Sell, Sell, Sell?

Foreign research houses on the extremes. Last week, I posted an optimistic article here by Citigroup which is considered the most bullish foreign house in town. Their year end target for KLCI was 1,499. Today, on the other extreme end with more than 500 points difference, is what I believe todate the most pessimistic target by a foreign/local research house in town. Yes, you guess it correct, it is CLSA which has today revised its KLCI year-end target to below 1,000. This revision is the third for the year (other revisions discussed here before):-

December 07 1,560

February 08 1,320(-15%)

March 1,150(-13%)

July 980 (-15%)

Next revision to be at 833? (-15% again?)

Could the 980 be the target for the coming months instead of year end target based on the frequency(short term in nature) of CLSA's revisions? Do you need to change year end target so frequently until any new revisions become meaningless? It seems that CLSA does not really bother about valuations, economics and technical analysis etc. All it needs is a calculator and just add/subtract a certain percentage from the base to get the revised target. So easy? I really doubt so. Below is the said article.

BT: CLSA Asia-Pacific Markets has cut its year-end target for the Kuala Lumpur Composite Index (KLCI) by 15 per cent to 980 points, believed to be the lowest estimate in the market. The foreign research house also downgraded its rating on the Malaysian market to "underweight" from "neutral". It cited political uncertanities, inflationary pressures and an economic slowdown as major drags on market sentiment in the medium term. "Investors have always viewed Malaysia as a politically stable country and a defensive market. "However, the current political bickering portrays a negative perception to foreigners that will cause further de-rating," CLSA said in its report on strategy outlook yesterday. In March, it had a year-end target of 1,150 points. The KLCI closed at 1,127.26 points yesterday. Some research firms recently cut their year-end targets as well, but none had set them below 1,000 points. TA Securities cut its target by 200 points to 1,210 last month, while RHB Research slashed 257 points to 1,128 last week. CLSA said it lowered its earnings forecasts and target prices for selected stocks to reflect a higher earnings risk. Its top "sell" calls include AMMB, Bursa Malaysia and SP Setia. "Banks, construction, property and consumer-related companies are the worst hit by rising operation and material costs, weaker sales and higher default rates. "Independent power producers will be hit severely by the windfall tax," it said. It recommended buying gaming, telecommunications and plantation stocks since the former two have relatively defensive earnings. CLSA also expects high crude palm oil prices to sustain plantation companies' earnings growth. Its top "buys" are DiGi, Kuala Lumpur Kepong and Resorts World. CLSA said that while Malaysia's move to cut fuel subsidies will lead to short-term pain from higher inflation, in the long term, it will enhance productivity and energy efficiency. It expects Malaysia's economic growth to slow to 3.3 per cent in 2009 from 5.3 per cent this year.

* Badawi: "We can hit 5% (growth) target". "Political stability will soon be restored"....matter will be solved...be cool?

* TheEdge: Notable share buybacks during market downturn. Genting, Commerz, YTL, AnnJoo, CBIP, Glomac, Ahmad Zaki and Parkson.

* More financial troubles for US lenders Fannie Mae and Freddie Mac. Lehman Bros reported both companies need USD46b and USD29b respectively for capital infusion. Both companies are facing a proposed change of accounting standards which if approved, could ends the companies' source of revenue. The proposed change requires financial services firms to move bonds backed by pools of loans (ie securitization) off their balance sheets.

* Here is a quick referral of commodities prices traded on the ICE, CBOT and Nymex yesterday quoted in USD: Aluminium 3,310 per tonne, Zinc 1,830 per tonne, Lead 20,950 per tonne, tin 22,900 per tonne, copper 8,415 per tonne, crude oil 141.2 per barrel, coal 194.79 per MT, corn 6.94 1/4 a bushel, wheat 8.18 a bushel, soya bean 15.7 a bushel, cocoa 29.5 per tonne, gold 926 a troy ounce.

* TheSun(by a reader): An old saying by Margaret Fuller "Today a reader, tomorrow a leader". If one stops looking around, reading, asking and thinking, one fails as a leader. This must be a paradigm to which one aspires. Read till your last breath.