged by Maxis Bhd, the company added about 31,000 mobile broadband subscribers in the first six months of 2009. Its broadband subscription totalled 171,200 or about 21% marker share, as at June 30. The new broadband packages ranged from as low as RM8 per day to RM48 per month. (StarBiz)
* * * *

evident from the “hot-selling” models- Persona, Saga and Exora. On the contest, Shukor said it had successful met its objective as car sales for June and July increased impressively to 14,065 units and 15,809 units respectively and this has placed Proton in the top spot for Malaysian car sales for the said months. (Financial Daily)
* * * * *
Green Packet Bhd (GPB) is set to secure a worldwide Interoperability for Microwave Access (WiMAX) broadband licence in Singapore, making it the first Malaysian company to directly hold such a licence in the city-state. Under the sealed deal yesterday, the original WiMAX licence holder Singapore based Pacnet Internet Corporations (S) Pte. Ltd. will transfer its facilities-based operator’s (FBO) licence and wireless broadband access (WBA) spectrum right to GPB group. GPB’s wholly owned unit Packet One Sdn Bhd (P1) inked the transfer and agreement with Pacnet for the transfer of the FBO licence and WBA spectrum right to newly incorporated Packet One (S) Pte Ltd (P1 Singapore) for US$2.04m (RM6.94m) cash. GPB said the transfer would enable P1 Singapore to operate wireless broadband access telecommunications systems in the island-republic, as well as offer supplementary bandwidth to which existing telecommunications providers to minimise network congestion. P1 CEO Michael Lai said the WiMAX operator’s entry into Singapore to become a multi-market player would enable it to offer a robust alternative to complement mobile operators and compelling proposition for both its individual and corporate customers via roaming services. (Financial Daily)
* * * * *
The domestic advertising expenditure (adex) this year is expected to be lower than the RM6.2bn posted in 2008 but the advertising industry is expected to perform better in 2010, said Malaysian Advertisers Association president Peter Anthony Das. He said total adex was expected to drop this year due to a lack of major events and the economic slowdown. “I hope the
total ad spending this year would be better than the RM5.4bn in 2007 as companies are pushing for sales by year-end and on improving market sentiment,” he said. (Financial Daily)
* * * * *
The Plantation Industries and Commodities Minister plans to propose the sale of biodiesel with less palm oil content to reduce government spending for the initiative, known as the B5 mandate. Under the mandate, the government has set a January 2010 deadline to sell B5 biodiesel, a mixture of 5% palm oil and 95% diesel. Minister Tan Sri Bernard Dompok said a more realistic alternative would be to revise downwards the blend ratio. "I' ll be proposing to the Cabinet to bring down the B5 mandate to B3 or B2. The B5 mandate, if it were to be fully implemented, would cost around RM240m to RM250m. This is a problem because ordinary diesel is already being subsidised by the government," he said. Malaysia had planned for the B5 mandate to be rolled out in stages, starting from February this year with government vehicles, followed by the industrial and transport sectors. (BT)
* * * * *

Stocks rally Thursday, blue chips led a bigger stock market rally, as better-than-expected results from four components pushed the Dow industrials above 10,000 again and reassured investors about the ongoing corporate reporting period. Investors took in stride announcements from the Federal Reserve and the Obama administration' s pay czar regarding curbing executive pay. The Dow Jones industrial average gained 1.3% (+131 pts, close 10,081.31), according to early tallies, closing at 10,081.31. The S&P 500 index rose 1% (+11 pts, close 1,092.91). The Nasdaq composite gained 0.7% (+14 pts, close 2,165.29). U.S. light crude oil for December delivery fell 18 cents to US$81.19 a barrel on the New York Mercantile Exchange, edging off a one-year high. (CNN Money)
* * * * *
U.S. leading economic indicators rose in September for a sixth straight month, showing the economy is likely to expand into early 2010. The Conference Board’s gauge of the economic outlook for the next three to six months climbed a greater-than-forecast 1%, contributing to the biggest six-month gain in 26 years. More than US$2trn in government stimulus programs worldwide have revived growth from the U.S. to China, signalling the worst global recession in the post-World War II era has come to an end. The leading index over the past six months was up 11.8% at an annual rate, the biggest gain since 1983. Eight of the 10 indicators in today’s report contributed to the gain, led by the difference between short- and long-term borrowing costs, an increase in consumer expectations, lower jobless claims and higher equity prices. (Bloomberg)
* * * * *
U.S. initial jobless claims rose more than forecast, a reminder that the labor market will be slow to recover. Initial jobless applications rose by 11,000 to 531,000 in the week ended Oct. 17, from a revised 520,000 the prior week that were the fewest in nine months, the Labor Department said in Washington. The number of people collecting benefits fell, while those receiving extended benefits increased. The four-week moving average of initial claims, a less volatile measure, fell to 532,250 last week from 533,000. Continuing claims decreased by 98,000 in the week ended Oct. 10 to 5.92m, in part reflecting those that have used all their benefits without finding another job. The number of people collecting extended payments climbed to 3.86m in the week ended Oct. 3 from 3.83m a week earlier, report showed. (Bloomberg)
* * * * *
The European Central Bank (ECB) advised the European Union (EU) to coordinate internationally on rules to regulate hedge funds, saying the current proposals could put Europe at a disadvantage. “The ECB urges the Commission of the European Communities to continue the dialogue with its international partners, in particular the United States, to ensure a globally coherent regulatory and supervisory framework,” the Frankfurt-based ECB said in a legal opinion published on its Web site. The EU’s proposals would require hedge-fund managers and private-equity firms overseeing at least 500m euros (US$737.8m) to report to regulators. The directive is one of several measures the EU has proposed in the wake of the worst financial crisis since World War II. (Bloomberg)
* * * * *
U.K. retail sales unexpectedly stagnated in September for a second month as Britons spent less on food and clothing, a sign the country is struggling to escape the recession. Sales were unchanged from August, the first time sales haven’t risen for two months in almost a year, the Office for National Statistics said in London. The median forecast was for a 0.5% gain, according to a Bloomberg News survey of 30 economists. Sales climbed 2.4% from a year earlier. Rising unemployment and the credit squeeze are discouraging Britons from shopping. Today’s report may signal that weakness in the economy is persisting as the Bank of England considers whether to increase its 175bn-pound (US$291bn) bond- purchase program. Food sales slipped 0.1% and textile, clothing and shoe sales fell 0.5% in the month, the statistics office said. Sales at non-specialized stores rose 0.5% and household goods stores showed an increase of 0.3%. (Bloomberg)
* * * * *
Chinese officials may be preparing to reduce monetary stimulus that propelled growth to 8.9% in the third quarter and led the world out of recession. The economic expansion the government reported yesterday exceeded the 7.9% gain in the previous three months and pushed stocks lower around the world on concern the central bank may tighten monetary policy. On the eve of the release, the cabinet signaled that inflation concern will play a greater role in setting policy. (Bloomberg)
* * * * *

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

WTK and BJCorp Charts

2009-10-18T20:03:00.002+08:00

Two charts to study,

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

Axiata (HOLD TP RM2.75)

2009-10-07T09:15:00.003+08:00

Price war escalates in India

· One big disruptive price plan in India Reliance Communications (RCOM IN, non-rated), the second largest mobile operator in India, unleashed a disruptive price plan on Monday which allows both prepaid and postpaid subscribers to make calls at only INR0.50/min (US 1 cent/min) nationwide, believed to be among, if not the cheapest tariff in India. On average, subscribers pay US 2 cents/min for local calls, while national long-distance calls are priced at about US 3 cents/min.

Intense competition over the years has driven down tariffs and pushed mobile operators to constantly innovate and throw in extra features to reduce churn and protect market share. Barely four years ago, BSNL introduced a plan which only charged INR1.00/min.

The disruptive plan by Reliance will likely result in Axiata’s associate, Idea Cellular (IDEA IN, non-rated) facing significant pressure on margins and downside risks to revenue and subscriber growth, with the extent dependent on how Idea will respond. Lowering tariffs may help reduce churn and stimulate usage but may not fully offset the effects from a steep drop in tariffs. Idea is expected to respond quickly to avoid churn and maintain its growth trajectory, as the next several weeks coincide with Deepavali in mid-October and the wedding season in November and December. This is crucial to ensure it does not lose out as mobile usage and new subscriber additions will likely surge during this period. However, being only the fifth largest among 11 players, Idea may not have the clout to go head-to-head with Reliance in a price war. Reliance has a subscriber base of 84.8m as at August while having a far superior EBITDA margin of 39.1% in 2QCY09. In comparison, Idea has 50.1m subscribers and EBITDA margins of only 28.9%. The market leader, Bharti Airtel (BHARTI IN, non-rated) leads with 110.9m subscribers and BITDA
margins of 40.6%.

Earnings forecast trimmed
In view of intensifying competition, we have reduced our EBITDA margins, ARPU and revenue growth assumptions for Idea. Consequently, our FY09-11 EPS estimates for Axiata are lowered by 2%-4%. Maintain HOLD, TP reduced to RM2.75 We maintain our HOLD call on Axiata, while lowering our target price from RM2.85 to RM2.75 based on SOP valuation. Risks to our recommendation include (1) irrational price competition, and (2) a long and drawn-out price war in India.

Source : ECM Libra

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

Glomac (BUY TP RM1.37)

2009-10-06T09:49:00.005+08:00

Expanding Sg Buloh township land

News
Glomac announced yesterday the acquisition of 43 acres of leasehold land, which is located within its existing Bandar Saujana Utama township in Sungai Buloh, Selangor, for RM9m cash or RM4.80 psf. Development rights on the said land was previously acquired in 2004 under a joint
venture arrangement where Glomac is required to pay a guaranteed land price of RM7.31m and a share of 30% development profit to the landowner, Pertubuhan Peladang Kawasan Kuala Selangor. The joint venture agreement will be terminated upon completion of the outright acquisition. (Bursa Malaysia)

Comments
Development on the said land has already commenced in March 2009. Known as Bukit Saujana, the project is divided into 5 phases with an estimated gross development value of RM98m. Todate, a total of 85 units of double storey terrace houses has been launched with more than 80% sales achieved. The outright acquisition of the said land instead of joint venture does not change our earnings estimates. The only effect the transaction has is perhaps the acceleration of payment of purchase consideration under outright acquisition instead of 8 semi-annual instalment payments from the date of approval of layout plan under the terms of the joint venture. Funding for the outright acquisition is not a problem due to improving financial position of the company following the sale of RM72m worth of investment properties as well as RM20m raised from the recent sale of treasury shares. Going forward, we expect the company to be on an expansion trail. Currently, the company is negotiating for the acquisition of 2 commercial land in the Klang Valley. We reiterate our BUY call on Glomac for its undemanding valuation. Earnings prospect is expected to improve going forward, underpinned by unbilled sales of RM333m. Further upside will come from the successful en bloc sale of office towers in its on-going Glomac Damansara project and acquisition of new landbank. Our target price remains unchanged at RM1.37 which is based on 10x P/E on FY10 earnings.

Source : ECM Libra

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

Mid-Autumn Festival

2009-10-02T22:02:00.000+08:00

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

Short term upset - The Trader

2009-10-02T09:14:00.002+08:00

Last night, the Dow Jones dropped 203 points amidst negative economic data. New initial job claims came in at 551k, disappointing economists estimates of 535k. In addition, the US Institute for Supply Management said its index of manufacturing activity in September slipped to 52.6 from 52.9 in August, disappointing expectations of a positive m-o-m improvement. Violation of short term dynamic support The Dow Jones violated a very important short term dynamic support last night which is the 30-day short term MAV line. We have always thought that the 30 day MAV line is a very crucial dynamic support of the Dow. An obvious break of the

support line will most certainly trigger more bearish sessions to come.

Strategy : Short term bearish
With the 30-day MAV line violated, we opine that there will be more bearish sell-downs in the days to come. Thus, we are forced by the bears to alter our short termviews to negative, though our mid term and long term positive views remain unchanged. As of now, we are technically short term negative on the closely correlated (>90% correlation) FBM-KLCI while maintaining our mid term and long term positive view. We expect the FBM-KLCI to face a correction ahead to below the 1,200 level. We are now advising caution for traders.

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

FBM KLCI: NO WORRIES (YET)

2009-10-01T13:38:00.002+08:00

The FBM KLCI continued to retrace by another 6.13 pts yesterday. The market has lost some 30 pts since hitting a high of 1231.49 pts. Nevertheless, the retracement is not worrying us just yet as we know that the 50-day MAV line is giving a clear signal that the market is still on an uptrend. Note that India’s key benchmark index cracked a new high yesterday while Jakarta’s benchmark index is approaching the recent-high. Once again, there was no panic selling across the board.

Although the FBM KLCI could have gone up at a faster pace after violating the 1196.46 pt-peak, the recent retracement does not bother us. Our view towards the near-term market will remain firmly bullish as long as the 50-day MAV line is not violated.

From the current level, an immediate support lies at the 1,196.5-1,200 pt-area and a very strong support is seen at the 50-day MAV line, which is now situated at the 1,178 pt-level. To the upside, an immediate resistance lies at the 1231.50 pt-level followed by the 1242 pt-level.

This is an update on AMMB’s latest technical landscape. The stock’s uptrend remains the same as it was a few months ago. Its share price is continuing with its steady ascent at above the 50-day MAV line and is expected to do so as long as the 50-day MAV line continues to provide support to the stock. Both the immediate and mid-term technical outlook of AMMB will remain firmly bullish as long as the stock maintains a posture at above the 50-day MAV line, which is now situated at the RM4.10 level. At below the RM4.10 level, look for the RM4.00 level and the RM3.90 level for the next support. Unless the stock is hit by negative news or the FBM KLCI’s technical outlook turns negative, we think AMMB should be able to maintain a comfortable posture at above the 50-day MAV line. From the current level, an immediate resistance lies at the RM4.42 level, followed by the RM4.65 level.

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

The Trader (30.09.2009)

2009-09-30T10:04:00.003+08:00

Last Wednesday, we made a call for a small profit taking wave to materialize in the FBM-KLCI. Three days of profit ensued to be followed by a small technical rebound yesterday. Besides our small profit taking call, our bigger picture positive view of the market remains the same. However, we are vigilant of any spanner in the bullish works.

We are particularly vigilant of a potential head-and-shoulders formation should the FBM-KLCI break below the crucial 1,180-1,200 support channel. However, at this point of time, nothing has changed. Thus, we maintain our status quo short term, mid term and long term positive view of the market.

L&G (RM0.415)
Land and General is now on a bullish uptrend. Since its high volume spike- up on the 18th of September, it has managed to maintain a nice uptrend posture. In addition, there still appears to be regular pockets of upward buying pressure. The next major level of resistance is nearby at the RM0.43 level. However we see no problems for L&G in surpassing this level. We are calling for a technical trading buy on L&G.

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

Glomac

2009-09-29T12:10:00.004+08:00

BUY Target Price RM1.37

1QFY10 : Stronger quarters ahead

· Broadly inline
1QFY09 results made up 21% and 25% of full-year house and consensus estimates respectively. We deem the results to be broadly in line as we expect results to be stronger in the remaining quarters mainly due to increasing contributions from Glomac Tower and Glomac Galleria as construction gets underway. No dividends were proposed for the quarter.

· Lower topline but higher bottomline
Revenue dropped 25.8% y-o-y due to the completion of Suria Stonor in FY09. However, bottomline grew by 6.9% y-o-y due to recognition of RM4.9m fair value adjustment on Block B in Glomac Business Centre which is pending completion of sale for RM22.6m. The recognition of FV adjustment prior to completion of sale is required by FRS. There will be no impact to our estimates as we have previously imputed this as gain on disposal rather than FV adjustment.

· Sales momentum gaining traction
Sales have improved q-o-q from RM24m to RM61m, underpinned by sales recovery in the Bandar Saujana Utama township as well as strong sales from Sri Bangi. We expect sales momentum to be sustained in the coming quarters backed by strong bookings in Phase 1 of Glomac Cyberjaya which has achieved 90% take-up as well as encouraging registration for new launches. The company is also negotiating for the en-bloc sale of two office towers in Glomac Damansara by end CY09. If successful, there will be scope for upward revision to our earnings. In the meantime, unbilled sales of RM333m will provide earnings visibility over the next 2-3 years.

· More landbanking activities in the pipeline
Glomac sold 18.2m treasury shares at RM1.098 each in an off market transaction yesterday. This represents 6.1% of Glomac’s paid-up capital. Together with proceeds from sale of investment properties, the financial position of Glomac will be enhanced from an already solid position where net debt/equity is at just 0.13x. This will allow the company to pursue landbanking opportunities. The company is negotiating for a few pieces of commercial land in the Klang Valley.

· Reiterate BUY
We make minimal changes to our net profit estimates for housekeeping purposes. However, EPS for FY10-FY12 will be diluted by 2.6%-6.9% due to the dilutive effects of treasury shares sold. Nevertheless, we remain positive on Glomac with a BUY call while target price is reduced to RM1.37 (previously RM1.40) based on P/E of 10x on FY10 earnings.

Source : ECM Libra

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

How to analyse an annual report

2009-09-24T20:12:00.001+08:00

MANY of us receive a lot of annual reports every year.

Even though we are aware that there is a lot of important information in the reports, not many of us are willing to spend time going through those reports before buying stocks.

Besides, it is quite difficult for some investors, especially those who lack proper financial training, to analyse the financial information.

In this article, we will provide a quick guide on how to analyse an annual report.

Given that there are many ways to dissect an annual report, the following six pointers are just a quick check on the financial health of any listed companies.

Income statement is the financial statement that shows the effects of transactions completed over a specific accounting period.

In this statement, we have three key pointers: the current level of revenue; high growth in revenue; and the profits made in proportion to the level of revenue.

The current level of revenue indicates the size of a company. A company with revenue or sales of RM1bil is definitely bigger than one that has revenue of only RM100mil.

In Malaysia, companies with revenue of RM500mil and above should be considered as more established companies.

High growth in revenue implies that the company has been expanding over the past period.

Assuming the high growth in revenue will eventually translate into high growth in profits, we should invest in companies with higher growth in revenue because this may lead to higher stock prices.

If the overall economy is expanding, avoid those companies that are showing a decline in revenue.

This might imply that the overall operating activities of the companies are declining.

The profits made in proportion to the level of revenue indicates whether this company has high or low profit margins in its products. The profits here refer to the profit after tax or net income.

We should invest in high profit margin companies because high profit margins will provide a cushion to the sudden change in operating environment. A company with revenue of RM1bil and profits of RM10mil is more likely to face tougher challenges in a stiff price competition environment compared with a company with revenue of RM100mil and profits of RM10mil.

Balance sheet is the financial statement that shows a company’s assets, liabilities and owners’ equity at a point in time. The two main pointers in this statement are cash in hand and total borrowings.

Cash in hand refers to the cash or cash equivalent like fixed deposits. If possible, we should invest in companies with high cash in hand and zero borrowings. High cash in hand may imply that the company has high chances of rewarding shareholders with higher dividend payments.

Besides, companies with high cash in hand have more financial stability than companies with very tight level of cash. This explains why most investment gurus like to invest in cash-rich companies.

Total borrowings include the short- and long-term borrowings. Here, we should check whether the company has reported any sharp increase in borrowings during the financial periods. Most companies need to increase borrowings to support their capital expenditure on any business expansion.

However, if a company has been increasing its borrowings each year and the level has far exceeded one to two times the shareholders’ funds, unless its operating activities are able to support the repayments, the company faces very high financial risk.

Cash flow statement shows the sources and uses of cash over the period. One very important pointer in this statement is the operating cash flow.

High operating cash flow implies that the company is generating cash from its operating activities. A healthy company should show high operating cash flow because this number will indicate how much actual cash the company has generated from operations during the period.

We need to be careful of the companies that are showing profits but at the same time generating negative operating cash flows every year. This may imply that these companies have very high receivables. Any economic downturn may cause a sharp increase in provisions on bad debts.

Lastly, investors need to understand that the above six pointers are just a quick guide to analysing any annual report. Serious investors should not only analyse these six pointers. They are advised to scrutinise the reports further for more details.

l Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting. (SOURCE)

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

Maxis to re-list only Malaysian ops

2009-09-23T20:03:00.000+08:00

Market capitalisation possibly at RM42bn

A draft prospectus lodged with the Securities Commission on Sep 17 outlines that Maxis Communications Bhd (MCB) will re-list only its Malaysian operations, Maxis Bhd (Maxis) under an initial public offering (IPO) involving 2.25bn shares (30% of its issued and paid-up share capital), of which 2.075bn shares will be offered to institutional investors and the remaining 174.795m shares to the public.

The final IPO price however has not been fixed. Some media reports have been quoting sources indicating the IPO is estimated to raise US$2-2.5bn (RM7-9bn) which implies an IPO price of RM3.11-4.00. Others say the IPO shares may fetch as high as RM5-6 each. What is clear however is that no new shares will be issued, implying Maxis will not receive a single sen from the IPO exercise. Instead, the proceeds will go to the shareholders looking to trim their stakes through the IPO exercise. This is perhaps not too surprising as the Indian and Indonesian operations which need the funds most are kept private for now, suggesting separate listing exercises in the future.

However, MCB did manage to squeeze RM5bn from Maxis via a pre-listing restructuring exercise, which we believe will be used to fund the heavy capex of its foreign subsidiaries. In brief, the pre-listing exercise involves the incorporation of a new company, i.e. Maxis Bhd as the vehicle to house the Malaysian operations. Maxis Bhd will essentially acquire the Malaysian mobile operations from MCB, owing RM5bn to MCB in the process. To meet the RM5bn payable to MCB, Maxis has stated in the draft prospectus that it will raise long-term debt. Maxis will then have a net gearing of 0.58x. Interest charges on the amount payable to MCB are c.RM185m p.a. at an interest rate of c.3.7% (1.5% + 3-month KLIBOR).

From FY10, Maxis is targeting a fairly generous dividend payout policy of 75%. Assuming a very conservative assumption of zero earnings growth since annualised FY09 figures and taking into account interest charges for the RM5bn loan, Maxis’ will have DPS of 23 sen / share in FY10 based on EPS of 31 sen

Maxis’ IPO shares may trade in the range of around RM5.00 and RM6.20, assuming a PE multiple range of between 16x and 20x based on our FY10 EPS estimate. However, we believe Maxis will likely trade at around RM5.60 based on a PE multiple of 18x, taking into account its mobile market leadership thus deserving premium valuation over DiGi (16x), but a discount to TM’s fixed-line and broadband monopoly (20x). At a prospective RM5.60 per share, Maxis’ will generate minimum dividend yields of 4.2% in FY10. Such yields are lower than our estimates for DiGi and TM, but perhaps investors may overlook this to have a stake in a blue-chip company that may fetch a market capitalisation of RM42bn.

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

Selamat Hari Raya From Bursa Chat

2009-09-18T00:07:00.009+08:00

Ah Seng ==> Saya mengucapkan Selamat Hari Raya kepada semua pengunjung Bursa Chat yang aktif dan yang pembaca diam yang beragama Islam. Semoga bahagia dan bergembira selalu.

Mikey==> To all our muslim friends, Selamat Hari Raya, Have a great raya and safe journey to your kampung and back. Dont forget to tapau some ketupat and rendand. :)

nan==> Selamat Hari Raya Aidilfitri. Mohon ampun dan maaf kalau ada salah , silap atau terkasar bahasa. Selamat balik kampung dan pandulah kereta secara berhemah,ingati orang tersayang.

Martin: saya mengucapkan selamat hari raya aidilfitri kepada muslimin dan mulimat. I wish Happy Eid Al Fitr to all.

oo ==> I wish everyone happy & healthy.Selamat hari raya & selamat hari-hari

mmm==> Happy Hari Raya

newbie: Selamat Hari Raya to all of our muslim friedns !!!!!!!!!!

Baby ==> Selamat Hari Raya!

Zen ==> Selamat Hari Raya.

pnut==> Selamat Hari Raya, Maaf Zahir & Batin!

hot mama: SELAMAT HARI RAYA TO ALL OUR MUSLIM FRIENDS

yy (yang) ==>

Berbulan puasa,
Tibalah raya,
Dengan rasa gembira,
Semuanya pulang ke kampung,
Bertemu keriangan,
Bersyukur tak terkira.

Bersalam-salaman,
Menziarah-ziarahi,
Saling memaafi,
Walapun di mana kau bertemu.

SELAMAT HARI RAYA ADILFITRI......

這個泡泡裡│。°∵╭ ╮。∵°。
★│裝着│∴。°╰～～╯‧°。‧
∵│祝福和希望│。°‧╭╮。∵‧。
☆│希望你們快樂│°☆∵╰～～╯°★∵。
∴│ |∴‧°╭╮‧。°∵。
。╰╮★☆★╭╯ 。∴°╰～～╯‧∴。°
│☆╭─╯
╭╯╭╯
╔╝★╚╗ 列車Ｎo 888888888888888888888888888888888888888
║★☆★║╔═══╗　╔═══╗　╔═══╗　╔═══╗　╔═══╗╔═══╗╔═══╗
║☆★☆║║　Selamat　║　║　Hari　║　║Raya　║　║　Adil　║　║fitri║
◢◎══◎╚╝◎═◎╝═╚◎═◎╝═╚◎═◎╝═╚◎═◎╝═╚◎═◎╝═╚◎═◎╝

Anony==>

Selamat hari raya
Aidilfitri mulia
Ampun maaf dipinta
Mensuci hening dosa

Setahun menghilang
Sekarang menjelang
Hari yang bahagia
Selamat hari raya

@@@@@@@@@@@@@

Selamat hari raya
Pada saudari saudara semua
Marilah dengan gembira
Merayakan aidilfitri yang mulia ini

@@@@@@@@@@@@@

May this HARI RAYA be a special one for you ... And may it bring you MANY happy moments to cherish forever!!!!!

SELAMAT HARI RAYA AIDILFITRI, MAAF ZAHIR BATIN

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

Understanding Rights Issue

2009-09-09T20:06:00.001+08:00

*Article by Kok Chin Keong*

There have been a spate of rights issues by listed companies recently. These changes are no doubt bought about by requests from companies. So, what exactly are rights issues?

Rights are essentially a way for companies to raise capital (money). Fresh capital is essential for a company if they need more funds for their business operations. In the current (2008 – 2009) economic climate, more and more companies find that they require more funds. There is also the problem of existing credit lines of companies being reduced, thus increasing their need to raise capital.

Traditionally, there are two main ways for companies to raise capital. Via debt or equity.

Debt can be raised through bank borrowings or the issuing of bonds. The problem with bank borrowings now (2009) is that banks are unwilling to lend money. And if they do agree to lend, the interest rates are higher than normal. For bonds, there might not be enough takers.

Equity can also be raised through issuing preferred shares, private placement of shares or rights issues.

In a private placement, shares are issued to a selected group of people at a particular price. The problem with this method is that the traded price of many companies are at very low levels now (2009). Existing shareholders will be extremely unhappy if a private placement is done at low prices and their shareholdings get diluted. It would be like daylight robbery.

A rights issue overcomes the problem of a private placement by offering all shareholders an equal chance to subscribe to the new shares at the low price. While this might seem fairer than a private placement that would benefit only selected people, it does come with its disadvantages to existing shareholders.

This would be better illustrated with an example.

Lets say you own 1000 shares of company X and the shares were purchased at $1 each. The company has 100000 shares in circulation so you own 1% of the company.

Suppose you were only willing to commit $1000 of your capital when you purchased the shares. And that is the amount you will lose should the company go bust. Your liability is limited to your initial capital.

Now company X decides to issue a 1 for 1 rights at a price of $0.80. Assuming you subscribe to your entitlement, you would have paid an additional $800 to purchase 1000 shares.

While the number of shares you own has now increased to 2000, your percentage of shareholdings actually remain unchanged. 2000 out of 200000 shares is still 1%.

What this means is that you have been “forced” to pump in more of your money just to maintain your ownership of the company. Your capital at risk has also increased from $1000 to $1800. This is like the reverse of issuing dividends.

You have the right to refuse to subscribe for the rights of course. If you do nothing at all, your initial shareholdings of 1000 shares will become only 0.5% after all the new shares are issued. This would be a huge mistake as the very least you should have done is to sell off the rights to recover some capital if you are not going to subscribe for the new shares. This will help to compensate slightly for the dilution of shares.

The rights of shareholders are these few options:

1. Subscribe to the rights based on the amount of money needed by the company. You are at the mercy of the terms of subscription price as well as number of shares you can subscribe to.

2. Sell off the rights, keep the shares and have your shareholdings diluted.

3. Sell off the shares before they go ex-rights.

Sometimes, an investor could feel that he is having no rights as none of the options are attractive. For example, an investor could be pretty positive about the company but he doesn’t have the cash on hand to subscribe to the new shares. Neither option 2 or 3 would be good for him.

So, faced with the prospect of a massive dilution of my shares, you had to decide whether to sell off your holdings (at firesale prices).

Renounceable - A renounceable rights issue allows for shareholders to sell away their rights. A non-renounceable rights, on the other hand, cannot be sold.

Underwritten - A rights issue that is underwritten ensures that all the required funds are received regardless of the number of subscriptions by the shareholders. The underwriter will have to subscribe to any leftover rights. In return for this risk, a fee has to be paid to the underwriter. In cases where an underwriter cannot be found, it is common to get a majority shareholder to agree to subscribe to the excess rights. Another way is to allow for all shareholders to subscribe to the excess rights.

Kok Chin Keong
Remisier
Futures Brokers' Rep
Kenanga Investment Bank

http://twitter.com/BursaTweets
http://bursatweets.blogspot.com
017-8860687

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

DJIA- Stocks in pre-holiday rally

2009-09-05T10:49:00.002+08:00

Wall Street advances after the August labor market report shows a slower pace of job cuts and a rising unemployment rate.

NEW YORK (CNNMoney.com) -- Stocks rallied Friday in a thinly traded session ahead of the Labor Day weekend, as investors focused on the positives in a mixed report on the labor market.

The Dow Jones industrial average (INDU) gained 96 points, or 1%. The S&P 500 (SPX) index added 13 points, or 1.3%. The Nasdaq composite (COMP) advanced 35 points, or 1.8%.

However, all three indexes ended the week lower.

Employers cut less jobs in August than they have in months, but the unemployment rate still rose to a fresh 26-year high.

"It's a good report that generally suggests more healing in the economy," said Jeff Kleintop, chief market strategist, LPL Financial. "But the market has been saturated with good news and is starting to show fatigue after the S&P 500 rallied 50%."

A roughly six-month rally propelled the S&P 500 more than 50% through last week, leaving the broad index at its highest point since just after the collapse of Lehman Brothers last September.

But stocks tumbled in the first three sessions of this week as investors worried about the health of the economy. There was a late-session advance Thursday as some of the bank and tech shares that slumped earlier in the week bounced back.

That carried over to Friday's session.

Trading volume was light ahead of the three-day Labor Day weekend. On the New York Stock Exchange, advancers beat decliners four to one on volume of 1.02 billion shares. On the Nasdaq, winners topped losers almost three to one on volume of 1.74 billion shares.

Economy: Employers cut 216,000 jobs from their payrolls in August, the Labor Department reported, after paring a revised 276,000 jobs in July. The month brought the smallest number of job cuts since August 2008. Economists surveyed by Briefing.com expected 230,000 job cuts

The unemployment rate, generated by a separate survey, rose to 9.7% from 9.4%, a 26-year high. Economists expected unemployment to rise to 9.5%.

Unemployment is expected to hit 10% by the end of the year or early 2010, even as the economy is starting to recover. Although a jobs recovery typically lags a broader recovery, the rise in unemployment remains the market's biggest economic worry right now.

Without a healthier labor market and a burst in consumer spending, inventory rebuilding and fiscal and monetary stimulus are the main factors fueling a recovery.

"In the last few weeks, we've gone from pricing in a recovery to worrying about a double-dip recession in 2010 when all the stimulus money gives out," said Kleintop.

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

Article About A Free Stock Market Software Project By Malaysian

2009-09-03T14:11:00.002+08:00

*This article is by Yan Cheng Cheok*

JStock makes it simple to track your stock investment. It provides compact and organized stock market information, to help you decide your best investment strategy.

JStock is a free stock market software for 23 countries. It provides Real-Time stock info, Intraday stock price snapshot, Stock indicator editor, Stock indicator scanner, Portfolio management and Market chit chat features. Free SMS/email alert supported.

This project is developed by

- Lead programmer and project admin from Malaysia (Yan Cheng Cheok)
- Graphics designer from New York
- Programmer from Austria
- Programmer from Netherlands
- Packager from Germany
- Web programmer from Malaysia

This project is estimated to have 40,000++ users, based on the number of downloads. The users are from all over the world, as it supports multiple countries stock market. However, primary users are from Malaysia and United State.

For more detailed information, feel free to visit :
http://jstock.sourceforge.net/

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

Market Commentaries & Technical Analysis as at 01 Sept 2009

2009-09-01T20:25:00.001+08:00

Investment Theme For 2009

*** UNCERTAIN ***

1. Privatization And M&As Deals

2. A Stronger Ringgit Policy

3. Implementation Of the Ninth Malaysia Plan

4. Asset Reflation Theme

5. Iskander Development Region (IDR) In South Johor

6. Eastern Corridor Development Programme (Petronas-Led)

7. Northern Corridor Economic Region

8. Sarawak Region Corridor

9. The Sabah Development Corridor

10. Sarawak Corridor of Renewable Energy (Score)

11. RM40 Billion Public Transport Expenditure

12. The Asia Petroleum Hub In Johor

13. The Solid Waste Management Play

14. Flow of OPEC Petrodollars

15. The Trans-Peninsula Pipe Project

*** UNCERTAIN ***

16. Water & Water-Related Play

17. A U-, V-, W- Or L-Shaped Global Economic Recovery

18. Fiscal & Monetary Pump-Priming & Normalization Of Corporate Earnings

19. The Economic Stabilization Plan & Mini Budget

20. Interest Rate Cycle (Speculating End Of Easing Cycle As Economy Recover)

21. Decoupling – Emerging Economies Is Disconnected From Developed Countries (Uncertain)

22. Liberalization Of The Services/Financial Sector

23. The Malaysian Government’s Reform “Train”

24. GLCs Revamp

25. The ‘Third’ Link Bridge (Eastern Johor) To Singapore (Uncertain)

26. A ‘Third Stimulus’ Package (Uncertain)

Watch List In The Coming Week

2010 Budget Announcement;

Market Commentaries

On a cautious note, even as the global economic outlook is increasingly rosier, the next challenge is to sustain the recovery.

Sustaining the recovery will require some rebalancing acts, in that the global economy should refocus towards more US exports and more Asian imports (a reverse from the present scenario). The rationale is that the crisis has left some “deep scars” that will affect both supply and demand in the global economy for many years to come.

Given that the current global economic (Aug 2009) rebound is supported mainly by massive fiscal stimulus measures, the concern is that the rebound may not be sustained once the allocated spending is exhausted. Most economists see the factors driving the current economic rebound as temporary in nature.

So, the main call is for Asia to create its own demand to reduce its reliance on exports for growth, while at the same time, generate new opportunities for international trade.

Asian governments, including that of Malaysia, have announced earlier that they planned to create new economic models to ensure the future sustainability of their economies. Malaysia is expected to announce the outline of its new economic model towards the end of the year (2009).

Meanwhile, some economists are also concerned about the growing fiscal deficits faced by most governments as a result of their massive stimulus packages. Higher taxation – unpopular, but perhaps necessary – as the solution.

Although a recovery is underway, a sustained recovery will likely be slow and a follow-through recovery is needed. A stronger global recovery in 2011 with 2010 merely a getting-out-of recession phase.

2010 would a be “year of global interest rates hike” with India and Indonesia to be the first few to make a move. There will be negative forces pushing the inflation higher next year (2010). Loose monetary policies, a revival in commodity prices and a higher budget deficit would push inflation higher.

If there is any rate action, it will be in baby steps and probably in the second half of 2010. It did not see a resurgence in high inflation now (Aug 2009).

High savings and foreign reserves exceeding US$4.3 trillion had strengthened Asian economies’ external position” and that “the region is poised to ride or even lead the next economic boom.”

There was a need to reinvent Asia and make a shift from external demand to domestic demand.

Asia had escaped the “bullet” of recession and that higher interest rates would not have a big impact on its recovery. Moving from the current 2% to 3% will not impact the market so much.

The best time to return to the market was three months ago (April – May 2009), but the risk of getting a double-dip was a lot lower now (Aug 2009) than three to four months ago. It is possible to return to the 2007 level but don’t know by when. Some companies might recover and some might not. Some have even surpassed their 2007 peak. It is unlikely everyone will recover?. There will be some winners and losers.

It also encouraged investors to continue investing in equities on expectation of a second round of recovery. The market moves ahead of the real economy by six to nine months. The recent (July – Aug 2009) positive market performance has moved in anticipation of the first round recovery. From here (Aug 2009), a positive uptrend that investors can still partake of in anticipation of the second leg of the recovery.

Technical Analysis

The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index were fast reaching the overbought territory. It flashed a short-term at the bottom on Aug 21 2009.

Elsewhere, the 14-day relative strength index drifted sideways to marginally higher the past week to settle at 58 points on Friday.

In stark contrast, the daily moving average convergence/divergence (MACD) histogram sustained the negative expansion against the daily signal line to stay bearish. It triggered a sell on Aug 12 2009.

Weekly indicators continued to deteriorate, with the weekly slow-stochastic momentum moving out of the bullish zones after issuing a sell a week ago, and the weekly MACD in danger of tripping below the weekly trigger line.

Bursa Malaysia appeared still in consolidation phase although the principal index was able to chalk up modest gains the past week.

As all of us can see, daily volume has been shrinking over the past several days. While the bulls take a longer-than-expected breather and the market turning sluggish, pessimistic investors moved to the sidelines adopting the “wait-and-see” on suspicions the market may be in distribution mode after a strong run up.

Based on the daily chart, the prevailing trend remains bullish and it looks like the FBM KLCI is in the midst of constructing a concrete platform for the next rally.

Perhaps, the reason why trading was dull and thin could be because many people were away on holidays during the school break, combined with the start of Ramadan.

Therefore, investors should not be overly worried but can consider accumulating more on dips.

Technically, the daily and weekly MACDs still are pointing at consolidation, probably sideways pattern until a bullish breakout is detected.

Support floor is maintained at the 1,150 points, followed by the 1,140-1,142 points band.

To the upside, the key index will encounter significant resistance at the recent peak of 1,196.46 and the next, at the 1,200 points psychological mark, of which a successful penetration will signal a resumption of the mending process.

Undermining Factors

1. Blowup In US Subprime Loans & Shaky Financial Assets Associated With Them And As A Result Of Re-pricing Or Revaluation Of Risk Contributed To A Squeeze In The US Credit Markets (Stabilizing);

2. Malaysia Political Uncertainty;

3. Fear, Uncertainties, Global Liquidity Crunch & Economic Fallout (Stabilizing);

4. Volatile Foreign Exchange Market (Signs Of Volatility Has Peaked);

5. A Slowdown In Global Economy (Rate Of Decline Has Started To Moderate Since March 2009);

6. Commodities Prices (Strengthening);

7. A Global Deflationary Threat -> Hints Of Recovery – Fear Of Inflation

8. Threats Of High Commodities Prices And US Dollar Crisis

Unpredictable Risks/Surprises

========================

1. Terrorist Attack –

2. Oil Supply Disruptions –

3. A Pandemic Disease – Swine Flu (Spreads Worsening)

4. Financial Shocks – Unwinding of Yen/Dollar Carry-Trade Funds, China’s Stock Market Bubble, Global Liquidity Crunch Resulting From Blowup In US Subprime Loans And Shaky Financial Assets Associated With Them & Falling Dollar;

5. Major Social And Geopolitical Upheaval –

Equity Strategy: Easing Malaysia Political Uncertainty, Outcome Of The Credit Crunch And Subprime Loans Crisis Stabilizing, Strengthening Commodities Prices, Stable Global Growth, Moderating Inflation, Easing Monetary Policy & Fiscal Stimulus Measures … Imminent Rebound In 2H2009 .. But With Threats !!!

Recession – Recovery – Growth – Boom - Burst

(Stabilizing Stage But Need More Improvements For Recovery Theme To Play Out)

a. What’s NEXT For The Global Economy … The Next Challenge Is To Sustain The Recovery & Investing In Equities On Expectation Of Second Round Recovery

b. What’s NEXT For The Global Equities Market … WHAT MATTERS MORE TO MANY DEVELOPING MARKETS NOW (AUG 2009) IS WHAT CHINA , NOT US, DOES WITH POLICY

c. What’s NEXT For The US, China & Malaysia Equities Market

d. Jims Rogers … Next Commodity Bull Run Had Just Begun, Bets In Airlines, Agricultural Land, Water

e. The Asian Equities Markets … Investors Should Start Accumulating On Weakness During 3Q2009, To Position For Further Upside Later 2009.

f. What’s NEXT (2H2009) For The Malaysian Equities Market …

g. Factors That Could Derail The Global Economic Recovery …

h. Carry Trades Are Making A Come Back Into Emerging Markets

i. High Commodities Prices & US Dollar Crisis Could Pose Threats To Global Economic Recovery In Coming Months (June 2009 & Beyond).

j. Beyond 2Q2009 Corporate Earnings Malaysia Listed Companies

a. What’s NEXT For The Malaysian Economy … The Next Challenge Is To Sustain The Recovery & Investing In Equities On Expectation Of Second Round Recovery

Signs that Asian economies are on a recovery path are growing although the pace of recovery will likely be moderate.

The worst is behind Asia, given the emergence of more signs of a bottoming-out in the region and globally. Asia (economies) have bottomed out and will stabilise. Recent data from G7 countries showed that the recession in these countries is easing. The worst is clearly over.

The Organisation for Economic Cooperation and Development’s (OECD) composite leading indicator, which rose for a fourth month in June 2009, was a clear sign of the bottoming out in the United States, Japan and Europe.

Asian economies are about to turn the corner and raise their contributions to the global gross domestic product (GDP). It (Asia) will stabilise and recover in the second half of this year (2009) and continue to improve in 2010 on increasing external and domestic demand

Growth in China, India and Indonesia would remain robust while in Malaysia, Singapore and Thailand, the pace of growth could remain uneven. Other Asian economies that have entered the positive territory in the second quarter of the year (2009) are South Korea and Singapore with a growth of 2.3% qoq and 20.7%, respectively.

But Malaysia is still lagging, with the tide expected to turn only in the third or fourth quarter of 2009. Perhaps, Malaysia can learn the benefits of speedy implementation of economic stimulus programmes from some of these Asian countries that have successfully averted technical recessions, so that its economy too can recover alongside those of its peers.

On a cautious note, even as the global economic outlook is increasingly rosier, the next challenge is to sustain the recovery.

So, the main call is for Asia to create its own demand to reduce its reliance on exports for growth, while at the same time, generate new opportunities for international trade.

If there is any rate action, it will be in baby steps and probably in the second half of 2010. It did not see a resurgence in high inflation now (Aug 2009).

There was a need to reinvent Asia and make a shift from external demand to domestic demand.

By AMResearch …

News that Germany and France have emerged from a recession has helped to underscore a positive vibe that has slowly gained momentum following one set of encouraging news after another.

The news of two major economies coming out of recession in Europe follows news of strong quarter-on-quarter economic growth in Singapore during the second quarter 2009 and Indonesia’s economy growing by 4% in the second quarter 2009 from a year ago.

The huge fiscal stimulus announced by the Government would work its way deeper into the economy in the months ahead (Aug 2009 & Beyond) and that should help lift economic growth into positive territory in the fourth quarter 2009.

The global recovery in exports had resulted in higher production in most parts. We also see more signs of a bottoming out in the case of domestic demand as deterioration in labour markets has somewhat been mild.

It is almost consensus that a global recovery would occur by the second half of 2009, but it would remain modest, Malaysia will not be left behind, though it may lag due to structural and policy constraints.

The economic recovery would be U-shaped rather than V and felt that economic growth would contract by 5% in the second quarter 2009. GDP would contract by 3% in the second half of this year (2009) but economic growth should turn positive in the final quarter of the year 2009. Expecting GDP to grow by 1,5% in the fourth quarter 2009.

By Affin Investment Bank …

The recovery in the US and Europe would continue in this half of the year (2009) and US fiscal stimulus, along with increased auto production from the cash for clunkers programme, would help economic growth.

Private sector economists and the market are having higher expectations on the recovery.

Expecting Malaysia’s full year GDP to contract by 2.8% against the Government’s current estimate of a shrinking of between 4% and 5% of the economy this year (2009).

By Maybank Investment Bank Bhd …

The better industrial production numbers in the second quarter should point to a smaller contraction in economic growth in the second quarter 2009.

Predicts Malaysia’s real GDP will contract 5.9% year-on-year in the second quarter 2009 after falling 6.2% year-on-year in the first quarter and expecting the economy to expanded by 2.5% last quarter (2Q2009) from the first quarter after shrinking 3.4% quarter-on-quarter in the fourth quarter of 2008 and 7.7% quarter-on-quarter in the first quarter of 2009.

By AmResearch …

Signs of a recovering global economy have convinced economists that Malaysia could have seen the worst in the first quarter (1Q) of 2009, prompting some to price in positive numbers for the country’s gross domestic product (GDP) as early as 4Q this year (2009).

The optimism is based on a gradually improving external trade environment, albeit still contracting at a slower pace, and rejuvenation of domestic demand in recent months, helped by policymakers’ monetary and fiscal policies.

The general view is that the country will likely register its first full-year GDP contraction in 2009 since the regional financial crisis in 1998, given that the economy in the second and third quarters of 2009 will continue to shrink against the backdrop of a still weak global platform.

Malaysia’s economy could see smaller annual contractions in the second and third quarters before registering growth in 4Q 2009. The optimism is based on a recovering Malaysian manufacturing sector due to demand from regional countries such as China, India and Singapore.

Although external demand may be weak, expecting significant improvement in domestic demand due to the easing of monetary policy and higher fiscal spending.

Since the regional economies will not get much help from the global economy as was the case in the late 1990s, reckon that Malaysia’s recovery will most likely follow a U-shape.

Malaysia’s economy has shown some signs of a bottoming out in tandem with the pick-up in confidence as well as manufacturing activity.

While there were signs of a recovery in the global electronics sector, it was still unclear whether these were indications of inventory rebuilding or rising final demand.

Its principal worry is the sustainability of global recovery, especially in the US and Europe. What if growth stalls, and what if recent stimulus programmes fail to stimulate domestic demand? Also, the Americans are becoming net savers rather than spenders in recent months.

By TA …

The Malaysian economy could have reached its trough in the first quarter 2009 and was expected to be dictated by weaknesses in the domestic and global landscape.
In the sub-division of supply, the manufacturing and construction sectors may be the drivers of economic growth. Not to mention, the liberalisation of the services sector in line with the New Economic Model may stimulate growth within the services industry.

Moving into 2010, the Malaysian economy may observe growth on the premise of a rebound in the international trade segment, parallel with the increase in investment expenditure.

Anticipates that Malaysia would register an annual GDP contraction of 4.6% in 2Q 2009, before posting a decline of 4.2% in 3Q. Fourth quarter GDP is expected to expand by 2.8%. Full-year GDP is expected to shrink by 3.1% in 2009 before registering a 3% expansion in 2010.

The government has initiated two economic stimulus packages with a combined value of RM67 billion to boost domestic demand to counter-act falling exports.

By RHB …

Global recovery was on track considering that credit markets had stabilised while downside risks to economic growth had dissipated.

Business and consumer sentiment, besides investors’ risk appetite, have improved, resulting in better asset prices and a more manageable world economic landscape.

The recovery pace, however, will likely be slow and gradual given that the corporates and households in the developed countries that have gone through the massive destruction of wealth would still need to repair their balance sheets before they can spend more aggressively for an economic revival.

The improvement in the global economic outlook will likely translate into an improvement in demand for Malaysia’s exports in the second half of the year (2009).

For now (Aug 2009), while many claim to see the light at the end of the tunnel as major economies such as the US and European nations exhibit more encouraging economic data, it is worth noting that high unemployment rates may continue to stifle demand in the coming months (Aug 2009 & Beyond).

Going forward, one trend that will be keenly monitored is how generous lenders are in extending lines of credit to consumers and corporates. These could be tell-tale signs of Malaysia’s economic fortunes in the months ahead (Aug 2009).

By MIER …

Malaysia may not be able to cut its deficit to below 7 per cent of gross domestic product (GDP) in 2010 as it needs to spend to spur the economy. Malaysia will probably have large deficits for "years to come" and 10-11 per cent in 2010.

A bigger deficit could lead to a weaker ringgit and lower the country's sovereign ratings, but this should not be a big worry now (Aug 2009). The government can offset this by showing a clear timetable to balance the books and a timeline to achieve it, and how it proposes to increase revenue.

Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah had said the government plans to cut operating expenditure by 15 per cent next year (2010) to rein in the budget deficit.

After announcing RM67 billion worth of stimulus measures, the government expects the deficit to rise to 7.6 per cent of GDP.

The 15 per cent cut in operating expenditure sounds like a tall order requiring painful adjustments ... it's easier said than done. The only way the government can bring down the deficit is through controlled expenditure.

By Khazanah …

Meanwhile, Khazanah Nasional Bhd managing director Tan Sri Azman Mokhtar said the Malaysian economy has not fully recovered from the 1998 financial crisis in many respects. The last five to six years (2004-2008) have been a commodity boom. With a country rich with commodities we should not be having a fiscal deficit. This betrays a deeper structural issue.

Azman also expressed concern about the drop in investments. Savings have remained in high 30 per cent while investments have dropped 20 per cent, raising the question as to why the corporate businesses have been investing less and what needs to be addressed.

b. What’s NEXT For The Global Equities Market … WHAT MATTERS MORE TO MANY DEVELOPING MARKETS NOW (AUG 2009) IS WHAT CHINA , NOT US, DOES WITH POLICY.

Common questions facing investors are: If they are not in yet, should they continue to stay out? And for those who are already in, is it time to cash out?

The dilemma is a tough one but the events that have unfolded may provide some insights into what to expect in the new few months (Aug 2009 & Beyond).

The hyper bull market in China was undone by what had started in the first place. Signs of tightening credit appear to have burst the bubble in the China stock market and coincidentally deflated the tyres of a five month (Early Till Mid Aug 2008) undisrupted rally, not only in that country but also other Asian bourses.

Right now (Aug 2009), the global stock markets seems to be still holding up despite the steep fall in China. However, with stock market volatility increasing, fund managers are expecting a correction n the next few months (Aug 2009 & Beyond) of between 10% and 15% or even up to 20% at the most.

Having said that, rather than seeing it as a fear factor, investors should see opportunities for the accumulation of stocks. Some believe that the global stock market is entering a correction phase, though it still seems resilient at this point.

Risk premium has come down a lot compared with earlier 2009 as earnings and macro numbers stabilize. Doubts there is any significant correction other than investors taking the opportunity to take some profit before buying again.

Morgan Stanley said that the recent turbulence (Aug 2009) in risk markets such as China is just a correction. It states that it will not get bearish until it sees policy tightening, material macro data disappointment or excessive valuation.

NONE IS APPARENT NOW (AUG 2009).

What is notable is, first, global markets taking their leads from Chinese markets, and second, the hyper sensitivity of equities to any hint of policy tightening. WHAT MATTERS MORE TO MANY DEVELOPING MARKETS NOW (AUG 2009) IS WHAT CHINA , NOT US, DOES WITH POLICY.

The global stock market trend in the mid Aug 2009 SUGGESTS THAT WHAT CHINA WILL DO WILL MATTER FOR EVERYONE.

All eyes are on China to maintain a fine balance between a stimulating its domestic economy and not creating bubbles in real estate as well as the stock market. Creating and subsequently allowing the asset bubble to burst will have serious repercussions for china’s banking sector, which disbursed RMB7.73 trillion of loans in the first seven months alone.

It will unsettle sentiment among global investors as well. THERE IS INCREASINGLY MORE CO-RELATION BETWEEN THE MOVEMENTS OF CHINA’S STOCK MARKETS AND THE WORLD’S MAHOR EXCHNAGES IN TERMS OF INVESTOR SENTIMENT, ESPECIALLY IN ASIA.

Geographically, we are close to China. Also investors sees Asia as a growth centre, with China taking the lead. Hence, it is not surprising that the China stock market has become an important pointer for its neighbours.

For markets to sustain current valuations (Aug 2009) and even extend from here (Aug 2009), earnings expectations increasingly have to be met or beaten as we move into year end (2009).

The markets may be expensive but they are not excessively expensive, even for the China stock market. Which is why any correction is unlikely to be significant. It is understandable that the US stock market does not command the kind of premium that Asian markets do because there is a greater risk of earnings shortfall in the former and that the US economy, even when it recovers, will not grow as fast as the Asian economies. The US IS NOT A GROWTH MARKET!

Going forward, if China remains a leading indicator, and if the situation in US continues to be stable, investors are unlikely to have to worry too much. Opportunities will arise for those who have missed the boat.

The consensus view is that with China’s exports still weak and unemployment rising, China will continue its expansionary fiscal and monetary policy. It is just that there will more scrutiny to ensure that credit resources are diverted to productive investments, which will strengthen real economic activities rather than continuing to create bubbles in the stock market and real estate sector.

The global equity market may be entering a transition phase from one led by a recovery in Chinese growth to one where growth is led globally by a recovery in the US going into year end (2009) as well as ongoing growth in China. While a near term correction may emerge, investors should remain focused on their longer term risk appetite and goals and engage in rebalancing their portfolio towards these targets.

The new trend is that investors may increasing benefit from shifting their focus from macro driven factors, such as the Chinese economy, to concentrating on stock selection, which will be the key.

c. What’s NEXT For The US Equities Market

As equity investors ponder whether the recent (Aug 2009) pullback in equities is just a brief pause for breath in an extended rally, fixed-income markets are signalling a less optimistic view of the economy and the consumer.

Until late Aug 2009, equities had diverged from the bearish performance of corporate credit and steady decline in Treasury yields. Then, equities were hit by selling, a move which extended the weakness in credit and boosted government bonds further.

This split in thinking has long been a feature of trading across asset classes, with equities usually reflecting a more optimistic view of the economy and the consumer. But over the Aug 2009, the debate over the sustainability and strength of a recovery in economic activity has intensified.

Equities in Japan, Europe and the UK have also pulled back after a strong rebound from their lows in March 2009. While data from Japan, France and Germany show that their economies have pulled out of a recession, doubts remain about how quickly activity will normalise. There are a number of headwinds in the economy and they are not really going away very quickly or easily.

Economists expect the US will expand in the third quarter 2009, as low inventories are built back up, but recent US data (Aug 2009) has highlighted weak consumption and tighter credit standards. The latest Federal Reserve loan officers survey for the three months ending July 2009, revealed further tightening in lending conditions.

Against a backdrop of high and rising unemployment and declining real incomes, it would be a leap of faith to suggest that this situation is going to change any time soon.

That has fuelled a Treasury rally, with the yield on the 10-year Treasury note back below 3.50 per cent, down from near 3.90 per cent at the end of the first week of August 2009. Once you stabilise, the recession ends, but the reality is that US face very weak growth as consumer balance sheets take time to adjust. There have been solid inflows into Treasuries since yields recently (Aug 2009) peaked.

Institutional investors such as Pimco have recently sought to lower their risk to some areas of the credit market, such as high yield, which has rallied more than 30 per cent this year (Till Aug 2009). High yield has been the winner of the year and it's time to turn cautious.

The second half of the year (2009) is going to see choppy waters for credit and that is a function of the economic reality being pretty weak with credit being range bound.

For many companies, however, cost-cutting translates into slashing jobs or wages, and the bleak employment picture, in turn, weighs heavily on consumer spending and confidence.

Consumers in different income groups have their own reasons to keep a lid on spending, be it high unemployment in the low-income segment, the overlevered balance sheets of the middle class, and lost wealth and fears of tax hikes among high earners.

US Equities have yet to fully reflect the consequences of declining nominal sales and incomes, which in part was evident in the economic data from the latter part of last week (Aug 2009).

The bank warns: "In particular, with an absence of corporate cheerleading for the next couple of months (Sept 2009 & Beyond), the economic news will likely need to improve somewhat for equities to make much headway during the tricky months of September and October 2009.”

**********************

In the past five months (March 2009 – July 2009), the world’s stock markets have gained more than 50 per cent. The big question now (Aug 2009) is: where next? This rally is not unprecedented but history offers few comparisons. Those that exist are all imperfect and contradict each other. But rallies in the last century stand out:

1930. In the wake of the Great Crash, the S&P 500 staged a rally a lot like this one. From its low on November 12 1929, it rallied 47.2 per cent in five months. This fooled many. Anyone who bought at the top of the rally, on April 10 1930, would have lost 83 per cent over the next two years. If there is a rally for the bears to cite in their cause, this is it.

1932. Marking the very bottom of the 1930s’ bear market and arguably the most impressive rally in stock market history, the S&P did twice as well as in this current rally (March 2009 – July 2009), in half the time. It rose by 111 per cent in the 10 weeks from July 8.

This time (March 2009 – July 2009), the lows were never revisited. But the outlook was not good. After that violent upswing, just before the election of Franklin D. Roosevelt, the bear market dragged on for decades, with gains only for opportunists. The S&P fell 25 per cent once more by the end of 1932 and it would fall below its level of September 1932 in 1934 and again in 1938. This was not a great time to buy and hold.

1975. After the savage 1973-74 bear market, stocks enjoyed a 53.8 per cent rally from October 12 1974 to July 15 1975. In one five-month span, it gained 47.1 per cent.

In hindsight, it looks like a cousin of the 1932 rally, as the rally gave way to a bear market that ground on for the rest of the decade. Stocks were no higher three years later. Profits were only for opportunists.

1982. With Paul Volcker at the Federal Reserve still attacking inflation, and Margaret Thatcher and Ronald Reagan applying unpopular economic medicine, the 15-year bear market suddenly ended.

In the five months after August 12 1982, the S&P gained 43 per cent, starting a secular bull market that lasted until the tech bubble burst 18 years later. August 1982 was possibly the best time ever to buy stocks; early 1983 was still a good time.

This is the rally that bulls call to their aid. Those alarmed by the potential for fresh crises in emerging markets can even point out that this rally survived the first great Mexican devaluation crisis, which hit in the early weeks of the equity rally.

What did these rallies have in common?

Pessimism had grown overwhelmingly, with fear far outbalancing greed when they started. Except for 1930, they came near the end of severe recessions. They have both points in common with the current (March 2009 – July 2009) rally.

But there are differences. The rallies of 1932, 1975 and 1982 came when stocks were unambiguously cheap, and were still cheap after the initial 50 per cent rally. The cyclically adjusted price/earnings ratio, a multiple of average earnings over 10 years, was at extreme lows.

But in 1930, stocks never dropped to long-term fair value before rallying and were blatantly expensive by the time the rally ended. This time, prices fell a bit below their long-term average for a few months but the rally has already brought them back to look expensive.

In the critical sense of valuation, then, this rally (March 2009 – July 2009) looks nothing like 1932, 1975 or 1982. It looks a little more like 1930.

The environment of inflation and interest rates differed widely. In 1930, western economies were lapsing into deflation; in 1932, the world was mired in deflation; in 1975, it was stuck in inflation; and in 1982, inflation was high but coming under control.

The current (March 2009 – July 2009) picture does not fit with any of these – consumer price inflation in the west has been tame for decades. Last year (2008)’s crisis created the risk of severe deflation but the prompt decision by governments to throw money at the problem is a huge point of difference from 1930. Those who believe the deflationary scenario can logically forecast a repeat of the 1930 collapse in share prices. But this is a pessimistic point of view.

Parallels with 1982 do not work any better. The 1980s’ huge gains from steadily lowering rates and innovation in the financial sector are not available this time around (2009). The very opposite is more likely.

The 1932 rally came in truly extreme conditions.

But the 1975 rally may be a decent match; it came during a restocking boom after companies had slashed inventories (very much what the market is betting on now (Aug 2009)), at a point when oil prices were volatile and exerting a big influence on the economy.

The world now (Aug 2009) is still different in many important respects from 1975 but this may just be the best comparison. That would suggest the most likely outcome now (Aug 2009) is a protracted dose of directionless trading. For those more optimistic or pessimistic, you have your examples to hang on to.

What’s NEXT For the China Equities market …

Foreign funds have fled China's stock market during this month (Aug 2009)'s slump as quickly as they rushed in earlier in the year (2009), when they bet on a V-shaped recovery in the world's third-largest economy.

The quick exit means foreign investors no longer believe, as they did during China's stock market peaks in 2006 and 2007, that a bull run in Chinese stocks can last for years (2009 & Beyond) - a clear shift in attitude after China's market was battered by the global financial crisis last year (2008).

Industry observers said that capital inflows into China over the next few years (2009 & Beyond) will not rise close to - let alone exceed - peak levels seen in early 2008, dampening expectations sparked by a rebound in China's foreign exchange reserves in the second quarter of this year (2009).

This should help to serve as a clear warning to investors to be more cautious about investment allocations in China, at least for the rest of this year (2009). Investors should be more defensive as China's market conditions will not be able to recover to their peak any time soon.

China's stock benchmark, the Shanghai Composite Index, fell 20 per cent over a early two-week (Aug 2009), partly reflecting Chinese companies withdrawing money from the market as they shifted bank borrowings from short-term investments into longer-term projects.

The tumble followed a 90 per cent rally from the start of the year that stalled amid concerns about stretched valuations, tightening liquidity and fresh supplies of equity in the market.

Funds are flowing in and out of the (Chinese) market very quickly this year (2009), bucking a trend seen in the last bull run in 2006 and 2007. Fund inflows from foreign investors keen to join that rally are considered one reason why China's foreign exchange reserves leapt by US$177.9 billion in the second quarter 2009, compared with just a US$7.7 billion gain in the first quarter 2009, as the cumulative April-June 2009 reserves far exceeded the combined net inflows from the trade surplus and foreign direct investment.

The central bank and other financial institutions spent 528 billion yuan to buy, or absorb, new foreign exchange flows into China in the second quarter 2009, up only modestly from 420 billion in the first quarter 2009. In July 2009, the amount was 220 billion yuan. Those figures were only a fraction of the quarterly peak of 1.41 trillion yuan in the first quarter of last year (2008), and 654 trillion in January of last year (2008).

With China's economy having proved vulnerable to the global crisis, overseas investors are no longer all that certain about the Chinese growth story.

The prospects for China's asset prices are also less certain. Add in the fact that the yuan is no longer appreciating against the dollar, and it will be impossible for capital inflows into China to recover to their peaks in coming months (Sept 2009 & Beyond), or perhaps even years.

That will have a clear impact on the medium-term trend of the stock market. We are set to see a lingering market consolidation, during which the index will move around the 3,000 point mark for at least several weeks (Sept 2009 & Beyond).

China's economy is still recovering, although not as quickly as the market had implied earlier this year (2009). Liquidity in the system is good but not as ample as many investors had expected.

The Shanghai Composite Index has rebounded since late Aug 2009 but is now (Aug 2009) moving in a narrow range between its short-term five-day moving average, currently around 2,900, and its medium-term 60-day moving average at 3,060.

The index has still risen around 60 per cent so far this year (2009). In the last boom-and-bust cycle, the index fell 65 per cent in 2008 after it had more than quintupled in the two years to late 2007, battered by a sharp slowdown in China's economy as the global crisis took its toll.

What’s NEXT For The FMB KLCI …

Many agree that the stock markets are entering a correction phase. However, the jury is still out on how severe this correction will turn out to be…

It is believed that it is the start of a correction, but whether this will be a major correction that everyone is talking about. Whether this correction will turn out to be a massive moderation of the market – that is a clawback of more than 50% - remains to be seen.

Let’s say that it is a correction to reverse the five months of relentless rise (April – July 2009) from 836.21 to 1196.46. It may be gentle at first but let’s see how the world markets also pan out in time to come.

Critics say that this is happening now (Aug 2009) as growth concerns resurface in light of the recent monetary tightening in China. The good news for investors, however , is that the correction will not be as severe as in previous rallies.

Analysis of the two previous bear rallies – in 1998/1999 and 2001 – indicates that the pullback after troughs tends to be transitory, stretching no longer than two months. And the dips were 15% to 22% off intermittent highs, before rebounding by stronger percentages.

This time around, the correction may be less dramatic because the starting point of the recent upswing was from a depressed trough PPE of 11 times in March 2009, versus 16 times in April 2001. In the immediate term, the market may dip 10% off Aug 2009 high of 1187, forming a base of 1068 in the worst case scenario.

At the end of the day, markets have gone up a lot and risk to reward is not as attractive as before. China aside, movements in the US market must also be taken into consideration. US markets are generally turbulent between Aug and Oct, so some unsteadiness should be expected there. As such 1196.46 may be the peak for the market for now (Aug 2009).

Meanwhile it is worth noting that overseas investors turned net sellers of Malaysian stocks in July 2009 for the first time in four months, as the Southeast Asian nation’s stock market continued to lag behind regional peers.

Foreign funds unloaded US$121 million of Malaysian shares in July 2009, the equivalent of 56 per cent of the previous three months’ inflow. The reversal of fund flows is an “unwelcome surprise for us” and the outflow was “relatively steep”. All its regional peers enjoyed foreign fund inflows in July 2009.”

Foreign funds “lightened” their holdings in stocks such as Genting Malaysia Bhd, Digi.Com Bhd and PLUS Expressways Bhd, he said. Funds added to weightings in banks including Public Bank Bhd, Malayan Banking Bhd and RHB Capital Bhd.

Malaysia’s lower liquidity and velocity could be a symptom or cause, of foreign investors’ lack of interest in the market. The net selling could be a temporary hiccup that is consistent with past trends where it was relatively rare for foreign funds to be net buyers for more than three months running.

Kok Chin Keong

Remisier

Futures Brokers’ Rep

017-8860687

03-27112677; 27134673

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

Chinese stocks swoon - down 6%

2009-08-31T21:15:00.000+08:00

Shanghai stocks fall to 3-month low on bank lending worries. Stronger yen drags on Nikkei after election.

HONG KONG (Reuters) -- Chinese stocks sank 6% to a three-month low on Monday, weighing on Asian stocks and sapping investor willingness to put money at risk.

Meanwhile the yen rose sharply after Japanese voters swept the opposition into power.

The election results, while widely anticipated, sparked some short-term buying of yen on hopes that new policies will support consumer spending in an economy trapped in deflation and haunted by a weak growth outlook, though domestic stocks slipped on exporter weakness.

Major European stock futures fell 0.9%, following commodity prices lower, in trade thinned by a holiday in London. U.S. stock futures fell 0.6% and U.S. Treasury futures were up 0.2%.

Outside of Japan, volatility in Shanghai, a market largely closed to foreigners, has curbed risk taking and has been weighing on the Australian dollar, which is a common target for investors searching for bigger returns because of its relatively high yields.

Shanghai-listed shares dropped 6.2% on the day, on track to post losses of 21 percent in August, only the second month that the composite index has fallen more than 20% in the last 15 years.

The index also crucially dropped below the 125-day moving average, what is viewed by many domestic investors as the threshold for bear and bull markets.

Fears that banks will rein in their lending after a torrid first six months of the year and an abundant supply of expected new shares have been knocking Chinese shares lower for the last month, often weighing on global investor sentiment about holding riskier assets.

Shares of Bank of China, the country's biggest foreign exchange lender, were down 3.9% in Shanghai and the top drag on the market. Hong Kong's Hang Seng dropped 1.8% to a one-month low in sympathy with Shanghai.

Tokyo's Nikkei share average fell 0.4%. Large exporters Canon Inc (CAJ) and Honda Motor Corp (HMC) were among the biggest drags on the Nikkei, losing around 3.3% and 1.8%, respectively, on the stronger yen.

Australian stocks also performed relatively well, falling only 0.2%. Shares of Australia and New Zealand Banking Group Ltd jumped 4.1% after the country's fourth-largest lender said it was starting to see bad debt provisions bottom out.

The MSCI index of Asia Pacific stocks traded outside Japan slid 1.3%. The selling was widespread, hitting the consumer discretionary, energy, telecommunications and materials sectors.
Stock valuations questioned

Asian stocks are trading at a price-to-book valuation of 1.1 times, above the 30-year average of 0.7 times and around the same level at the peak of the last bull market.

Investors since March had been justifying the premium based on the region's growth prospects and its expected speedy recovery from the global downturn. Yet in August developed markets, such as the United States and Europe, have attracted investors away from emerging markets thanks to better economic data.

The Asian stock rally sputtered in July and August for two reasons, according to Mark Matthews, Asia Pacific strategist with Fox-Pitt Kelton in Hong Kong.

"The first is that the U.S. in particular and the developed world in general are experiencing economic recoveries that are more robust than previously expected. The second is that there is policy shift in China, and even the doves there are happy that asset prices are no longer rising quickly," he said in a note.
Yen for yen

In the currency market, the yen got an early boost on the clear-as-day election result, which eliminated any uncertainty about Japan's political leadership. The sharp selloff in Shanghai equities also supported the yen as dealers sought a safe haven.

The U.S. dollar fell 0.7% to ¥92.75, the lowest since July 13, and the euro dropped 1% to ¥132.28.

The sharp decline in Chinese stocks "has muddied the picture as well as to whether it's a reaction to the election victory or risk aversion. It's probably a bit of a combination of both," said a dealer at a European bank in Hong Kong about the yen strength.

The Australian dollar was off 0.6% to $0.8373, though was largely unchanged in August.

The yield on the benchmark 10-year U.S. Treasury note slipped to 3.43%, down sharply since hitting 4 percent on June 10.

The creeping rise of risk aversion in markets pushed down oil prices, with U.S. crude for October delivery down 0.7% to $72.22 a barrel. To top of page

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

2009-08-29T23:36:00.000+08:00

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

Bursa Chat Weekend School Flag & Pennant

2009-08-01T17:32:00.004+08:00

CHART EXAMPLES OF FLAG AND PENNANT PATTERNS / COMMODITIES

"BULL" FLAG IN AN UPTREND (BULLISH)

After a sharp rally, this "bull" flag served as a breather before running off again in the same direction. You can see the volume ease up a bit in the beginning of the flag, but then pick up as it nears the top of the formation and blows through it.

"BULL" FLAG IN AN UPTREND (BULLISH)

"Bull" flag in an uptrend. Quick rally, short pause, blast higher. Volume dips in the flag and surges on the breakout.

"BEAR" FLAG IN A DOWNTREND (BEARISH)

"Bear" flag in a downtrend. After a big rout, the flag seemingly presents a chance to re-group before continuing in the same direction (down.) Volume diminishes during the pause and then rapidly expands on the continuation.

"BEAR" FLAG IN THE BEGINNING OF A DOWNTREND (BEARISH)

After a big dump, this "bear" flag sets the stage for another quick and even larger fall. Volume decreases considerably in the flag, but the break to the downside is accompanied by a big increase in activity.

"BULL" PENNANT IN AN UPTREND (BULLISH)

"Bull" pennant in an uptrend. After a month long rally, the market takes a five day breather and continues even higher. Volume dips briefly and then picks up on the breakout.

"BULL" PENNANT IN AN UPTREND (BULLISH)

How's that for a pattern? Remember from the preceding page; 'pennants look very much like symmetrical triangles, but are typically smaller in size (volatility) and duration.' After a near straight up advance, the market takes only three days before resuming the upmove. During those few days, participation drops off a bit, but comes back as the market explodes out of the pennant. (Take a look at all those gaps right before and right after the pennant. Obviously a very strong and convinced market!)

"BEAR" PENNANT IN A DOWNTREND (BEARISH)

"Bear" pennant in a downtrend. This pattern came right after a 'bear' flag breakout. (Can you see it?) This pennant also presents only a brief pause before the market reasserts itself in the direction of the trend (down.) Volume dips in the pattern and jumps as the market breaks out and gaps lower.

"BEAR" PENNANT IN THE BEGINNING OF A DOWNTREND (BEARISH)

"Bear" pennant in the beginning of a downtrend. After a dramatic two day plunge, the market has a short lived consolidation. The rout continues and the market collapses. You can see activity dry up in the pennant. The breakout though, was made on extremely heavy volume.

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

The Psychology of Price Movement

2009-07-31T19:40:00.000+08:00

The price of a stock is the result of a decision on the part of both a buyer and a seller. The buyer believes prices will go higher; the seller feels prices will decline. These decisions are represented by a trade at an exact price.

Once the buyer and seller make their trade, their influence in the market is spent — except for the opposite reaction they will ultimately have when they close the trade. Thus, there are two aspects to every trade: 1) each trade must ultimately have an opposite reaction on the market, and 2) the trade will influence other traders.

Each trader's reaction to price movements can be generalized into the reactions of three basic groups of traders who are always present in the market: 1) traders who have long positions; 2) those who hold short positions; and 3) those who have not taken a position but soon will. Traders in the third group have mixed views on the market's probable direction. Some are bullish while others are bearish, but a lack of positive conviction has kept them out of the market. Therefore, they also have no vested interest in the market's direction.

The impact of human nature on futures prices can perhaps best be seen by examining changing market psychology as a typical market moves through a complete cycle from price low to price low.

Classic price pattern
Assume prices trade within a relatively narrow trading range (between points A and B on the chart). Recognizing the sideways price movement, the "longs" might buy additional contracts if the price advances above the recent trading range. They may even enter stop orders to buy at B, to add to their position if they should get some confirmation the trend is higher. But by the same token, recognizing prices might decline below the recent trading range and move lower, they might also enter stop loss orders below the market at A to limit their loss.

The "shorts" have exactly the opposite reaction to the market. If the price advances above the recent trading range, many of them might enter stop loss orders to buy above point B to limit losses. But they, too, may add to their position if the price should decline below point A with orders to sell additional contracts on a stop below point A.

The third group is not in the market, but they are watching it for a signal either to go long or short. This group may have stop orders to buy above point B, because presumably the price trend would begin to indicate an upward bias if point B were penetrated. They may also have standing orders to sell below point A for converse reasons.

Assume the market advances to point C. If the trading range between points A and B has been relatively narrow and the time period of the lateral movement relatively long, the accumulated buy stops above the market could be quite numerous. Also, as the market breaks above point B, brokers contact their clients with the news, and this results in a stream of market orders. As this flurry of buyers becomes satisfied and profit-taking from previous long positions causes the market to dip from the high point of C to point D, another distinct attitude begins working in the market.

Part of the first group that went long between points A and B did not buy additional contracts as the market rallied to point C. Now they may be willing to add to their position "on a dip." Consequently, buy orders trickle in from these traders as the market drifts down.

The second group of traders with short positions established in the original trading range have now seen prices advance to point C, then decline to move back closer to the price at which they originally sold. If they did not cover their short positions on a buy stop above point B, they may be more than willing to "cover on any further dip" to minimize the loss.

Those not yet in the market will place price orders just below the market with the idea of "getting in on a dip."

The net effect of the rally from A to C is a psychological change in all three groups. The result is a different tone to the market, where some support could be expected from all three groups on dips. (Support on a chart is denned as the place where the buying of a futures contract is sufficient demand to halt a decline in prices.) As this support is strengthened by an increase in market orders and a raising of buy orders, the market once again advances toward point C. Then, as the market gathers momentum and rallies above point C toward point E, the psychology again changes subtly.

The first group of long traders may now have enough profit to pyramid additional contracts with their profits. In any case, as the market advances, their enthusiasm grows and they set their sights on higher price objectives. Psychologically, they have the market advantage.

The original group who sold short between A and B and who have not yet covered are all carrying increasing losses. Their general attitude is negative because they are losing money and confidence. Their hopes fade as their losses mount. Some of this group begin liquidating their short positions either with stops or market orders. Some reverse their position and go long.

The group which has still not entered the market — either because their orders to buy the market were never reached or because they had hesitated to see whether the market was actually moving higher — begins to "buy at the market."

Remember that even if a number of traders have not entered the market because of hesitation, their attitude is still bullish. And perhaps they are even kicking themselves for not getting in earlier. As for those who sold out previously-established long positions at a profit only to see the market move still higher, their attitude still favors the long side. They may also be among those who are looking to buy on any further dip.

So, with each dip the market should find the support of 1) traders with long positions who are adding to their positions; 2) traders who are short the market and want to buy back their shorts "if the market will only back down some"; and 3) new traders without a position in the market who want to get aboard what they consider a full-fledged bull market.

This rationale results in price action that features one prominent high after another and each prominent reactionary low is higher than the previous low. In a broad sense, it should appear as an upward series of waves of successively higher highs and higher lows.

But at some point the psychology again subtly shifts. The first group with long positions and fat profits is no longer willing to add to its positions. In fact they are looking for a place to "take profits." The second group of battered traders with short positions has finally been worn down to a nub of die-hard shorts who absolutely refuse to cover their short positions. They are no longer a supporting element, eagerly waiting to buy the market on dips.

The third group of those who never quite got aboard the up-move become unwilling to buy because they feel the greatest part of the upside move has been missed. They consider the risk on the downside too great when compared to the now-limited upside potential. In fact, they may be looking for a place to "short the market and ride it back down."

When the market demonstrates a noticeable lack of support on a dip that "carries too far to be bullish," this is the first signal of a reversal in psychology. The decline from point I to point J is the classic example of such a dip. This decline signals a new tone to the market. The support on dips becomes resistance on rallies, and a more two-sided market action develops. (Resistance is the opposite of support. Resistance on a chart is the price level where selling pressure is expected to stop advances and possibly turn prices lower.)

The downturn
Now the picture has changed. As the market begins to advance from point J to point K, traders with previously-established long positions take profits by selling out. Most of the hard-nosed traders with short positions have covered their shorts, so they add no significant new buying impetus to the market. In fact, having witnessed the recent long decline, they may be adding to their short positions.

If the rally back toward the contract highs fails to establish new highs, this failure is quickly noticed by professional traders as a signal the bull market has run its course. This is even more true if the rally carries only up to the approximate level of the rally top at point G.

If the open interest also declines during the rally from J to K, it is another sign it was not new buying that caused the rally but short covering.

As profit-taking and new short-selling forces the market to decline from point K, the next critical point is the reactionary low point at J. A major bear signal is flashed if the market penetrates this prominent low (support) following an abortive attempt to establish new contract highs.

In the vernacular of chartists, a head-and-shoulders reversal pattern has been completed. But rather than simply explaining away price patterns with names, it is important to understand how the psychology of the market action at different points causes the market to respond as it does. It also explains why certain points are quite significant.

In a bear market, the attitudes of the traders would be reversed. Each decline would find the bears more confident and prosperous and the bulls more depressed and threadbare. With the psychology diametrically opposite, the pattern completely reverses itself to form a series of lower highs and lower lows.

But at some point, the bears become unwilling to add to their previously-established short positions. Those who were already long the market and had refused to sell higher would eventually be reduced to a hard core of traders who had their jaws set and refused to sell out. Traders not in the market who were perhaps unsuccessfully attempting to short the market at higher levels will begin to find the long side of the market more attractive. The first rally that "carries too high to be bearish" signals another possible trend reversal.

With this basic understanding of market psychology through three phases of a market, a trader is better equipped to appreciate the significance of all technical price patterns. No one expects to establish short positions at the high or long positions at the low, but development of a feel for market psychology is the beginning of the quest for trades that even hindsight could not improve upon.

When you analyze charts, approach them with the idea that they reflect human ideas about prices that are the result and the struggle between supply and demand forces. Your attitude and ability to judge market psychology will determine your success at chart analysis. Unexpected occurrences can change price trends abruptly, and without warning. Also, some of the chart formations may be hard to visualize. You'll sometimes need a good imagination as well.

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

GDP Zenith?

2009-07-30T10:25:00.002+08:00

In a hypothetical scenario, if there was a big black bear out there, he would mark the zenith of the rally during these few days which would coincide with the release of the US GDP data (advanced estimates) tomorrow night.

Late last month, we called for this bullish wave which has pushed the KLCI up by 100 points to a peak of 1,179 yesterday. We believe that the main force driving this 2 week rally is the upcoming US GDP results, which experts think could surprise on the upside. With the US GDP results out tomorrow, we opine that this could possibly be a short term peak, and that traders should be more cautious in the next few days.

On Monday, we called for a correction towards the end of the week. This scenario is now coming into play with the KLCI down 7.9 points yesterday and the Dow mildly negative for the last two days. These are small symptoms of toppishness.

US Q2 GDP Results out tomorrow
The critical US GDP results advanced estimates for Q2 will be released tomorrow night. Consensus estimates peg an annualized GDP decline of 1.5%which is a significant improvement over the previous quarters annualized decline of 5.5%. We think that positivity of the GDP data has already been priced in with a 12% rise in the Dow and a 9.3% rise in the highly correlated FBM-KLCI in the last two weeks

Peak of Positivity
With a string of US economic reports (Case Shiller Housing Indexand Durable Goods ex-trans) showing positive results yet still failing to push the Dow above its 9,124 high in the last few days, it is obvious that US traders are now uncertain and awaiting the release of the GDP data tomorrow. We think that theGDP data might possibly be the short term finale of the recent bullish wave.

We still retain our bullish view, but opine that KLCI traders should now i) take profit at upticks and ii) suspend buying for now and observe the post-GDP behavior of the US Dow Jones. If the Dow and global markets can still rally post-GDP data then it could be a positive continuity sign for the global bull rally.

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

KLCI Daily Chart

2009-07-29T14:01:00.001+08:00

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

FBM KLCI Chart

2009-07-27T13:03:00.001+08:00

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

Bursa Chat Weekend School- Five Chart Patterns

2009-07-25T14:01:00.004+08:00

FIVE CHART PATTERNS

1.Profitable Pattern Number One
The Symmetrical Triangle: A Reliable Workhorse

You’ll recognize the symmetrical triangle pattern when you see a stock’s price vacillating up and down and converging towards a single point. Its back and forth oscillations will become smaller and smaller until the stock reaches a critical price, breaks out of the pattern, and moves drastically up or down.

The symmetrical triangle pattern is formed when investors are unsure of a stock’s value. Once the pattern is broken, investors jump on the bandwagon, shooting the stock price north or south.

Symmetrical triangles are very reliable. You can profit from upwards or downwards breakouts. You’ll learn more about how to earn from downtrends when we talk about maximizing profits.
If you see a symmetrical triangle forming, watch it closely. The sooner you catch the breakout, the more money you stand to make.

Watch For:

• Sideways movement, a period of rest, before the breakout.• Price of the asset traveling between two converging trendlines.• Breakout ¾ of the way to the apex.

Set Your Target Price:
As with all patterns, knowing when to get out is as important as knowing when to get in. Your target price is the safest time to sell, even if it looks like the trend may be continuing.For symmetrical triangles, sell your stock at a target price of:
• Entry price plus the pattern’s height for an upward breakout.• Entry price minus the pattern’s height for a downward breakout.

The ascending and descending patterns indicate a stock is increasing or decreasing in demand. The stock meets a level of support or resistance (the horizontal trendline) several times before breaking out and continuing in the direction of the developing up or down pattern.
Sponsor:Instant delivery of explicit forex trade alerts sounds like something you might be interested in - try them FREE for 30 days!
How to Profit from Ascending and Descending Triangles
Ascending and descending triangles are short-term investor favorites, because the trends allow short-term traders to earn from the same sharp price increase that long-term investors have been waiting for. Rather than holding on to a stock for months or years before you finally see a big payday, you can buy and hold for only a period of days and reap in the same monster returns as the long-time stock owners.
As with many of our favorite patterns, when you learn to identify ascending and descending triangles, you can profit from upwards or downwards breakouts. That way, you’ll earn a healthy profit regardless of where the market is going.
Watch For:
• An ascending or descending pattern forming over three to four weeks.
Set Your Target Price:
For ascending and descending triangles, sell your stock at a target price of:
Entry price plus the pattern’s height for an upward breakout.• Entry price minus the pattern’s height for a downward breakout.

The first trough is a signal that buying demand is starting to weaken. Investors who believe the stock is undervalued respond with a buying frenzy, followed by a flood of selling when traders fear the stock has run too high. This decline is followed by another buying streak which fizzles out early. Finally, the stock declines to its true worth below the original price.

How to Profit from the Head and Shoulders Pattern
• Short sell as soon as the price moves below the neckline after the descent from the right shoulder.
Set Your Target Price:
For the head and shoulders pattern, buy shares at a target price of:
• Entry price minus the pattern’s height (distance from the top of the head to the neckline).

4&5Profitable Patterns Number Four and Five

Triple and Double Bottoms and Tops: Reversals upon reversals

When you see a W or M pattern forming, you may have just discovered a money-making double bottom or double top pattern. These patterns are common reversal patterns used to suggest the current stock trend may be likely to shift.

But don’t panic if your double bottom or double top patterns do not develop as you had originally thought. You haven’t lost your chance for cash. If your W or M pattern reverses for a fourth time, you could now be working with the profitable triple bottom or triple top.

Double Bottom Pattern

Double Bottom Pattern
A small peak is surrounded by two equal troughs.

Purchase When:

• The price exceeds the middle-peak price.

Watch For:

• A price increase of 10% to 20% from the first trough to the middle peak.
• Two equal lows, not to differ by more than 3% or 4%.

Set Your Target Price:

For the double bottom pattern, sell your stock at a target price of:

• Entry price plus the pattern’s height (distance from the peak to the bottom of the lowest trough).

Double Top Pattern

Double Top Pattern
A small trough is surrounded by two equal peaks.

Short Sell When:

• The price drops below the middle-trough price.

Watch For:

• A price decrease of 10% to 20% from the first peak to the middle trough.
• Two equal highs, not to differ by more than 3% or 4%.

Set Your Target Price:

For the double top pattern, buy shares at a target price of:

• Entry price minus the pattern’s height (distance from the trough to the top of the highest peak).

Triple Bottom Pattern

Triple Bottom Pattern
Three equal troughs amid a series of peaks.

Purchase When:

• The price exceeds the resistance established by the prior peaks.

Watch For:

• A series of three identical troughs at the end of a prolonged downtrend.

Set Your Target Price:

For triple bottom patterns, sell your stock at a target price of:

• Entry price plus the pattern’s height (distance from the resistance to the bottom of the lowest trough).

Triple Top Pattern

Triple Top Pattern
Three equal peaks amid a series of troughs.

Purchase When:

• The price falls below the support that formed from the prior troughs.

Watch For:

• A series of three peaks at relatively the same level.

Set Your Target Price:

For triple top patterns, buy shares at a target price of:

• Entry price minus the pattern’s height (distance from the support to the top of the highest peak).

Now You Know…

The five most profitable stock patterns:

• symmetrical triangle
• ascending and descending triangles
• head and shoulders
• double top and double bottom
• triple top and triple bottom

How to Minimize Your Risk

No investment advisor likes to admit it, but no stock picking system is perfect. Sometimes, the stocks we think will explode, don’t. Sometimes, the stocks we feature lose money.

There may not be a foolproof system to predicting the stock market, but we do have a foolproof system for managing risk. ChartAdvisor follows one of the safest risk reduction systems available.

Using these three simple steps, you can reduce the risk in your stock picking plan:

Three Ways to Take Risk Out of the Stock Market

1. Screen Your Picks. This might seem obvious, but patterns that look like they are developing into predictable trends do not always follow through. After combing over thousands of stock charts a day, ChartAdvisor will often not fetures a single stock.

2. Get In. Get Out. ChartAdvisor preaches setting realistic target exit prices for all stocks. We lock in high returns while the stock is high, and we get out before the market has a chance to change its mind.

3. Set Tight Stop Losses This step is absolutely critical to minimizing your risk in the stock market. If a sure-fire winner turns out to be a fizzled-out dud, your system needs to have a built-in, abandon-ship trigger. That is, you need to know when to cut your losses and move on to brighter prospects.

If you like the post, please subscribe to Bursa Chat. We will send you the latest post by Email
===> Click Subscribe to Bursa Chat by Email

BACK TO CHAT BOX

Bursa Chat

Further upside for FBM KLCI

Bursa Chat - News Highlights 23.10.09

WTK and BJCorp Charts

Axiata (HOLD TP RM2.75)

Glomac (BUY TP RM1.37)

Mid-Autumn Festival

Short term upset - The Trader

FBM KLCI: NO WORRIES (YET)

The Trader (30.09.2009)

Glomac

How to analyse an annual report

Maxis to re-list only Malaysian ops

Selamat Hari Raya From Bursa Chat

Understanding Rights Issue

DJIA- Stocks in pre-holiday rally

Article About A Free Stock Market Software Project By Malaysian

Market Commentaries & Technical Analysis as at 01 Sept 2009

Chinese stocks swoon - down 6%

Bursa Chat Weekend School Flag & Pennant

The Psychology of Price Movement

GDP Zenith?

KLCI Daily Chart

FBM KLCI Chart

Bursa Chat Weekend School- Five Chart Patterns

2.Profitable Pattern Number Two

3.Profitable Pattern Number Three

4&5Profitable Patterns Number Four and Five