Smart Investing/Trading for the week ending June 20 2008

Weekly US Market Update and Outlook

Stock market comeback faces triple threat

MarketWatch: U.S. stocks on Monday will attempt to recover from some hefty losses next week. The Dow Jones Industrial Average ended at 11,842.69, off 220.4 points, or 1.8%, for the session. It lost about 465, or 3.8%, on the week. Friday's finish marked the Dow's lowest close since March 10, when it settled at 11,740. Any comeback will likely be contingent on three factors: the price of crude oil, any hints of inflation, and developments in the troubled financial sector. "Obviously this market is in lockstep with three things, the most important of which is the price of a barrel of oil," said Art Hogan, chief market strategist at Jefferies & Co. On Friday, stocks sank as crude-oil futures gained, a trend that played throughout the week, as the weaker U.S. dollar added to the allure of oil and other commodities as a currency hedge. More trouble in the financial sector compounded market anxiety.

And, while investors fretted about the impact of rising energy costs on the already soft economy, the credit crisis and its ongoing impact on the troubled banking sector last week continued unabated. Merrill Lynch on Friday warned of investor capitulation on the regional banking sector, with analysts envisioning further dividend cuts as likely to be on the horizon. The broker cut its median earnings estimate for regional banks for 2008 by 15%, with J.P. Morgan analysts chiming in a prediction of further efforts to replenish reserves in the sector. "Merrill sees investors effectively throwing in the proverbial towel when it comes to bank stocks. With capitulation come buying opportunities, normally. A normal year 2008 has not been thus far," said Nadler. Of the Dow's 30 components, 29 posted losses, with blue-chip financials among the hardest hit. Citigroup Inc. fell 4.3%, American Express Co. fell 3.4% and American International Group Inc. declined 3%. The S&P 500 fell 24.9 points, or 1.9%, to 1,317.93, with all 10 of the index's industry groups posting declines, led by consumer discretionary, off 3.1%. The S&P closed with a weekly loss of 3.1%. The Nasdaq Composite Index dropped 55.97 points, or 2.3%, to close at 2,406.09, giving the technology-laden index a loss of 3.1% for the week.

Bonded

As stocks sank, bond prices climbed, with the yield on the benchmark 10-year note, which moves in reverse of its price, falling to 4.16%. The U.S. dollar declined against most currency rivals, while the price of gold climbed. And, with the price of crude already on the rise, the climb was further fueled by a published report of an Israeli dry run of an attack on Iranian nuclear facilities. Crude for July delivery climbed $2.69 to end at $134.62 a barrel on the New York Mercantile Exchange, while uncertainty ahead of a meeting of oil producers and consumers this weekend in Saudi Arabia and China's hike in fuel prices helped push prices down 0.2% for the week In addition to energy concerns, next week brings a slew of reports that could shed further light on whether other costs are climbing as well. "We will also be scouring the economic data calendar for signs of inflation," said Hogan. The economic docket looks to be a busy one, particularly in regards to the ailing housing sector. Analysts expect the S&P/Case-Shiller Home Price Index will fall to 168.8 in April from 172.2 in March, with the report slated to be released Tuesday. The second day of the week also brings June consumer confidence, which is projected to weigh in at a 16-year low. On Wednesday, investors will receive durable goods in May, with the data expected to show a 1.0% rebound, along with an expected small hike in May new home sales, which are projected to rise to 530,000. Thursday brings final first-quarter GDP, which analysts expect to be revised up to 1.2% from an initial 0.9%, along with initial jobless claims and existing home sales for May. The May personal income report is due on Friday, along with a measure of consumer sentiment. Added to the mix is the Federal Open Market Committee, or FOMC, which on Tuesday begins a two-day meeting, with Federal Reserve Chairman Ben Bernanke and his colleagues widely expected to step up talk about the risks of inflation, while not hiking benchmark lending rates from the current 2% "Fed projections on economy and inflation are also likely to be revised higher, laying the groundwork for a hike or two this fall," wrote analysts at Action Economic

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KLSE Technical Update and Outlook

I Capital on Plantation Index: Interestingly, the trend of Plantation Index is contrary to that of the KLCI. As it retests its resistance level of 8,000, its DMI is bullish and its MACD has also just crossed into the bullish territory. ...If there is plenty of volume support, a breakout of its ascending triangle resistance should start a new uptrend move. Thus, the Plantation Index would still provide some cushion to the broader KLCI.

* 100 days after- courtesy of The Malaysian Insider.

* CIMB finally sets its foot in Thailand. It won a bid to buy 42.1% stake in Bank Thai plc for RM577.4m. The buy of 2.10 baht translates to 59% premium of the last traded price of Bank Thai or 2.91x of its March 31 book value. CIMB is expected to offer to buy the rest of the bank shares and would in total cost the Malaysian bank RM1.9b. Bank Thai is the 9th largest bank in Thailand in terms of assets. However, this bank has exposure to collateralized debt obligations of about 1.96b baht in its accounts.