Investment and Trade Jottings

Technical Analysis - February 23 2009

2009-02-23T15:59:00.001+08:00

S&P500 (770, last week 827 or -6.9% w.o.w)
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This will be the second week of hefty losses. The Daily MACD and MACD Histogram had a negative crossover 5 sessions ago and has thus joined the Daily Parabolic SAR, Guppy MMAs and DMIs (+ve and –ve) turning bearish. For the weekly readings, the MACD and MACD Histogram are still positive but the Parabolic SAR has just turned negative. The weekly ADX trend, DMIs (+ve and –ve) and Guppy MMAs are still weak. Support is around 700 and resistance at 820.
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KLSE CI (890, last week 910 or -2.2% w.ow)

Despite the daily indicators MACD, Parabolic SAR, ADX trend and DMI (+ve and –ve) have all turned positive during last week, indicators such as MACD and DMI (+ve and –ve) are now slowly flashing negative although no crossover downwards yet.. The weekly charts MACD and Parabolic SAR continues to be positive but the weekly ADX trend, DMIs (+ve and –ve) and Guppy MMAs are still otherwise. The index is expected to trade between 860 and 910.

HangSeng (12,699, last week 13,555 or -6.3% w.o.w )

With a hugh drop during the week, the daily indicators like Parabolic SAR, MACD and MACD Histogram dips under water again. As of weeks ago, the DMI (+ve and -ve) and Guppy MMAs continue to be negative. The weekly charts are still positive, especially the MACD, MACD Histogram and Parabolic SAR but the weekly ADX trend, DMIs (+ve and –ve) and Guppy MMAs are still bearish . Support is seen at 12,000 and resistance at 13,200.

Nikkei 225 (7,416, last week 7,779 or -4.7% w.ow)

All the daily indicators like the Parabolic SAR, MACD, MACD Histogram, Guppy MMAs and DMIs (+ve and –ve) are bearish now. The weekly charts are still positive, especially the MACD, MACD Histogram. However, the Parabolic SAR, Guppy MMAs, ADX trend and DMI (+ve and –ve) are still weak. Support is seen at 7,000 and resistance at 8,000.

* Bloomberg: South Korea is prepared to support won, banks as market tumbles.

* Bloomberg: Asia agrees on USD120B pool of currency reserves as crisis worsens.

* BT: Macquarie:- Investors positive on Malaysia stocks. It picks Genting, AMMB, KNM, TMI and Tenaga.

* InvestorsBizDaily: Clinton urges China to keep buying US Treasurys.

Smart Investing/Trading for the week ending February 20 2009

2009-02-22T19:23:00.005+08:00

US markets Update and Outlook

Stocks at the mercy of nationalization debate

MarketWatch: U.S. stocks are likely to face choppy waters next week, as the debate about whether or not to nationalize banks intensifies along with growing investor demand to rid the financial system of its toxic assets.

"Financial markets appear to be fixated on 'toxic' assets, and until they are removed from bank balance sheets, pressure will remain on the sector," said Benjamin Reitzes, an analyst at BMO Capital Markets. It's a week full of home sales and real-estate data, and Ben Bernanke heads to Capitol Hill for two days of testimony. Home Depot, Dell and others report earnings, and Microsoft has annual strategy meeting. Such concerns have helped drive the Dow Jones Industrial Average to fresh six-year lows. For the week, the blue-chip average fell more than 6%, marking its worst week since October of last year. The broad S&P 500 index fell nearly 7% for the week, while the Nasdaq Composite lost 6%.

A big chunk of the pain came from the financial sector, where Bank of America sank to new lows and Citigroup fell to an 18-year low on Friday amid concern the government may take over the banks, wiping out their shareholders. Senate Banking Committee Chairman Christopher Dodd on Friday said banks may have to be nationalized for a short time, according to Bloomberg News. But Robert Gibbs, the White House press secretary, said the Obama administration supports a privately held banking system. While the comments seemed to help financial shares come off their lows Fridays, stocks on Wall Street have again taken a turn for the worse since last week after Treasury Secretary's Tim Geithner unveiled a plan to help ailing banks.

Many analysts complained that the plan was short on details, specifically, on how the government would deal with the toxic assets that have plagued banks' balance sheets and the financial system for more than a year and a half.

"Unless investors are somehow convinced the assets are worth more or banks are willing to sell for less, the only option might be broad nationalization," BMO's Reitzes said in a note. Yet, he added, it was that very "prospect that helped drive U.S. banking shares to their lowest level since the early 1990s this week."

Not all asset classes lost over the past week, as investors seeking a safe haven led gold to top $1,000 an ounce for the first time since March of 2008. Still, the lack of follow-through from gold mining stocks isn't sending much of a bullish signal, according to some analysts. As commodity prices have plunged over the past year, the materials sector, which includes the shares of mining and chemical firms, has seen its profits collapse. In the fourth quarter, profits in the sector are down 82% from the year-earlier period, making materials the second worst performing sector of the S&P 500, after financials.

Overall earnings are now expected to have fallen 42.1% for the fourth quarter, according to Thomson Financial. This would mark the worst earnings growth rate since Thomson began tracking earnings 10 years ago. "The weakness is now spread out across multiple sectors and it looks to continue at least through the third quarter," said John Butters, earnings analyst at Thomson.

The first quarter is looking increasingly grim, with the ratio of negative to positive company forecasts jumping to 5.9 to 1, compared with a usual ratio of 2 to 1 historically.

Whereas health care, consumer staples and the utilities sectors had still posted slight earnings growth in the fourth quarter, all 10 sectors of the S&P are now expected to see their earnings fall in the first quarter, according to Thomson.

Next week, another 51 S&P 500 companies will report results, including Dow component Home Depot another update on the housing market, with the December S&P/Case-Shiller Home Price Index, followed by a survey of consumer confidence in February by the Conference Board. And Fed Chairman Ben Bernanke will deliver his semiannual report on monetary policy and the state of the economy, at the Senate Banking Committee. Wednesday will bring existing home sales figures for January, followed by new home sales date on Thursday. Also on that day will be data on durable goods orders for January and weekly jobless claims. On Friday will be a February manufacturing survey from the Chicago region, followed by another February reading of consumer confidence, this time by the University of Michigan. Also on Friday, will be a second estimate of gross domestic production in the fourth quarter. "Weaker business inventory and trade data suggest the second estimate for the fourth quarter GDP [...] will show a meaningful downward revision to something around negative 5% from the initial estimate of negative 3.8%," said William Knapp, investment strategist at MainStay Investments.

Weekly KLSE Update and Outlook

StarBizWeek(MarketWatch): The local bourse could not make much progress despite breaking out of the 21-week simple moving average for the first time in 12 months a week earlier, as investors were not enthusiastic to take up new positions due to frail offshore leads. Instead, they opted to book profit.

Despite that, Bursa Malaysia was holding quite well given the trauma the US market had been through the past week.

According to the daily chart, the recent breakthrough in the CI appears a half-hearted move for now and going forward; Bursa may just be range-bound due to limited participation from investors amid a dearth of market-stimulating news.

In short, there is still no solid confirmation of the recent bullish reversal but we will continue to look out for that.

While the weekly MACD is firming, the daily MACD is at a risk of flashing a sell. Given the tricky technical reading, the key index may channel sideways pending a new lead to emerge. Support 886, 860-863 and 835. Resistance at 925, 936.63, 946-950, 963.

* MarketWatch: Russian boom ends as resource wealth vanishes

* Japan leaves interest rate at 0.1%.

Gold and Dollar, Rising Together

2009-02-19T15:44:00.001+08:00

"The rally in the US dollar and gold is telling the market that investors are worried about global economic stability outside of the US and therefore they are preparing for the worst".

Please continue to read here for Kathy Lien's interesting article on the concurrent rise in gold and USD and its implication.

* North Korea warns of war as Clinton heads for Seoul

* BT(Singapore): Beijing will increasingly use its USD2T in foreign exchange reserves to support domestic growth and to finance the overseas expansion of Chinese companies.

Yen heading for a fall?

2009-02-18T15:53:00.004+08:00

Japan has been attracting all kind of negative news lately. The "unbelievable" contraction in its economy which contracted at its quickest pace in 35 years , resignation of its Finance Minister Shoichi Nakagawa who was allegedly intoxicated during a G7 Press Conference in Rome, the recent big drop in the approval ratings of its PM Taro Aso's and Clinton's visit to Japan which include a courtesy call to Japan's opposition party leaders are some of the recent "lowlights" for the country. Also, in recent times, there have been calls for the Japanese government to intervene in the money market to slow down the Yen's appreciation. A strong Yen will eventually kills the Japanese economy(or has it not already) and have repercussion to world trade. Here are some of the current views from analysts on this subject:

The Yen needs to depreciate

SeekingAlpha.com: An excessively strong Yen goes against the interest of everybody except those who have longed Yen......

It is frustrating for me to observe Japanese officials trying to bolster the stock market but doing nothing to avert the senseless appreciation of the Yen. At such levels, almost every manufacturing concern in Japan would fail. Artificially supporting stock prices would not work! But the Bank of Japan can sell Yen; indeed it can sell as much Yen as the market wants. There is no worry this will create excess liquidity, because should the Yen depreciate excessively, and at any sign of inflation, the central bank can mop up the excess Yen just as easily as it had sold the Yen in the first place.

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The excessively strong Yen is not helping other countries to export to Japan at all, because when unemployment and bankruptcies are on the rise, Japan's imports can only go down. In part because Japan's share in world trade is shrinking fast, world trade is also shrinking fast, hurting everybody. Order needs to be restored to the foreign exchange market before the world's second largest economy can have any chance of recovering

The yen is heading for a fall

FT:Com: The yen is overvalued and its status as a “safe haven” currency is likely to come under scrutiny, says Michael Metcalfe, head of global macro strategy at State Street Global Markets.

He argues that analysts typically fall back on either current account positions or, better still, net foreign asset positions as a guide to which currencies should perform in times of heightened risk aversion. “The rationale is that investors respond to reduced risk appetite by cutting their exposure to international investments,” Mr Metcalfe says.

This theory appears to be supported by the fact that Japan has one of the largest surpluses on its net foreign asset position – and therefore the biggest potential for repatriation flows – and the yen has appreciated strongly.

Getting the Yen Back to Previous Levels Could Help Ease Current Pressures

SeekingAlpha.com: The two currencies causing problems for the world’s reflationary efforts just now are the yen and the dollar. Both are too strong. Equally, the yen and the dollar this decade have played key, global roles in the extension of credit via their structural weakness. While I’m not making a case for resurrection of conditions that got the world into its current mess, it’s certainly true that the global policy response is an attempt at stabilization. Getting the yen back towards its previous carry-levels would do a lot, right now, to ease pressures.

Here are two possibilities. One, the dollar is devalued against gold. Second, Japan essentially lends yen interest free to the IMF, which forms the backing of a large expansion of its balance sheet of SDRs. Those SDRs are then used to recapitalize banking systems from Austria, to Ireland. The result of these two actions is that the brunt of the dollar devaluation is borne in part by gold, to ease the race-to-the-bottom effect on other currencies. In the case of the yen, weakness does get restored against most foreign currencies, but, Europe is willing to pay that price as a recipient of IMF recapitalization.

These are of course elaborate and sophisticated methods to accomplish something simple: Money Printing. Global devaluation of paper currencies, reflation, and rescue of banking systems. Those are the goals. The world will be no richer for it.

* Ovarian cancer and talcum powder.

* Report On Yuan Depreciation Remark False

* Bloomberg: GM, Chrysler seeks up to USD21.1B in first aid, plan to cut 50,000 jobs.

* East Europe faces deep recession.

* FT.com: Gold went to a 7 month high of USD972.65 a troy ounce after Russia's central bank planned to increase gold holdings with its overall foreign exchange reserves.

What's feeding the Chinese stock rally?

2009-02-17T15:30:00.002+08:00

Many economists expect China's economy to recover early this year backed by the government's four-trillion-yuan stimulus plan. Many are also confident it would embrace on an early recovery before global economy picks up. As a result, there were a lot of buy calls for China stocks, example here. Due to these factors, the recent run up in China's stock markets may not be too shocking to many. (The above chart is the comparison between The Shanghai Stock Exchange CI -which gained almost 30% and S&P500 -which lost almost 10% over a period of 3 months)

However, I was shocked when I read the article below. China using stimulus money to prop up the share markets???...it will only create short term gain but long term pain. There is no real economic benefit to push up the share prices of the companies. Nevertheless, such strategy has been practiced by many countries for many years before China though.

NakedCapitalism: The China bulls have commented approvingly on the growth in loans in China, seeing it as a sign of pending recovery, along with an upswing in stock prices. We've pointed out that economist and China commentator Michael Pettis has heard quite a few reports that many of these loans were in fact sham transactions to meet government targets. And now it gets even better. One analyst estimates that more than 1/3 of the total "new" lending (assuming that the loans were truly extended) may have gone into the stock market.

From Bloomberg (hat tip reader Michael):

Chinese companies may be using record bank lending to invest in stocks, fueling a rally that’s made the benchmark Shanghai Composite Index the world’s best performer this year, according to Shenyin & Wanguo Securities Co. As much as 660 billion yuan ($97 billion) may have been converted by companies into term deposits or used to buy equities, Li Huiyong, Shanghai-based analyst at Shenyin Wanguo, said in a phone interview today, citing money supply figures. China’s banks lent a record 1.62 trillion yuan in January as part of a government drive to stimulate the world’s third- largest economy, while M2, the broadest measure of money supply, climbed 18.8 percent from a year earlier. The Shanghai Composite has surged 29 percent since the start of 2009, compared with a 10 percent decline in the MSCI World Index.

* BT: How much are Malaysia's richest worth now?

* BT: Citi: Worst yet to come for developers.

* TheStandard: Japan's Finance Minister said he will resign, after denying being drunk at a G7 meeting in Rome recently where he appeared incoherent and slurred his speech.

* Eliz Wong to quit?

Technical Analysis - February 16 2009

2009-02-16T15:52:00.003+08:00

S&P500 (827, last week 869 or -4.8% w.o.w)

Another volatile week. Although index was up strongly a week earlier, the following week was a "strong down". The Daily Parabolic SAR which was the first to turn bullish is now bearish for the last two trading sessions. The Daily MACD has hooked down but has not crossover negatively yet. The MACD Histogram is still holding on while Guppy MMAs and DMIs (+ve and –ve) are remains negative. For the weekly readings, the MACD, MACD Histogram and Parabolic SAR are still positive. The weekly ADX trend, DMIs (+ve and –ve) and Guppy MMAs are still bearish. Support is around 820 and resistance at 900.

KLSE CI (910, last week 897 or +1.4% w.ow)

The daily indicators MACD, Parabolic SAR, ADX trend and DMI (+ve and –ve) have all turned positive during the week. The weekly charts MACD and Parabolic SAR continues to be positive but the weekly ADX trend, DMIs (+ve and –ve) and Guppy MMAs are still bearish. The index is expected to trade between 860 and 931.

HangSeng (13,555, last week 13,655 or -0.7% w.o.w )

The daily indicators like Parabolic SAR, MACD and MACD Histogram continues to be positive. The DMI (+ve and -ve) and Guppy MMAs are still negative. The weekly charts are still positive, especially the MACD, MACD Histogram and Parabolic SAR but the weekly ADX trend, DMIs (+ve and –ve) and Guppy MMAs are still bearish . Support is seen at 13,000 and resistance at 15,000.

Nikkei 225 (7,779, last week 8,077 or -3.7% w.ow)

Following S&P500, the Daily Parabolic SAR which was the first to turn bullish is now bearish for the last two trading sessions. The Daily MACD has hooked down but has not crossover negatively yet. The MACD Histogram is still holding while Guppy MMAs and DMIs (+ve and –ve) are remains negative. The weekly charts are still positive, especially the MACD, MACD Histogram. However, the Parabolic SAR, Guppy MMAs and DMI (+ve and –ve) are still negative. Support is seen at 7,500 and resistance at 8,600.

* China's FDI falls 32.6%

* Japan's GDP plunges at 12.7% annual rate in Q4 of 2008.

Smart Investing/Trading for the week ending February 13 2009

2009-02-15T12:27:00.004+08:00

Weekly US Markets Update and Outlook

Stocks to cut their apron strings with Washington

Wal-Mart, economic data to dominate; bad-bank plan could still make waves

MarketWatch: U.S. stocks, at the beck and call of Capitol Hill in the past month, get a chance to cut those ties in the week ahead, as Congress heads home and a smattering of corporate and economic releases take over the calendar.

During a holiday-shortened week, earnings from Wal-Mart Stores Inc. and Deere & Co. round out a quarterly reporting season notable for the gallons of spilled red ink.

Investors on watch for early signs of an economic turnaround also will wade through two economic surveys on how business and the housing market are faring this month, plus January's industrial activity and inflation.

"Everyone knows that the economy is weak, but the consensus is that the economy will bottom in the summer," said Alec Young, equity strategist for Standard & Poor's equity research unit. "If you see the numbers miss, it makes it harder for investors to believe things will get better."

News out of the Beltway could still wreak havoc across traders' screens when they return from the President's Day holiday weekend Tuesday. U.S. Treasury Secretary Timothy Geithner could fill in the details of his recently announced plan to partner with private investors to wipe the bad assets off banks' books. Stocks sold off sharply in the past week, after analysts said the plan fell short of the needed fix for the beleaguered banking system.

Geithner has yet to detail how much the government will pay to take bad loans and securities off the balance sheet of banks. Too low a price for these illiquid assets would likely cause some banks to take a fresh round of charges, further pushing off a recovery in the financial system. "There will be a lot of speculation as to whether Geithner comes out with the details," said Greg Valliere, senior political strategist at Stanford Financial Group in Washington, D.C.

The Treasury or the FDIC could reveal how it plans to value toxic mortgage-related assets by rescuing a struggling financial institution, according to analysts.

For weeks, mixed sentiment about the progress of a second economic-stimulus package and the Treasury's bank plan has teased the benchmark indexes.
Optimism over both underwrote a rally in stocks during the first week of February. But the S&P 500 Index and Dow Jones Industrial Average gave back most of those gains in the past week, making spectacular intraday dives on Tuesday and Thursday, on disappointments that both programs would fall short.

The S&P 500 and the Dow both lost about 5% for the week ended Feb. 13.
Stock investors shut the door on one source of that volatility Friday, when Congress prepared to push through a sprawling, $787 billion stimulus package backed by President Barack Obama. He is expected to sign the bill into law on Monday. "It's going to be a quiet week because Congress is out," Valliere added.
Legislators heading home for the President's Day holiday typically take the week off to spend time with voters and donors.

Future news about the stimulus will involve details of its implementation, such as how "shovel-ready" infrastructure projects are and when certain tax changes will go into effect, Valliere pointed out. But for now, distraction from that legislation is likely to give ground to reports from the economy and corporations.

Wal-Mart, inflation

The world's largest retailer is expected Tuesday to report a lower profit for its fiscal fourth-quarter, hurt by higher expenses and a stronger dollar. Analysts expect Wal-Mart will earn 98 cents a share, excluding a charge from class-action lawsuits. Reports from retailers J.C. Penney Co. and Lowe's Co. follow later in the week.

Companies are closing the books on an earnings season that has made records for its dismal performance.

Reported earnings, which include one-time gains and charges, in the S&P 500 have lost $10.44 a share in the fourth quarter -- the first time companies in the index have ever posted a collective loss. Operating earnings are on track for the six straight quarterly decline. Companies have been struggling to project future quarters as the economy founders.

On Tuesday, surveys from New York area manufacturers and the National Association of Home Builders give traders a taste of how factories and the real-estate sector have been faring this month.

On Wednesday, the January industrial output report is likely to show widespread declines in U.S. manufacturing, particularly pressured by lower auto production. Housing starts, also out Wednesday, likely slid to a new all-time low. Also Wednesday, the Fed releases minutes from its last meeting and its economic projections.

The week ends with reports on January wholesale and consumer prices. Both indexes are expected to reflect slightly higher gasoline prices since December while continuing to underscore the risk of deflation. Most key economic data this week "will contribute further evidence to the decay in economic growth in this quarter," wrote Brian Fabbri, chief economist for North America at BNP Paribas, in emailed comments Friday.

Weekly KLCI Update and Outlook

StarBizWeek(MarketWatch): Despite overseas markets, especially the Dow experiencing great swing and volatility, trading on the local bourse was pretty stable, with the key index fluctuating sideways to marginally higher, catching many people by surprised.

According to the weekly chart, a positive development appears in the making. That is, the key index had penetrated the 21-week simple moving average for the first time in 12 months. Theoretically, the breakthrough would pave the way for more scaling but because the CI still is flirting around the breakout level, it is wise we seek further confirmation before everyone turns bullish again.

Technically, the uptick of the daily and weekly MACDs suggest Bursa Malaysia may firm gradually this week.

To the upside, the key index is expected to face resistance at 925 points, 936.63 points, 946-950 points, 963 points and the 970-973 point range.

Support is seen at 886-892 point range, followed by 860-863 points band and the next at 835 points.

* Xinhua: South Korea Exchange plans to sign an official agreement with the Cambodian government next week to launch the kingdom's proposed stock exchange market in December. More fresh blood to spill? .

Time to sell gold?

2009-02-12T14:30:00.003+08:00

According to the Editor of Investment U, this guy Louis Basenese (inset) has been dead on with his predictions. He called the U.S. dollar bottom versus the euro within 26 days… oil’s peak within 24 days… and the top in U.S. Treasuries within two days. So when he makes a big call like this, we listen. And while Lou thinks gold is going down, there’s another asset class he thinks is going straight up - small caps. To get access to his five best small-cap picks, go to The White Cap Report His other recent article includes Time to Invest in China stocks which was posted here before. Anyway, here are his reasons for being bearish with gold.

Shorting Gold: 12 Reasons Making The Case For This Contrarian Investment by Louis Basenese, Advisory Panelist Senior Analyst, The Oxford Club

If you’re a self-professed “Goldbug,” feel free to read no further. Or at least spare me your hate mail. Because no matter what I say today, I know you’ll cry foul… or something much more colorful.

But for those of you with an open mind - especially after my last three contrarian predictions proved dead accurate, read on.

Because it’s time to start shorting gold!

You won’t find many, if anyone else, making this case. But as the first reason of 12 below reveals, that’s precisely why you should give it more credence.

12 Reasons To Start Shorting Gold

1. It’s decidedly contrarian. If a contrarian investor is someone who deliberately decides to go against the prevailing wisdom of other investors, shorting gold certainly fits the bill. Right now, everyone else is buying gold, or at least recommending it. If you have any doubt we’ve reached such fever pitch levels, consider No. 2.

2. The infomercial factor. The best indicator of a turning point for any investment, in my experience, is infomercials. If an investment gets so popular it invades the pre-dawn hours with non-stop but-wait-there’s-more offers, it’s time to get out. And that’s exactly what’s happening now. So much so companies like Cash4Gold.com are invading primetime television. They even splurged for a Super Bowl ad spot. And they recruited washed-up celebrities Ed McMahon and M.C. Hammer to boot. In case you forgot, the Hammer filed bankruptcy in 1996. And Eddie boy almost lost his 7,000 square-foot, $6.5 million Beverly Hills pad to foreclosure. No offense, if you take investment cues from these two, you deserve to lose money.

3. There is always some truth in a rumor. Recent news reports suggested Germany, the world’s second-largest holder of gold, was selling some from its vaults to trim its deficit. It turned out to be a rumor. But you gotta wonder if there’s some truth behind it. After all, high gold prices would be an easy way to raise cash. In other words, the scenario is completely plausible. And if Germany’s considering it, even remotely, so, too, are plenty of other deficit-ridden governments. It goes without saying that a government dumping supply on the market will send prices lower, quickly.

4. The gold-to-oil ratio is out of whack. Historically, an ounce of gold will buy you about 14 barrels of oil. But with oil around $40 per barrel, an ounce of gold gets you almost 23 barrels - a whopping 64% above the historical mean. If you believe in statistics, a reversion to the mean is imminent!

5. So is the gold-to-silver ratio. Historically, an ounce of gold will buy you 31 ounces of silver. But now the ratio stands at 73 - an unbelievable 134% above the historical mean. Here, too, a reversion to the mean is imminent. And I’d rather place my bets on a 57% decrease in the price of gold, than silver more than doubling to make it happen.

6. The HGNSI index is too high at 60.9%. For the past 25 years, Hulbert Financial Digest has tracked the average recommended gold market exposure among a subset of gold-timing newsletters. It usually fleshes out around 32.6%. But now it rests at 60.9%, a level it’s only exceeded 13% of the time. The key - Hulbert found an inverse correlation exists between his proprietary index and the short-term market direction of gold. In other words, if the index is high, like now, gold is headed lower.

7. Trinkets drive demand, not governments or speculators. Nearly 75% of gold demand comes from the jewelry market. And if Indian brides balk at buying above $750 per ounce as the Bombay Bullion Association reports - India’s gold imports cratered 81% in December - look out below. And don’t be fooled into thinking investors (governments or speculators) will pick up the slack. As HSBC reports, rising demand from investors, particularly from ETFs, only offset half of the 33% decline in jewelry market demand since 2001.

8. What makes now “different?” If the global economic crisis keeps getting worse, as goldbugs like to point out, why hasn’t gold tested last March’s high of $1,030.80 per ounce? Or blown right by it? After all, gold is supposed to increase in value as economic conditions worsen. But it hasn’t lived up to expectations, not one bit. And I don’t think it ever will. Ultimately, when you factor in the massive amounts of stimulus being injected into the markets, on a global level, we’re close to the worst of times… and the peak for gold.

9. Analysts love it. According to Bloomberg, 16 of 24 analysts surveyed by the London Bullion Market Association believe gold will reach a minimum of $1,032 per ounce this year. As we all know, analysts’ track records are deplorable. Instead of just ignoring them, why not bet against them? The odds are definitely in our favor.

10. Hedge fund buying dried up. Institutional speculators (hedge funds) played a large part in gold’s run-up. But 920 of them went Kaplooey last year, according to Hedge Fund Research, Inc. Not to mention, hundreds of others hemorrhaged capital as investors demanded their money back, while those left standing ratcheted down borrowing to close to nothing, according to Rasini & C., a London-based investment adviser. In the end, gold prices will eventually reflect the absence of these former heavyweights.

11. Gold is schizophrenic and the wrong personality is in control. Multiple motivations exist to buy gold including the desire for a safe haven, currency, adornment, raw material, or inflation hedge. But much like Treasuries, the bulk of buyers come from the safe haven camp today. And once the economy shows any signs of perking up, we can expect these same investors to flee for more risky assets. And don’t be so quick to rule out a second half recovery…

12. The Fed, the President, history and the Baltic Dry Index concur - the economy’s on the mend. Despite dismal data, both the Fed and President Obama point to the current recession ending by the second half of 2009. Moreover, the average recession only lasts 14.4 months. So even if this one is longer than usual, we’re still near the tail end of it. A fact underscored by the recent 61.4% rally in the Baltic Dry Index from its early December low. As I wrote in November 2008, the index is the first pure indicator of an uptick in global activity. And once the economy gets back into gear, the Fed will act quickly to reign in the money supply and curb inflation.

Cleary the gold rush is on. But that’s all the more reason to move in the opposite direction, against the herd. I realize this might be the most unpopular recommendation right now, but that means it could also be the most profitable.

And before you brandish me a fool for recommending shorting Treasuries and gold in the span of two months, here’s the intersection. The driving force behind both assets in recent months has been safe haven buying. And it will remain the dominant variable in determining price in the months ahead. So when investors go back on the attack for more risky assets, prices for both assets will fall.

It’s already happening for Treasuries. And I’m convinced gold is next.

Good (and contrarian) investing,

* RGE Monitor: Chinese exports contracted by 17.5% y/y in January, the steepest in 13 years, and the third month of contraction. Imports contracted even more (43.1%, the worst since data begun being collected in 1995). The deep import contraction took China's trade surplus to the third highest of all time $39.11b (record $40.09b in November and $39.98b in December)

* China to stick with US bonds.

* Bloomberg: House, Senate agree on USD789B stimulus, setting stage for final vote.

* Bloomberg: South Korea cuts interest rate to record low 2% as economy nears recession.

Those smart Japanese investors

2009-02-11T15:55:00.003+08:00

SeekingAlpha.com: The tide is starting to change and I want to make sure my readers are aware. Last year, the yen literally beat the performance of 177 currencies. However, the rise has been so swift and severe, that it’s killing the country. No one in Japan seems to be happy with it. Their exporters are literally campaigning to the central bank to intervene in the currency. The central bank has been quoted as saying that they are not happy with the rise of the yen either.

So what is a Japanese investor to do with such a strong yen that may not be that strong for long.

Invest abroad.

Here’s where the money is flowing!

Do we have any clue as to where they are starting to place their money? Yes! According to the Ministry of Finance, there have been “net purchases” of international stocks and bonds for the past seven weeks in a row now.

So where’s the money going? It’s working its way into places like Brazil, Mexico, Turkey and South Africa.

Therefore, money is being exchanged for the currencies of these lands and is further going into their bonds and stocks.

The yen gained an average of 55% against the currencies of these countries last year and they know that these gains will not hold. Therefore, they’re going into beaten down currencies with beaten down stock and bond markets.

It’s really important to note what these Japanese investors are doing, because they are smart investors. They get it right much more than they get it wrong. They are experts on international markets, because their own currency usually yields one of the lowest rates in the world. Therefore, they like to get into an appreciating currency that also has an appreciating stock or bond market.

A year ago, money was fleeing these emerging markets. However, they’ve plummeted so much and the yen has gotten so strong, it makes them one of the first groups of investors to march back into these markets.

In addition, one thing that you will see happening more and more this year in Japan is international mergers and acquisitions. There’s no better time to be buying when your currency is extremely strong and the stocks of international companies are extremely cheap. It’s a win/win for them.

They have done many of them already. In fact, their merger and acquisition activity tripled last year to $76 billion from about $25 billion the previous year.

All of this is beginning to cause a “net selling” of yen, finally, as the Japanese and other investors around the world exchange their yen for emerging market currencies around the world.

For those who are holding Japanese Yen or intending to short the currency, continue reading here are some idea what/where those smart Japanese investors are investing now.

* Skepticism is brewing that the US government 's bank rescue will not work. The US Treasury Secretary Geither has pledged government financing for as much as USD2T of efforts to spur new lending and address bank's toxic assets.

* Sunny days ahead for Hong Kong securities firms?

* Pimco Says World Faces Second Wave of Economic Crisis

* China Needs U.S. Guarantees for Treasuries

Technical Analysis - February 10 2009

2009-02-10T16:29:00.005+08:00

S&P500 (869, last week 826 or +5.2% w.o.w)

What a turnaround! Now the Daily MACD and MACD Histogram have joined the Daily Parabolic SAR to become positive as well while Guppy MMAs and DMIs (+ve and –ve) are slightly negative. At this juncture, the indicators may continue to turn bullish if further bad news in the market are being discounted. For the weekly readings, the MACD, MACD Histogram and Parabolic SAR are still positive.The weekly ADX trend, DMIs (+ve and –ve) and Guppy MMAs are still bearish. Support is around 820 and resistance at 900.

KLSE CI (897, last week 884 or +1.5% w.ow)

The daily indicators MACD, Parabolic SAR, ADX trend and DMI (+ve and –ve) although have turned negative recently is seen making a comeback. Unlike the S&P500, none of the indicators have register positive readings yet but will soon be if the markets are to move up discounting further bad news. The weekly charts MACD and Parabolic SAR are still positive but the weekly ADX trend, DMIs (+ve and –ve) and Guppy MMAs are still bearish. The index is expected to trade between 860 and 915.

HangSeng (13,655, last week 13,278 or +2.8% w.o.w )

After gaining almost 8% in two weeks, the daily indicators like Parabolic SAR, MACD and MACD Histogram have turned positive again. The DMI (+ve and -ve)and Guppy MMAs are still negative but has improved. The weekly charts are still positive, especially the MACD, MACD Histogram and Parabolic SAR but the weekly ADX trend, DMIs (+ve and –ve) and Guppy MMAs are still bearish . Support is seen at 13,000 and resistance at 15,000.

Nikkei 225 (8,077, last week 7,994 or +1.0% w.ow)

The daily indicators like MACD and MACD Histogram has joined the Daily Parabolic SAR to become positive during the week However, the DMIs (+ve and –ve) and Guppy MMAs are still negative. The weekly charts are still positive, especially the MACD, MACD Histogram. However, the Parabolic SAR which turned negative are still as such but will turn bullish soon if the market continues to turn upward. Support is seen at 7,700 and resistance at 8,600.

* Bloomberg: China's inflation slows to 1% in January 2009 from a year earlier, weakest pace in 2 years as economy cools. Many analysts are predicting deflation looming

* BT(Singapore): Delhi expects growth to slow to 7.1%.

* YahooFinance: Obama to Congress: Pass stimulus, don't play games.

Smart Investing/Trading for the week ending Februeary 6 2009

2009-02-08T21:30:00.002+08:00

Weekly US markets update and outlook

Stocks pin hopes on rescue plans

Market rallies past dismal jobs numbers, with sights set on possible recovery
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MarketWatch: Investors are poised to start next week eager for plans from the government to boost the economy and rescue the financial system, which could help bulls cement a nascent February rally in stocks. Hopes that the market has already priced in much of a dismal outlook for the economy this year were also evident Friday, as stocks rallied past news that January saw the biggest loss of jobs since 1974.

"The market is possibly looking at what we see today and thinking that we can't get much worse than that," said Paul Nolte, director of investments at Hinsdale's Associates. "It's not yet expecting that things will get better, but at least not much worse." On Friday, the Dow Jones Industrial Average jumped 217 points, or 2.7%, to end at 8,280. The S&P gained 22 points, or 2.7%, to 868, while the Nasdaq Composite rallied 45 points, or 2.9%, to 1,591. After posting their worst January performance on record, stocks entered the month of February on a positive note. For the week, the Dow rose 3.5%, the S&P gained 5.2%, and the Nasdaq jumped 7.8%.

Part of the rally was supported by hopes that the Obama administration's economic stimulus plan was close to being passed by Congress. Late Friday, senators reached a tentative deal on a $780 billion plan, clearing the way for a vote over the weekend.

And on Monday, Treasury Secretary Timothy Geithner is expected to unveil the administration's plans to rescue ailing banks and hopefully tamp down the credit crisis that has crippled the financial system and the global economy the past year and a half.

While outlines of the plan remain sketchy, many holders of financial stocks fear that potential moves to nationalize banks could reduce their stake or wipe them out altogether. "There remains an outside chance the federal government could move to nationalize the banks or commit additional capital and thus require banks to halt interest payments on preferred shares or at the very least, dilute existing equity shareholders," said Robert Pavlik, market strategist at Oaktree Asset Management. Yet, absent of the exact details of the Treasury's prescription for change, financial shares still rallied over the past week on Wall Street, a bullish sign for the market, according to Pavlik. "The market's turnaround on a lack of concrete news is interesting," he said. "We believe it points to the hope that the Street has that investor optimism will once again return to the levels we saw back in November."

Depressed earnings

The market also seemed not overly concerned about weaker-than-expected earnings and even some drastically weaker outlooks from companies posting their quarterly results. With 309 companies from the S&P 500 having now reported, fourth-quarter earnings are expected to have slumped more than 40% from the year-ago period. This would mark the weakest growth rate since at least 1998, according to Thomson Financial, which began tracking the data that year. Just a week ago, earnings were expected to have fallen 35% in the quarter.

The outlook for the rest of the year has also weakened, with a drop of more than 28% now expected for the first quarter, a roughly 25% decline in the second quarter, followed by a drop of 10% in the third quarter. Most forecasters still expect modest growth for the fourth quarter. But that view currently seems in jeopardy, warns John Butters, earnings analyst at Thomson.

Next week, another 60 companies from the S&P 500 are expected to report, including one Dow component, Coca-Cola Co. on Thursday.

Economic blues

Next week will be light on economic reports, except on Thursday, when the government will report its January tally of retail sales. Dismal sales and outlook from U.S. retailers failed to prevent those stocks from rallying last week, as investors had already priced in very bad numbers. On Tuesday, Federal Reserve Chairman Ben Bernanke is expected to testify on the central bank's lending programs to ailing financial institutions. That same day, wholesale inventories and sales data for December are due. On Wednesday, the government will report trade data for December.

Weekly KLSE Update and Outlook

MarketWatch(TheStarBizWeek): Bursa Malaysia's principal index retraced from the recent high of 936.63 on January 7 to a low of 867.35 on January 23 in an apparent profit-taking activity before turning range-bound on consolidation.

According to the chart, the CI has been trapped within a moderate band. It will continue to trade in this way until a clear breakout or a breakdown is detected, with many investors adopting a cautious stance while volume stays low due to prevailing uncertainty.

Initial resistance is pegged at the 900-point mark, followed by the 100-day SMA of 914. A successful push above the recent peak of 936.63 will see the market experiencing greater volatility to the upside.

Important support is set at the 860-863 point band. If it is violated, the next lower floor of 835 points and the recent bottom of 801.27 will be become much weaker. Overall, the technical landscape is unclear but a slight improvement in the short term indicators suggest share may have a mild upward bias initially before pulling back later.

* It is steaming hot today isn't it? In Australia, the hot weather has caused the worst fire disaster in a quarter century and the death toll has now reached 84.
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* Australia's latest GDP estimates: 2009 : 0.5%, 2010: 2.5%

* IMF: China has potential to maintain 8% growth this year.

* Bloomberg: Japan won't print new currency to help stimulate the economy.

* RTTNews: Japan's foreign exchange reserves for January is USD1.011T(Dec USD1.631T)

Bite the bullet, fight another day?

2009-02-05T16:20:00.004+08:00

Like many other Malaysians, I have been following the "katak jumping events" in Perak fervently over the online news portals, newspapers or any other piece of information that makes senses. I have lost count already how many times I have visited and refreshed those online sites eager to see how those events unfold and to get the final verdict from the Sultan. The public opinion polls are all calling for dissolution of state assembly.

While I was busy "googling", many random thoughts on katak jumping came into my mind. Amongst them include the feeling of being cheated, sad, anguish, anxiety, revengeful, corruption, power play, plots, disloyal, betrayal, treachery, inducements, lack of integrity and quality or moral standards, options and alternatives and the fast sinking economy.

Then at 300pm, the much awaited news were out. Sultan has asked Nizar to resign, BN set to form government. I have stopped "googling" for any more updates then but those thoughts mentioned above are still coming back and forth my mind as I write.

The winners will be rejoicing while the losers will be depressing. What can the losing Pakatan Rakyat, Perakians and rakyat do? Will they protest against it(can't help but relating it to Bangkok) or like Jeff Ooi says, Bite the bullet, fight another day?

* Fitch downgrades Russia's debt to BBB(2nd lowest investment grade). The ruble has fallen by 40% since July 2008 against the USD.

* Bloomberg: Sany Heavy, China's biggest supplier of concrete-making equipment, plans to cut its Chairman's annual salary to 15 cents from USD92,000 (in 2007) and cut pay of board members by 90% because of the financial crisis.

* Old folks don't just attend company's meetings for souvenirs and food. See here.

Sharing by Warren Buffett

2009-02-04T15:20:00.003+08:00

Warren Buffett: We begin this New Year with dampened enthusiasm and dented optimism.

Our happiness is diluted and our peace is threatened by the financial illness that has infected our families, organizations and nations. Everyone is desperate to find a remedy that will cure their financial illness and help them recover their financial health.

Every new year, I adopt a couple of old maxims as my beacons to guide my future. This self-prescribed therapy has ensured that with each passing year, I grow wiser and not older.

This year, I invite you to tap into the financial wisdom of our elders along with me, and become financially wiser.

Hard work : All hard work brings profit; but mere talk leads only to poverty.
Laziness : Sleeping lobster is carried away by the water current.
Earnings : Never depend on a single source of income.
Spending : If you buy things you don't need, you'll soon sell things you need.
Savings : Don't save what is left after spending; spend what is left after saving.
Accounting : It's no use carrying an umbrella, if your shoes are leaking.
Auditing : Beware of little expenses; a small leak can sink a large ship.
Risk-taking : Never test the depth of the river with both feet.
Investment : Don't put all your eggs in one basket.

Opportunities are never lost. The other fellow takes what you miss.

Truly words of wisdom, aren't they? The above article is sourced from an email received recently.

* Malaysian katak and politics. Frogs are great jumpers, hardy, exceptional ability to hide and camouflage, poisonous and at times noisy. According to Wikipedia, frogs feature prominently in folklore, fairy tales and popular culture. They tend to be portrayed as benign, ugly, clumsy, but with hidden talents.

* Australia announces its 2nd "move earth and heaven" stimulus package worth up to 4% of GDP or AUD42b while cutting interest rate by100 basis point to 3.25%. The news pushed AUD up by 2% yesterday.

* Bloomberg: Isuzu, Japan's largest maker of light duty trucks may post its first annual loss in 6 years.

Technical Analysis - January 30 2009

2009-02-03T11:50:00.002+08:00

S&P500 (826, last week 832 or -0.72% w.o.w )

Except for the Daily Parabolic SAR which turned positive recently, all other indicators egs MACD, MACD Histogram, Guppy MMAs and DMIs (+ve and –ve) are negative. For the weekly readings, the MACD, MACD Histogram and Parabolic SAR are still positive but will eventually turned negative if the selling continues further. The weekly ADX trend and DMIs (+ve and –ve) are bearish while Guppy MMAs is weakening further. Expect index to be at best consolidating. Support is around 780 and resistance at 850.

KLSE CI (884, last week 873 or +1.3% w.ow)

The market still has a 1% gain for the year. The daily indicators MACD, Parabolic SAR, ADX trend and DMI (+ve and –ve) have turned bearish. The weekly charts MACD and Parabolic SAR are still positive but will eventually turned negative if the selling continues further. The index is expected to trade between 835 and 915.

HangSeng (13,278, last week 12,579 or +5.6% w.o.w )

Despite only traded for two days during the week, the index gained more than 5% . Despite this, all the daily indicators like Parabolic SAR, the daily MACD and MACD Histogram and Guppy MMAs are still negative. The weekly charts are still positive, especially the MACD, MACD Histogram and Parabolic SAR but will eventually turned negative if the selling continues further. Support is seen at 12,600 and resistance at 15,000.

Nikkei 225 (7,994, last week 7,745 or +3.2% w.ow)

Similar with S&P500, except for the Daily Parabolic SAR, all the daily indicators like MACD and MACD Histogram, DMIs (+ve and –ve) and Guppy MMAs are still negative. The weekly charts are still positive, especially the MACD, MACD Histogram. However, the Parabolic SAR has just turned negative. Support is seen at 7,400 and resistance at 8,400.

* JapanTimes: Japan's longest boom in the post war era died in October 2007. The boom lasted 69 months.

* CNN: Heaviest snow in 18 months partially criples UK.

* Will Australia cuts its interest rate by 150 basis point today similar with its NZ counterpart? Together with a slowing down economy and a negative trade deficit in December, watch AUD goes down further.

* Fitch: Outlook for KL currency rating negative.

* China considering new stimulus: Wen. A recent survey reveals that 20m migrants workers recently lost their jobs.

Smart Investing/Trading for the week ending January 30 2009

2009-02-01T19:57:00.003+08:00

Weekly US Market Update and Outlook

'Bad bank' is best hope for beaten stock market

MarketWatch: Progress creating a government structure to absorb banks' rotten assets could provide some relief next week for the stock market, which otherwise faces a tough lineup of woeful corporate outlooks, plunging auto sales and big job losses.

Investors are hoping for more clarity from Congress and the White House on establishing a good bank/bad bank institution that would buy up the delinquent loans and illiquid securities corroding banks' books.

Traders will also be cued to policymakers' decision on how to spend the second half of last fall's $700 billion Troubled Asset Relief Program, or TARP.

"The market fully understands that the two largest problems we're faced with are the solvency of the banking system and bringing about the end to the real estate crisis," said Robert Siewert, a portfolio manager at Philadelphia-based Glenmede Trust Co., which manages about $17 billion in assets. "It could start to rally on any sort of indication of putting the banking system on a better footing," he said.

The market could use the good news. The S&P 500 and Dow Jones Industrial Average have lost about 9% this year, adding to last year's double-digit losses.

Any spark of hope from Washington faces a squall of negative reports from corporations around the country. Some 193 S&P 500 companies, 40% of the entire index, have already reported fourth-quarter results. Another 102, including Dow Jones Industrial Average components Merck Co., Kraft Foods, Inc. and Walt Disney Co. , are slated to report next week.

So far, earnings look bad and forecasts look worse. S&P 500 companies are on track for a 35% earnings decline. Companies are missing earnings' expectations at a rate not seen since the fourth quarter of 1995. These added to a gloomy jobs picture that next Friday's jobs report will likely illustrate.

Economists are expecting the economy lost 400,000 to 600,000 jobs in January. As in past months, the Wednesday release of payroll processor ADP's job forecast, followed by Thursday's jobless claims figures, could roil traders ahead of the Friday Labor Dept. release. January sales figures from the auto industry and retailers could also tip indexes, even though the theme of plunging auto sales and stingy shoppers is a familiar one. GM sales fell about 40%, Chrysler sales dropped 50% and Toyota Motor Co. sales lost more than 30%.

Devil's in the bad-bank details

The possibility that policymakers would take a page from the 1980s savings and loan crisis by creating an agency to buy institutions' bad assets sparked a rally in bank shares last week. After some jaw-jumping intraday rises, the Financial Select Sector SPDR Fund , which tracks the S&P 500 bank stocks, ended the week 2.8% higher vs. a 0.7% drop for the broader index. Many agree that the market won't rally until the financial system works through the toxic mortgage and related assets. These prompted the failures last year of Lehman Bros. and Washington Mutual, caused successive writedowns as big banks such as Bank of America Corp. and sent the industry running hat in hand to the U.S. government - repeatedly knocking down any chance of a stock market rally.

But even if policymakers pull together to form a new version of the 1980s' Resolution Trust Corp., investors say a sustained rally won't necessarily follow. A lot rides on the details of the structure. If a government "bad bank" buys up bank debts for a steep discount to par value, say at 23 cents on the dollar, those purchases could force struggling institutions to embark on another big round of writedowns and capital raisings. That process could send more down the path to bankruptcy. But if the government buys the assets at par value, in other words, for far more than they are worth now, the problem passes on to the government and ultimately, the taxpayer. "The idea that this will be such a sizeable pricetag to the taxpayer is certainly something investors are weary of," Siewert said.

And regardless of the details of a proposed bank fix, the market still faces a rocky road. Siewert said his firm continues to underweight equities in favor of more investments in bonds, such as high-yield and municipal securities.

Weekly KLSE Update and Outlook

Trading is seen to be supportive after the week-long holiday.

StarBizWeek/MarketWatch: OUTLOOK: With the return of market players after a week-long holiday season, trading on the Bursa this week is expected to be "supportive". Having said that, most dealers expect trading to be range bound throughout most of the week.

Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi sees a strong support level of 867- 868 points for the KL Composite Index (KLCI) "which it is unlikely to violate" and resistance level of 887-900 points for the week ahead.

"I think this trading week is going to be okay and not as bleak as would be assumed based on overseas markets," he says, pointing out that the KLCI had managed to punch through into positive territory on Friday.

While the local bourse failed to sustain the window dressing activity that lent it a boost towards the end of the year, some say the Umno general assembly meeting in March may inject some vigour into the market, as historically the market sees support from local players in the run-up to the meeting. However, with February having two-shortened trading weeks, there may not be much time to structure a supportive equities market, he says.

Rotational play is already evident in the market with the run-up in water-utilities linked counters on Thursday and plantation counters on Friday.
Despite weakness in crude palm oil (CPO) futures that are trading at around RM1,760 per tonne, plantation stocks have drawn speculative interest and this may continue.

"It's not pretty because CPO futures have broken past the RM1,790 per tonne support level, but there is still a run-up in plantations counters which are index linked," he says.

Lee expects this week to be trapped between the support and resistance levels with trading opportunities in some speculative stocks, naming infrastructure firm MMC Corp Bhd.

* Wow!How time flies when you are having fun! Its the 7th day of the Chinese New Year already! Time to wish everyone a very Happy and Bullish Birthday and enjoy tossing“Yu Sang” (a special dish in Malaysia Chinese community).

Happy Chinese New Year!

2009-01-23T15:35:00.003+08:00

May you and your families be richly blessed with Wealth, Health and Happiness Always in this year of the Ox. Happy Chinese New Year!

JR: "UK has nothing to sell"

2009-01-22T14:40:00.007+08:00

Jim Rogers(JR)'s advise with reference to the pound and the UK economy pushed the country deeper into its financial gloom. With a very troubled housing and financial service sector, JR's statements push the already nervous investors over the edge. In fact, the advise spark a Sterling sell-off resulting it sitting at a 23 year low against the USD and an all-time low against the Yen. Questions have emerged whether the UK will be able to ride out this financial storm and how soon or earned the reputation as being the second European Union country after Iceland to fail in this crisis. Are the fundamentals of the UK that weak? Will the RBS, Lloyds and Barclays be nationalised soon? Will the country be able to retain its AAA ratings? Will pound near parity with the USD? Will the London Olympics 2012's projects get stuck? One thing I am sure, despite all this, the country will still have their famous football clubs and pubs, just to name a few.

FT.com: The pound is a currency with no underpinning and should fall against the dollar and the euro, says Jim Rogers, chairman of Rogers Holdings and co-founder of the Quantum Fund with George Soros.

He says his view reflects the UK’s dire economic situation: “It’s simple, the UK has nothing to sell.”

Mr Rogers says the two main pillars of support for sterling have been North Sea oil and the strength of the UK financial services sector, in particular, the City of London’s role.

But Mr Rogers says just as North Sea oil is running out, so London’s standing as a major financial centre is set to suffer.

“I don’t think there is a sound UK bank now, at least, if there is one I don’t know about it,” he says.

“The City of London is finished, the financial centre of the world is moving east.”

“All the money is in Asia. Why would it go back to the West? You don’t need London,” says Mr Rogers.

Mr Rogers thinks the pound is more vulnerable than the dollar or the euro.

He says the UK housing market is arguably in a worse state than that of the US, given pockets of strength in the US and prices that are sliding across the board in the UK.

Meanwhile, he says, the UK is in worse shape economically than the eurozone, where most countries are not big debtors and do not run huge trade deficits.

“If the UK discovers more North Sea oil, I might change this view,” he says. “But I don’t see that happening.”

* China's economy grew 6.8% in the 4Q; slowest in 7 years. For the year, the economy grew 9% in 2008.

* South Korea's economy shrank 5.6% in the 4Q.

* BNM has lowered its key interest rate by 75 basis point to 2.5% yesterday. Pretty sharp and desperate?

* Japan keeps its key interest rate at 0.1%.

* Come July 6, KLCI will be replaced and be known as FTSE Bursa Malaysia KLCI (30 largest main board companies based on investable market capitalisation. We will have a tough time getting used to it!

Time to invest in China?

2009-01-21T16:15:00.004+08:00

The report below from Morning Money was written by Louis Basenese an Associate Investment Director of The Oxford Club and a regular contributor to Investment U. This article first appeared in Investment U a week back. Like Jim Rogers, this investment manager seems to be very bullish with China and even provided 11 reasons why he is keen in buying China shares. Well, is he too early to call China a BUY? I just understand China's urban unemployment rate jumped for the 1st time in 5 years to 4.2% as of December 2008. Also, there were over 550,000 Chinese laid off in the last 3 months of last year. What will it be for the up and coming GDP figures and other economic data? Ugly also. Me? I will keep watching...till it turns really ugly.

1) The truly “smart money” is buying, not selling.

To be fair, the reason Bank of America “took a little money off the table,” according to spokesman Bob Stickler, is because of its own financial condition and need to raise cash. Same goes for the Royal Bank of Scotland. Yet, looking past these institutions, the truly smart money is loading up on China. Mark Mobius, the king of emerging markets, sums it up best, “We’re having a wonderful time buying tremendous bargains.” Statistics from research firm EPFR Global indicate the rest of the smart money is following suit. Funds investing in emerging-market stocks raised their Chinese holdings to the highest level since 1995. We should, too.

2) Chinese stocks are cheap.

Ridiculously so. If legendary investors like Warren Buffett salivated over U.S. stocks trading at 12 times earnings, they should be rabid over Chinese stocks. Based on the MSCI China Index, the average Chinese stock trades for less than eight times earnings. Share prices are contracting, but earnings keep growing. Based on the severity of the sell off, you’d think every Chinese company was unprofitable and headed for bankruptcy. Yet the fundamentals remain rock solid. The average Chinese company is still growing earnings by 30%, according to a recent report in China Securities Journal. Compare that to the estimated 12% earnings decline in the fourth quarter for the companies in the Standard & Poor’s 500 Index, and the bargain valuations make even less sense.

3) Chinese investors learned a tough, but necessary, lesson.

During the height of the China mania, retail investors viewed the stock market as an ATM. They lined up by the millions to open brokerage accounts. But much like our infamous dot-com bubble, Chinese day traders and novice investors got a very painful reminder of what happens when the “Greater Fool Theory” reaches the last idiot. The important thing, however, is that the correction served a higher purpose. It began the process of flushing the extreme irrationality from the market. So we can be certain the next leg up will be governed by fundamentals, not hype.

4) Oil is much cheaper.

One of China’s biggest challenges was to keep a lid on inflation, while still maintaining its breakneck pace of economic growth. That was no easy task with oil at close to $150 a barrel, as the cost of shipping, food and fuel were rapidly increased. Keep in mind, China imports a net 3.3 million barrels of oil a day. Now that oil prices are down considerably, we can cross one big inflation risk off the list.

5) The economy is NOT in a recession.

Sure, it’s slowing down, but China is still on track for a solid 6% expansion based on analysts’ estimates. And 8% if you believe the government statistics. Regardless of who ends up being right, compared to the contraction in the United States, such a high rate of growth is downright explosive.

6) Massive foreign reserves.

The last time Chinese stocks were this cheap was during the Asian financial crisis. Back then, most Asian countries were running huge deficits. But this time the roles are reversed. As of December, China boasted of having $1.95 trillion in foreign reserves. And counting. If necessary, the government can deploy these surpluses to keep economic growth humming along.

7) Personal savings.

Unlike Americans that spend more than they earn, the Chinese save an amazing 35 cents of every dollar they bring in. This provides yet another cushion against any slowdowns. But also an enormous opportunity for future growth. As China’s economy develops, and affordable insurance and health care become ubiquitous, expect the Chinese to get comfortable spending more of their hard earned cash.

8) The consumer is just getting started.

The country’s burgeoning middle class, now the size of the entire United States, is just getting started. The McKinsey Quarterly estimates that it will take two decades before these nouveau riche reach their full spending potential. As we know from our own experience and prosperity - 70% of GDP in the United States is attributed to consumer spending - the consumer is an engine of economic growth. In other words, the global recessionary headwinds are no match for the Chinese consumer.

9) Forget what Westerners think, locals are optimistic.

We know consumer confidence plays a big role in the success of our own economy. It flat out stinks right now in the United States, and the economic conditions reflect that. But in China, it’s an entirely different situation. A recent survey from the Pew Research Center shows that most Chinese people (86%) feel positive about where their country is headed. And that’s up from 25% just six years ago. If they overwhelmingly see good things on the horizon, we should believe them.

10) The “mother of all stimulus plans.”

While the massive government stimulus package has yet to take hold in the United States, rest assured it will. The same goes for the $586 billion the Chinese government is pumping into its economy. As a fund manager for BlackRock Inc. (BLK) notes, China’s “got the mother of all stimulus plans” when you factor in the government spending, savings rates and the rapid decline in commodities prices.

11) The Best China Bets.

Make no mistake, the shooting-fish-in-the-barrel-stage of China investing is long over. Simply buying the iShares FTSE/Xinhua China 25 Index ETF (FXI) won’t cut it anymore. It’s too obvious.

So how do we play the next bull charge in China?

Well, last week, I offered up one compelling small-cap Chinese play, E-House Holdings Ltd. (EJ). I’d stick to that theme - small caps, with the strongest growth profiles. And that puts China Security & Surveillance (CSR), a leading provider of digital surveillance technology, and A-Power Energy Generation Systems (APWR), a power equipment company, at the top of my list. For those with a more conservative bent, I’d stick to large-cap, blue chip, best-of-breed China stocks - ones like China Mobile Ltd. (ADR: CHL), the world’s largest phone company. It sports a solid balance sheet, increasing profitability and a temporarily cheap valuation.

Whatever you do, don’t wait too long. The Chinese New Year holiday gets underway Jan. 25. When it’s over, don’t be surprised if the Chinese markets start fresh and get back to their winning ways.

I say that because the strong economic underpinnings, which lined investors’ pockets with gold from 2004 to 2007, remain well intact. Whether the next leg up will produce the same 450%-plus returns remains to be seen. But rest assured, the catalysts are in place to make it possible.

* Bird flu on the rise in China?

* Bloomberg: Singapore economy may shrink to record 5% adding to pressure for stimulus.

* Toyota is poised to end General Motors' 77 year reign as the world's largest automaker when the US company reports on its 2008 global sales today.

HSBC replies

2009-01-20T13:22:00.004+08:00

Of late, HSBC has been rumoured to require cash injection in order to keep its ship chugging along the stormy financial waters. Morgan Stanley for example, predicted the bank needs between USD20-30b of equity and halve its dividend in order to bolster its Balance Sheet. No recovery is anticipated in its results until 2011.

The news of the second financial bailout for the British banks and the staggering 70% fall of RBS yesterday compounded the already bruised European banks share prices, including HSBC. It is true as a 12 month analysis saw HSBC's share price peaking at HKD140 in May last year but has now gone down to HKD58. (refer here for share price movements). A drop of almost 60%.

HSBC has been "quick" to respond to the negative comments and says that it has ample of capital and do not need any help from anybody. It also added that, these "negative" analysts need to apologize once their predictions do not come true! Wow, we need more of such optimism(but truthful ones) in the market! Get ready your ang pow money to scoop the high dividend yield HSBC?

The Standard:Banking giant HSBC (0005) has refuted rumors that it is seeking capital support from the British government, saying it cannot "envisage circumstances" when such action would be necessary.

"HSBC has long been one of the world's most strongly capitalized banks and is committed to maintaining this position," the lender said in a statement in response to speculation that it would receive a cash injection when London announced yesterday a second bailout package for banks.
HSBC was on a list of lenders that could receive Bank of England funds in the first rescue plan unveiled in October. But HSBC rejected that offer, saying it had ample capital and needed no help from the central bank.

David Eldon, former chairman of Hongkong and Shanghai Banking Corporation, the local arm of HSBC, concurred saying the lender has no funding needs. He also said HSBC is only a victim of recent fund-raising activities by foreign banks.

Eldon cast doubt on statements by investment bank analysts that HSBC needs to raise funds, saying the London-based lender has always had a prudent policy regarding its capital base. Eldon said the analysts need to apologize once their predictions are proved wrong. Big investment banks including Morgan Stanley and Goldman Sachs have issued reports in recent weeks revising downward their forecasts on HSBC, and slashing their target prices for the lender's shares to as low as HK$52. They also predicted that the bank will cut dividends. Amid the bearish sentiment, shares of HSBC continued to nosedive in Hong Kong yesterday, losing 3 percent to close at HK$62.30, the lowest in more than 10 years. The bank's share price has shed around 15 percent since the beginning of this year.

Eldon also said he supports the Hong Kong Monetary Authority's proposal to take up all banking regulatory functions.

* Obama, the 1st Black President and the 44th President of the USA will be inaugurated today. Above. Dennis Haysbert played the accomplished President David Palmer in "24".

* YahooFinance: RBS expects full year loss up to 28B pounds due to a goodwill impairment charge related to the acquisition of ABN Ambro. The loss is probably the biggest loss ever by a British corporation.

* Forbes: South Korea's finance minister and top regulator replaced. President says reshuffle aimed at boosting economy.

* China Premier Wen says toughest year ahead since 2000.

* Jim Rogers said investors should be worried about USD, sell government bonds and buy raw materials, China stocks and the Japanese yen.

* FinancialDaily: Khazanah's December 31 portfolio down by 36.5% compared to 7 months ago. The investment now stands at RM33.7B. Also to note is Khazanah do not support LCCT in Labu plan.....??

Technical Analysis - January 19 2009

2009-01-19T15:08:00.003+08:00

S&P500 (850, last week 890 or -4.5% w.o.w )

The daily index has succumbed to selling pressure during last week. The Daily MACD, MACD Histogram, Guppy MMAs, Parabolic SAR and DMIs (+ve and –ve) are all showing negative already. However, we cannot discount a short term rebound during this week. For the weekly readings, the MACD, MACD Histogram and Parabolic SAR are still positive but will eventually turned negative if the selling continues further. The weekly ADX trend and DMIs (+ve and –ve) are not bullish yet while Guppy MMAs is weakening. The market is at best range bound. Like others, the market is still stuck in a major downtrend channel created since November 2007. Support is around 800 and resistance at 890.

KLSE CI (896, last week 919 or -2.5% w.ow)

One of the remaining few markets that still have a positive gain for the year but this may not likely to last soon. The index is finding it hard to sit above the daily 50-day ema. The daily indicators are at a crossroad again with the MACD, Parabolic SAR, ADX trend and DMI (+ve and –ve) going into an early bearish tone. The weekly charts MACD and Parabolic SAR are still positive but will eventually turned negative if the selling continues further. The market will need to work hard to avoid indicators turning negative again. To be positive, the index needs to clear the 935 level (a 20-day ema) and as such will breakaway from the major downtrend channel created since January 2008. The index is expected to trade between 850 and 970.

HangSeng (13,256, last week 14,377 or -7.8% w.o.w )

The index is determined to go south again. All the daily indicators like Parabolic SAR, the daily MACD and MACD Histogram and Guppy MMAs are turning negative and will remained so unless the index goes up strongly this week. We could see a short term rebound this week. The weekly charts are still positive, especially the MACD, MACD Histogram and Parabolic SAR but will eventually turned negative if the selling continues further. Support is seen at 12,600 and resistance at 15,000.

Nikkei 225 (8,230, last week 8,837 or -6.9% w.ow)

Similar with S&P500 and HangSeng, the index seems determined to go south again. However, we cannot discount a short term rebound during this week. All the daily indicators like Parabolic SAR, the daily MACD and MACD Histogram and Guppy MMAs are turning negative and will remained so unless the index goes up strongly this week. The weekly charts are still positive, especially the MACD, MACD Histogram and Parabolic SAR but will eventually turned negative if the selling continues further. Support is seen at 7,500 and resistance at 9,500.

* YahooFinance: Buffett says US in "economic Pearl Harbour".

* Bloomberg: China economy probably grew at slowest pace in 7 years as export slump.

* After ending 22 days of conflict leaving more than 1,200 Palestinians and 13 Israelis dead, Israel and Hamas has both declared victory?

Smart Investing/Trading for the week ending January 16 2009

2009-01-18T14:22:00.005+08:00

Weekly US Markets Update and Outlook

Market braces for inauguration and earnings

MarketWatch:The inauguration of President-elect Barack Obama might be the only boost for Wall Street next week, as a deluge of what are expected to be mostly bad corporate results and fresh reports on the state of the housing market starts pouring in.

"The stock market is a forward-looking animal that tends to move about five months ahead of the real economy, but right now its actions don't bode well for a recovery until late in the year at best," said Robert Kavcic, market strategist at BMO Capital Markets. With U.S. markets closed Monday for the Martin Luther King holiday, the trading week will kick off Tuesday. No economic reports are due that day, but there will be a slew of financial results, including those from IBM and Johnson & Johnson, two blue-chip stocks, and from regional banks, Regions Financial , State Street and U.S. Bancorp. Financial firms were already front and center in the market over the past week, as the likes of JP Morgan Chase, Bank of America, and Citigroup, all posted worse-than-expected results, with the economic recession further darkening the outlook for the already-embattled sector.

"Earnings are terrible and outlooks are cloudy," said Jack Ablin, chief investment officer at Harris Trust. "For financials, there are more worries ahead in my view."

For the week, the Dow Jones Industrial Average slumped 3.7%, the broad S&P 500 fell 4.7%, and the tech-heavy Nasdaq Composite lost 2.7%.

But stocks still rose Friday, for the second consecutive session of gains, with the Dow ending the session up 68 points at 8,281, the S&P 500 rising 6 points to 850 and the Nasdaq gaining 17 points to 1,529.

The government late Thursday approved a deal to provide an additional $20 billion in capitalization for Bank of America and to guarantee up to $400 billion in losses on real estate loans at both the Charlotte, N.C. lender and at Citigroup. Separately, Citigroup said it would split its operations in two. Although the stock market seemed poised to continue its late-year bounce into January, many market strategists are now trimming their expectations in the face of much worse-than-expected economic data, including dismal job losses in December, and the few earnings reports that have come out so far.

Earnings at S&P 500 companies are now expected to have tumbled 20.2% in the fourth quarter of last year from the year-ago period, according to Thomson Financial. Just a week ago, expectations were for earnings to fall 15.1%. The ratio of negative to positive pre-announcements has jumped to 3.6 to 1, its highest level since 2001, during the last recession. "And one of the themes for the fourth quarter is that earnings weakness is spreading," said John Butters, earnings analyst at Thomson. "During the early stages, most of the weakness came from financials but now, seven out of the 10 sectors of the S&P 500 are expected to post negative growth." Firms in traditionally defensive sectors, such as health care, consumer staples, and utilities are the only ones expected to have posted any profit gains during the fourth quarter.

Next week, 55 companies from the S&P 500 will report, with a lot of financial firms' results due out, along with a number of big names from the tech sector. Besides IBM on Tuesday, Apple Inc. and eBay Inc. will report on Wednesday, followed by Google Inc. and Microsoft Corp. on Thursday. Other blue-chip stocks due to report are United Technologies on Tuesday, and General Electric Co. on Friday.

Housing

The housing market, whose demise revealed the bad home loans that led to the credit crisis and pushed the economy into recession, will dominate the news on the economic data front next week. Wednesday will bring data on mortgage applications from the Mortgage Bankers Association, and the January housing market index from the National Association of Home Builders. On Thursday, December housing starts and building permits, which are forward-looking indicators, will be released. Also on that day, investors will continue to monitor a dismal labor market with the release of weekly jobless claims numbers.

The Obama factor

The inauguration of President-elect Obama on Tuesday could still provide a needed boost for the market, according to Owen Fitzpatrick, market strategist at Deutsche Bank. "The luster around Obama is quite big," he said. "It's like a light switch: out with the old, in with the new." Political momentum for the president elect's economic stimulus plan, now estimated at around $850 billion, might also accelerate. "It's now on the horizon," Fitzpatrick said. "The size of the package is large and it should lessen the impact of the recession."

Weekly KLCI Technical Update and Outlook

ICapital: The KLCI has rebounded nicely from its bear market low to kick start the year 2009 and it is now trading within a rising wedge formation. However, the nearby trendline that would act as a resistance level has somehow prevented the bull from continuing the recent rally. A break below the lower trendline will also likely trigger another wave of selling pressure and signal a resumption of the downtrend. With the catalyst to improve the global economic outlook still missing, the bottoming process for the KLCI will probably be drawn out over a multi-month time period. If it can follow through above the recent high, it could then ignite a sharp rally.

* ...PAS wins KT! ...second by-election win by Pakatan Rakyat after the March 2008's general election. Are we seeing a trend here for things to come?

* FT.com: Shift to dollar sees rouble reaching new low. Russia has since November last year devalued its currency 16 times to adjust for the collapse in the oil price.

* People are raising questions about the price gap between WTI and Brent.

* ECB cuts interest rate by 50 basis point to 2% .

Japan: Where Capital Goes to Die

2009-01-15T16:10:00.007+08:00

Hope I did not bore you again with another write up about the doom and gloom of Japanese stocks.....the author did give some recommended stocks to buy at the end though and a word of advise. "In Japan, just as we've discovered here at home(in the US), the market's best stocks are ignored, obscure, and small".

TheMotleyFool: Ah, Japan: land of the rising sun, homeland of the hot dog-eating champions, and capital-sucking vortex.

"Capital-sucking vortex?" That's a wee bit harsh, no?

No, it's really not Japan is where capital goes to die, and I have the stats to prove it.

Firing up my super-duper stock screener (not sold in stores), I see 2,371 companies with a primary listing on the Tokyo Stock Exchange. That excludes non-Japanese firms that happen to have local listings, like Dow Chemical (NYSE: DOW) and Aflac (NYSE: AFL). Out of all those businesses, how many do you think managed a greater-than -4% return on equity -- a solid but not stunning result -- over each of the years 2005, 2006, and 2007?

Make sure you don't guess too high, or you'll be disqualified. I'll give you a hint: The answer is less than 800.

The price is wrong! In fact, only 35 firms hit that mark! Add in the 925 companies on the Jasdaq exchange, plus the stragglers listed on other local exchanges, and the number climbs to ... 36. In total, fewer than 1% of Japanese equities pass this simple test of Capital Allocation 101.

Why does return on equity (ROE) matter to Foolish investors? Here's a primer, but the simple fact is that the "E" in ROE is shareholders' money. If management is retaining earnings to reinvest in the business, one of its basic requirements is to continuously generate an attractive return on the owners' investment. There are plenty of "profitable" companies in Japan, but those wealth-withering single-digit returns on equity just don't cut the wasabi.

Return on equity isn't the end-all and be-all of performance yardsticks, but it's a very handy one, especially if you remember that managers can juice this figure by taking on more debt. Note that I didn't limit my Japanese search to a maximum level of indebtedness. Some of the companies that passed the test only did so by leveraging to the hilt.

Do we avoid the archipelago entirely? After running this sobering screen, I'll definitely refrain from throwing investment dollars at something like the iShares MSCI Japan Index (NYSE: EWJ), no matter how cheap the broad market looks. However, I'm not going to rule out every single Japanese company. After all, I've got three dozen here that are at least worth a look. Take Komatsu, for example. This equipment heavyweight is the Japanese version of Deere (NYSE: DE). After checking out the numbers, I'm tempted to say that Komatsu is the superior firm.

These two outfits throw off about the same level of revenue, but Komatsu sports slightly fatter margins. In trying to suss out the difference, one statistic really jumped out at me. On its website, Komatsu lists 39,267 employees on a consolidated basis, whereas Deere recently claimed 56,700 full-timers. The resulting revenue-per-employee figure suggests that Komatsu's operations are a good deal more efficient.

I would also note that Komatsu has managed to post good returns on equity without employing nearly as much balance-sheet leverage as Deere.

Another interesting group of firms are the so-called sogo shosha, or general trading companies. Mitsubishi, Mitsui (Nasdaq: MITSY), Itochu, and Marubeni all passed my simple return-on-equity screen.

What do these firms trade, exactly? Well, pretty much everything, from textiles to food products to petroleum. Some of these companies date back centuries; they seem like a natural outgrowth of the nation's limited resource endowment.

I've run across several of these firms in my energy-sector coverage, from Mitsui's profitable Petrobras (NYSE: PBR) partnership to Itochu's dinged deepwater venture. They're interesting businesses, but I find them nearly impossible to analyze. If you're a fan of conglomerates like General Electric (NYSE: GE), then the Japanese trading houses may be right up your alley.

A Foolish final word I'm still parsing this list of Japanese firms, but here's a preliminary observation. Of the 36 firms, only six have a market capitalization north of $10 billion. In other words, the big boys are blowing it. That should make you even more wary of taking an index-based approach to your Japan exposure, unless you pick up one of the small-cap ETFs. In Japan, just as we've discovered here at home, the market's best stocks are ignored, obscure, and small.

* Nissan to post annual operating loss too?

* WSJ: Citigroup ready to shrink itself by a third!

* FT.Com: Morgan Stanley: TP for HSBC cut to 455p. It also says the bank needs between USD20-30b of equity and halve its dividend in order to bolster its Balance Sheet. No recovery in its results until 2011.

* China economy grew to 3rd largest in 2007 after beating Germany but still trails behind Japan and the US.
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* Jackie Chan to star in the remake of Karate Kid.

A rare P/BV of 1

2009-01-14T16:25:00.005+08:00

Japanese companies, like the rest of its competitors around the world, are struggling with recessionary pressures. The effects of recession has hit sales(local and export) and increased the difficulty in raising funds. Some that are not level footed face the possibility of bankruptcies. In fact according to BBCNews, company bankruptcies in Japan jumped 24.7% in December from a year earlier. For the 2008 year, it rose 11%, the most in 8 years. With regards to operating loss, the latest forecast figures are also grim. Toyota, the world's second largest automaker is expected to lose USD1.7B this coming March, its first loss in 71 years due to slowing demand and a strong yen(yen soared 25% in 2008). Similarly, Sony is also expected to face an operating loss in the coming March of USD1.1B, its first loss in 14 years. Without doubt, such companies are all too ready to axe their workforce.

Would we be seeing opportunity here to buy cheap beaten up "blue chip" Japanese companies? In fact, according to IHT, refer here, the Nikkei which is nearing its 26 years low, and with a rare P/BV(or NTA) ratio of 1 now (October low of 0.87 when the index hits 6,995) indicates that investors are valuing companies at less than what they could theoretically be liquidated for. It added that even during Japan's decade of economic stagnation, deflation and banking troubles, the price-to-book ratio never fell below 1.

However, some will advise you to keep your money first. Sourcing from Bloomberg here, Analyst John Mihaljevic, writing on the Web site Seeking Alpha, looked at corporate Japan’s evolution since the 1990s, and it’s not pretty. “We approached our study of Japanese stocks with the hypothesis that we should be able to find some compelling investments given the cheap valuations of a large subset of Japanese public companies,” wrote Mihaljevic, managing editor of the Manual of Ideas in New York. “So far, however, we have remained unimpressed.” Five specific issues are explored: a lack of business focus, murky corporate governance, little regard for returns on investment, the high cost of production, and clubby boardrooms.

Despite the above, will you forego this golden opportunity to make money in the long run since the average Japanese stocks are at firesale prices? Actually I am not sure. I did try to do a search using the Bloomberg machines to compare the Nikkei's P/BV with the Bursa or HangSeng in general. Apparently, no such average can be calculated from its database. However, there is such information based on individual stocks. To feel how a 1X P/BV is like, look at AirAsia now. Also, for comparison based on Kenanga Research's latest sector coverage, the P/BV of Property is 0.8X, Plantation 1.7X and Oil & Gas 1.9X . So is P/BV of 1 cheap then? I think the Nikkei's P/BV of 1 is cheap but too generalised as we must also look deeper into the individual stocks themselves. In addition, I believe other valuation ratios (p/e, eps growth, roe etc) must also be used to justify our conviction to buy.

* Happy Ponggal to you! Hope you have the sweetest start for the year and your low is bearable while your high is exceptional!

* Citi which expects a technical recession in 1Q09 for Malaysia, downgrades on Malaysian banks but still a hold AMMB. It also says Singapore property is in a Bear Trap and advises to sell into strength.

* YahooNews: Yahoo names tech veteran Carol Bartz as new CEO.

* US Trade deficit hits 5 year low in November due to fall in oil prices and slower domestic demand.

* Bloomberg: ABN Ambro: China, HK stocks may be the first to bottom amidst slump.

* RTTNews: China's foreign exchange reserves reaches USD1.95T on 31st December. For the year, it was up USD417.8B. However, the 4th quarter increase has slowed down compared with the previous 3 quarters.

Of culture, spirituality, morality and God

2009-01-13T12:17:00.001+08:00

Bloomberg: The Dalai Lama, Tibet’s exiled spiritual leader, blamed a lack of spirituality among people today for the global financial crisis. The Buddhist monk, speaking during a weeklong religious seminar in the Indian holy city of Varanasi, told followers that “rampant corruption in the world” is due to a decline in culture and spirituality. “People have become selfish and materialistic, which has led to the economic slowdown,” the 73-year-old Nobel Peace Prize winner said in an address at the Central Institute of Higher Tibetan Studies yesterday, Indian state-run broadcaster Doordarshan reported.

The U.S. housing slump that began in 2007 has developed into a worldwide crisis that forced central bankers to cut interest rates to near zero to unlock credit markets, pushed governments to bail out their biggest banks amid $1 trillion of writedowns, and sent titans like General Motors Corp. and American International Group Inc. begging for bailouts.

Pope Benedict XVI, reflecting on the crashing stock markets and financial turmoil, said in October that money “is nothing” and the only solid reality is the word of God. “He who builds only visible and tangible things like success, career and money, builds the house of his life on sand,” the 81-year-old pontiff told bishops at an assembly in the Vatican.

Hey it it is time to seriously consider reading the teachings of the Great Confucius in Di Zi Gui.

* Bloomberg: 1) Euro falls to one month low versus Dollar on ECB rate view this Thursday.

2) RBS sees growth in China may slow to 5% this year. 3) Germany has agreed to spend an additional USD66.8b in the next 2 years, its second attempt to stem the worst recession since WWII in Europe's largest economy.

* FT.com: Ireland blames UK for engineering Sterling's slump.

* Aussie and NZ dollars fall on worsening outlook for world economy. As at yesterday, 1 AUD=RM2.44, 1 NZD=RM2.06

Technical Analysis - January 12 2009

2009-01-12T15:30:00.000+08:00

S&P500 (890, last week 932 or -4.5% w.o.w )

There are some mixed signals in the short term coming from the index. For example, even though the Daily MACD is still in the positive, the Daily Parabolic SAR and DMIs (+ve and –ve) are showing weakness already. For the weekly readings, the indicators are improving slowly and the MACD had a positive crossover and the weekly Parabolic SAR has also just turned positive. The weekly ADX trend and DMIs (+ve and –ve) are not bullish yet. Support is around 820 and resistance at 950.

KLSE CI (919, last week 894 or +2.8% w.ow)

Unlike the other markets, the daily indicators continued to improve further during the week. The index is still able to sit above the daily 50-day ema. The daily indicators of Parabolic SAR, ADX trend and DMI (+ve and –ve) are still positive. The weekly charts have improved and the MACD and Parabolic SAR are still positive. The uptrend will be enforced further if the weekly ADX trend and DMIs (+ve and –ve) were to turn bullish too, so far still moving towards it only. The index is expected to trade between 850 and 970.

HangSeng (14,377, last week 15,043 or -4.43% w.o.w )

Another volatile situation during the week. Market sentiment for the current term seems to be mixed. While the week before there was a positive turnaround for the index, this week witnessed a negative turn. The index is now below the daily 50-day ema of 14,850 again. Except for the Parabolic SAR, the daily MACD and MACD Histogram are slightly negative. The weekly charts are doing well, especially the MACD and MACD Histogram which are bullish. The weekly Parabolic SAR is also positive. It will be bullish for the market if it can break through the tough weekly 20-day ema of 16,000. Support is seen at 14,000 and resistance at 16,000.

Nikkei 225 (8,837, last week 8,860 or -0.26% w.ow)

The daily indicators also giving some mixed signal during the week as the index falls below the daily 50-day ema of around 8,900 level after a brief success. The daily MACD and DMI indicators which have just turned positive earlier are getting weaker while the Parabolic SAR has just turned bearish. The weekly charts are improving. The Parabolic SAR is positive too. It will be bullish for the market if it can break through the tough weekly 20-day ema of 9,500. The index is expected to trade between 8,500 and 9,500.

* Japan market closed today due to the Coming of Age holiday and will be reopen on Tuesday.

* Bloomberg: Satyam may restate earnings, be broken up following Chairman Raju's arrest.

* The WSJ: Disney is moving ahead on a plan for a USD3.59B theme park in Shanghai- one of the largest foreign investments in China.

* China says it can be the first to "recover" from the current financial crisis.

Smart Investing/Trading for the week ending January 9 2009

2009-01-11T12:19:00.005+08:00

Weekly US markets Update and Outlook

Stocks turn to earnings as recovery hopes slip

Marketwatch: Investors will get their first taste next week of what's expected to be a gruesome earnings season, with a double helping of sour 2009 outlooks and even more evidence of the depth of the recession.

"There's disappointment about the prospect of the recovery," said Ken Tower, market strategist at Quantitative Analysis Services. "Earnings are now more likely to disappoint, and across the board, [companies] are slashing estimates going forward." Stocks fell on Friday, and posted steep losses for the week, after the government said the U.S. economy lost another 524,000 jobs in December, and the unemployment rate rose to 7.2%, confirming 2007 as the worst for the labor market since World War II.

The current market consensus is for the U.S. recession to bottom out sometime in the middle of this year -- but the latest signs from the labor market suggested to many that these forecasts might be too optimistic.

"I think that people are too optimistic about the recovery," Tower said. "A lot of bad news is already priced in but every time you get worse than expected news, the stock market will have to adjust." On Friday, the Dow Jones Industrial Average finished at 8,599.18, down 143.28 points, or 1.6%, for the session. For the week, the blue-chip average posted a loss of 4.8%. The S&P 500 lost 19.38 points, or 2.1%, to finish at 890.35, with the broad index losing 4.5% for the week. The Nasdaq Composite shed 45.42 points, or 2.8%, to stand at 1,571.59 Friday, leaving it down 3.7% from last Friday's close.

President-elect Barack Obama told a news conference on Capitol Hill the jobs report underlined the need for quick action on his proposed economic stimulus proposal.

"The new Obama Administration has been very quick to market their roughly $750 billion two-year stimulus package in the hopes of speedy implementation after the January 20 inauguration," said Sherry Cooper, chief economist at BMO Capital Markets.

"Even so, it appears that the squabbling on Capitol Hill will stall early passage, at least for a while," she said.

Next week, investors will key in to more economic data, especially the December retail sales numbers due out on Wednesday, and the Federal Reserve's Beige Book of economic conditions, released on the same day.

According to Marc Pado, market strategist at Cantor Fitzgerald, the stocks in the retail sector bear watching as they have shown signs of life over the past week, even after most retailers posted scary same-store sales numbers.

Earnings

In the quarterly reporting season that gets its unofficial start Monday, analysts polled by FactSet anticipate earnings for S&P 500 companies fell 12%, dragged down by double-digit drops in auto, retail and materials companies. Alcoa Inc., which kicks off the unofficial start of reporting season after the close of trading Monday, earlier this week said it planned to cut 13,500 jobs, close plants and chop capital spending by 50%. Intel Corp., another blue-chip stock often used as a barometer for both the tech sector and the economy, will report earnings on Thursday.

Weekly KLSE CI Update and Outlook

ICapital: The KLSE CI is above its 30-day and 50-day but below its 50-week moving averages. Its daily MACD and DMI are bullish. On weekly KLSE CI. The stock market had one of its worst years ever in 2008, with the KLCI falling 39.3%. However, the KLCI has actually been quietly attempting to build a base in the past couple of months from which a bottom may form with the 800-mark acting as support. Would the volume that picked up substantially amidst the New Year rally be a precursor to a new sustained bull market?

* Beware of fake RMB ..esp...RMB100 notes.

* I am feeling worried....TheStar: Government departments ordered to drop austerity measures.

* Bloomberg: Bank of Korea cuts key interest rate to record low 2.5% as recession looms.

* Bloomberg: Morgan Stanley: Buy Won, Mexican Peso, Yuan as dollar shortage ease.

We are unmoved!

2009-01-08T16:55:00.002+08:00

Stumbled into this article by AmResearch this morning. It is titled "Market Strategy : Five high conviction SELL ideas in a counter-cyclical rally." Another conviction to sell is noted below this article. Those who are bullish may not be too happy to read this. Incidently, all markets are in a sea of red today.

We are unmoved by the recent strength in the market, which may be attributable to the ‘January-effect’ and some rotational index-linked buying from portfolio funds looking to raise exposure to equity in the new year. Sure, there are growing calls for a recovery in Asian equities in the second-half of this year. The massive fiscal as well as monetary stimulus on the global front is expected to take hold, albeit with a time lag to lift the regional economies out of recession perhaps in 2010. But for now, we do not think that this extended counter-cyclical rally can be sustained as the near term macro cycles are fast deteriorating: the economic inflexion point will remain a moving target. After the steep and swift run where select big-cap stocks have already risen by more than 20% in the past month alone, valuations may not withstand the onslaught of negative macro news and earnings disappointment as we enter the 1Q earnings reporting season starting from the third week of January 2009. Furthermore, catalytic policy pronouncement to seriously prod the market’s immediate focus beyond upcoming weak earnings season also appears unlikely ahead of the transition in political leadership. We are advocating locking profits in the current counter-cyclical rally. In this report, we highlight five high conviction SELL ideas, namely Bumi-Commerce, SP Setia, IJM, MAS and TMI, where earnings may seriously disappoint.

Similarly, JP Morgan wrote this morning on IOI. " We would take profit after strong outperformance; share price already implying CPO prices above RM2,000/T. TP is RM3.50"

* Satyam's "enron" type scandal will erode confidence in software/outsourcing companies and India in general.

* Bloomberg: BOE is expected to cut interest rates by 50 bp today to 1.5%, an all time record low. Why is the pound rallying mate?

* Bloomberg: Bank of China falls in HK after Li Ka-Shing sells 2 b shares at HKD1.98 (or 7.5% discount of its previous day closing price).

A and H shares near parity

2009-01-07T17:13:00.004+08:00

Near parity. Well, I think I have heard of this term being used quite commonly by financial commentators especially in the money markets these days. Remember months ago when the value of Canadian and AUD was close to the USD? Parity or Near parity term was used. Then only before year end, this word was used again. Sterling's drop to near parity with euro! Platinum near parity with gold! And now, near parity was used to compare China's A shares and Hang Seng's H shares which we all know for years having very much differences in price. Well, nothing is impossible as we are living in exciting times!

FT.com: The difference in the share prices of Chinese companies listed in both Shanghai and Hong Kong has narrowed dramatically in recent weeks and may disappear if the Chinese economy proves resilient in the slowdown.

The A shares of companies traded in Shanghai or Shenzhen were on average 16.1 per cent higher than the H shares of the same 56 companies listed in Hong Kong, compared with 44 per cent in early December and a peak of 108.1 per cent on 16 January 2008, according to the Hang Seng China AH Premium Index.

Mainland markets have different dynamics to those in Hong Kong. Shanghai was the world's best-performing market in 2007 thanks to huge demand by domestic investors who could not buy shares overseas.

But mainland retail investors have turned cautious after the Chinese market halved in 2008. The internationally oriented Hong Kong market has recovered from 2008's lows more quickly, narrowing the price gap.

The premium could even turn into a discount if foreign investors become "massively bullish" on Chinese companies and so bid up H shares in Hong Kong, said Khiem Do, head of Asian multi-asset at Baring Asset Management. "If A shares trade at a discount, that means overseas investors are going crazy about China again and they can't access the A share market, therefore they have to buy H shares." That could happen if China grows more than expected or if the US and other developed economies shrink further than feared in 2009, he said. "But there are some very big 'ifs' there."

Hong Kong shares have risen faster than their mainland counterparts, Mr Do said, partly because some investors shorted the Hang Seng and the Hang Seng Chinese Enterprises Index of H shares as proxies to hedge against other emerging markets. As markets recovered, they had to buy back the shares. "That's why the bounce has been so big."

Even now, the shares of some small companies such as Nanjing Panda Electronics and Sinopec Yizheng Chemical trade on mainland markets at about 4½ times their Hong Kong price. In theory there should be negligible differences between shares listed on two or more stock exchanges.

But China has strict capital controls. They prevent arbitrageurs from buying shares of a dual-listed company cheaply in Hong Kong and selling them at a higher price on the mainland – a process that would eventually equalise prices.

"In Hong Kong and in Shanghai and everywhere else the methodology [of valuation] is the same, but prices do vary from the intrinsic value," said Steven Sun, senior China equity strategist for HSBC. "In the long run the difference should narrow."

* BT(Singpore): Toyota to shut plants for 11 days during February and March in order to cut bulging inventories as sales plummet.

* Bloomberg: Alcoa, world's largest aluminium maker, will fire 13,500 employees, 13% of its workforce and reduce production.

* Bloomberg: Obama says federal budget deficit is likely to approach USD1T for years to come as the government grapples with a recession and other spending demands.

* RGE: Will the US Treasuries be the next bubble to fall?

* Parkson shares slumped after saying sales growth in China slows. Currently it is trading at RM3.68 or down 60 sen.

* WCT- took in its second limit down at 92.5 sen but now hovering around RM1.13 . Aseanbankers cut WCT’s earnings forecast by 21 per cent for this year and 11 per cent for 2010.

* Refer here for Genting International's latest. Its share prices is currently at 48 SG cents.

* BT: OSK-UOB: KLSE unlikely to hit 1,000 this year.

* BT: Credit Suisse: Buy high beta stocks! eg Commerce, KLK, TMI, Tanjong and Plus.

Confidence trickling in?

2009-01-06T17:10:00.002+08:00

After more than a week of hefty rise in major world markets, market commentators have begun to feel "positive" again. Confidence seems to be on the rise amid cautiously due to a "new beginning" factor? It is true that markets do "look much better" now technically speaking despite the gloomy economic numbers being churned out. However, I must say the majority of the market participants are not convinced to go in just yet and only watched at the sideline. Or are you one of the many waiting for profit taking to set in before buying? Below is one of the few early bullish commentators for Bursa stocks. It advises "BUY" bombed-out stocks now despite an expectation of only a bear market rally this year.

Dow Jones Newswire: Malaysia players should move out of cash and into equities in 1Q09, says Macquarie; expects bear market rally this year, reckons investors "would do well to buy bombed-out stocks." Malaysian earnings likely to outshine region in 1Q09 as most of listed companies not exporters; also says "at some point, regional equity markets should respond to an easing in the bad news as fiscal policy stabilizes economic conditions towards mid-2009, leading to a partial recovery in 3Q." Recommends "bombed-out" stocks like AMMB(1015.KU), Genting(3182.KU), TM International(6888.KU), Tenaga(5347.KU). Still, warns market recovery expected to fade in 4Q as fiscal stimulus insufficient "and growth falls again once the money finishes traveling through the system"; reckons more fiscal stimulus would be needed for economy, forecasts "real recovery" through course of 2010.

* Above - Meydan RaceCourse Dubai -a joint venture project between WCT and Arabtec now gone "off course". See below.

* First limit down for the year...WCT Bhd (WCT) hits limit down in early morning trade today before it was suspended at 9.12am by Bursa Malaysia. The suspended price was RM1.29 The contract worth RM4.6b was cancelled “because of non-adherence to the agreed time schedule for construction.” WCT will make a material announcement late today. Meanwhile here are the latest TP for the stock. RHB Research RM1.28, AmResearch RM1.36. According to DJ, it may find support at MYR1.07 (Oct. 28 low), next at 90.5 sen (limit down threshold).

* Dr M: Save Palestine, Boycott US goods! Is it that easy Dr M? "OK, lets start by not using the computer!" Think of Microsoft, www, trades ......

* CNBC: People's Bank of China predicts China 2008 GDP growth seen at 9.3% and CPI at 6%.

* ChinaDaily: PWC: IPOs for China and HK will begin to pick up in the 2nd half of the year as the impact of stimulus package starts to feed into the wider economy.

BT: Palm oil at more than 2 month high. March delivery is now at RM1,894 a MT.

Technical Analysis - January 5 2009

2009-01-05T15:18:00.002+08:00

S&P500 (932, last week 873 or +6.8% w.o.w )

The index worked extremely hard during the week with a hefty rise of almost 7%. As a result, the daily indicators continued to be in the positive last week. The index is now above the daily 50-day ema. For the weekly readings, the indicators are improving slowly and the MACD had a positive crossover but the weekly Parabolic SAR is not positive yet. The uptrend will be enforced further if the daily/weekly ADX trend and DMIs (+ve and –ve) were to turn bullish too, so far still moving towards it only. Support is around 890 and resistance at 980.

KLSE CI (894, last week 867 or +3.1% w.ow)

The daily indicators continued to improve further during the week especially during the last day of trading for the week. The index went a step higher and close the week sitting above the daily 50-day ema despite the index under pressure as evident from the high daily stochastic oscillator. The daily indicators of Parabolic SAR, ADX trend and DMI (+ve and –ve) are still positive. The weekly charts have improved and the MACD and Parabolic SAR are still positive. The uptrend will be enforced further if the weekly ADX trend and DMIs (+ve and –ve) were to turn bullish too, so far still moving towards it only. The index is expected to trade between 850 and 930.

HangSeng (15,043, last week 14,184 or +6.06% w.o.w )

What a turnaround by the index again. Despite trending lower the week before, the index jumped 6% and is now above the daily 50-day ema . Despite this, the daily MACD and MACD Histogram and Parabolic SAR are still slightly negative. The weekly charts are doing well, especially the MACD and MACD Histogram which are bullish. The weekly Parabolic SAR is also positive. Support is seen at 14,000 and resistance at 15,800.

Nikkei 225 (8,860, last week 8,740 or +1.37% w.ow)

The daily indicators continued to improve further during the week. The index seems to be heading towards the daily 50-day ema of around 8,900 level. The DMI indicators have just turned positive. However, the daily/weekly stochastic oscillator is at a high level which requires the index to correct soon. The weekly charts are improving. The Parabolic SAR has just turned bullish too. The index is expected to trade between 8,500 and 9,500.

* World condemns Israel's offensive in Gaza Strip.

* Bloomberg: Fed officials endorse "big stimulus" to pull economy out of recession.

* Bloomberg: Obama said to push for USD300b tax cuts in economic stimulus package.

* The Standard: HK investors of Lehman minibonds may have to pay around 20% of any money they receive to their US lawyers.

Smart Investing/Trading for the week ending January 2 2009

2009-01-04T12:00:00.001+08:00

US Markets Update and Outlook

Year-end rally to get put to the test
As volume returns, will recent euphoria depart?

MarketWatch: Like so many New Year's revelers, the U.S. stock market may try to stick to its resolutions -- and fail miserably.

After a dismal 2008, U.S. stocks started out the new year with a splash. The Dow Jones Industrial Average on Friday rose above 9,000 for the first time since early November and finished 6% higher for the week, ending a four-week losing streak. But with many professional money managers home for the Christmas and New Year's holidays, the stock market made its recent moves in very light volume. The return of institutional money next week will determine whether these gains stick. "The real question is, is this going to last when traders come back from vacation?" said Doug Roberts, chief investment strategist at investment research firm ChannelCapitalResearch.com.

Every day next week, traders will get a dose of new corporate and economic news that may give them more insight into the depth of the U.S. recession and credit crunch. Items most likely to move stocks include minutes from the Federal Reserve's last interest-rate setting meeting, two big tech conferences, returning lawmakers' efforts on another stimulus package and Friday's job report.

Autos, Madoff

The trading week starts out with a bout of Detroit dolor, Capitol Hill head-cracking and the end of an era at Apple, Inc. On Monday, U.S. automakers disclose auto sales for December. Industry sales risk dropping below a rate of 10 million on a seasonally-adjusted annual basis, or the lowest for 2008. The Treasury Dept.'s move last week to grant $5 billion in bailout money to GM's financing arm GMAC LLC, which immediately prompted GM and GMAC to ease lending conditions for new auto loans, probably came too late to sway December sales, say analysts. Still, with General Motors Corp., Ford Motor Co. and Chrysler LLC executives making no secret of their problems in hearings last month, the market may shrug off auto sales data unless the expected drop turns into a freefall.

"People are obviously expecting pretty bad numbers," said Bill Stone, chief investment strategist at PNC Wealth Management. "The fear is that you get something far worse."

Also Monday, the House Financial Services Committee will hold a hearing on the $50 billion Ponzi scheme investment manager Bernard Madoff allegedly orchestrated. The panel, led by Barney Frank, D-Mass., says it will interview witnesses with an eye on making "the most substantial rewrite" of financial markets laws since the Great Depression.

TARP, Macworld

Any word from Washington on its efforts to stem the current financial crisis -- and prevent the next one -- is likely to pique investors' interest. President-elect Barack Obama and Democratic lawmakers say they want to pass a second fiscal stimulus package to create jobs and deliver tax cuts to low-wage and middle-income workers. Recent estimates of its size have ranged from $850 million to as much as $1 trillion. Plus, lawmakers are expected to enter a new round of wrangling over the uses of the $700 billion Troubled Asset Relief Program. The Bush Administration's decision to extend the financial system bailout money to automakers pushed total TARP payouts past $350 billion. The Treasury Department must now convince Congress, which is at odds over the best uses of TARP, to release the second half of the $700 billion.

The House Financial Services Committee will hold a hearing Wednesday on uses of the TARP. Separately, Treasury Secretary Henry Paulson is scheduled to speak on the government-sponsored mortgage agencies. For tech investors, the annual Macworld trade show kicks off Tuesday with a keynote speech by a top Apple official -- but not Apple CEO Steve Jobs. The announcement last month that Jobs would forego his traditional opening remarks sent Apple's stock tumbling as worries resurfaced about Jobs' health. This is also the last Macworld Apple plans to attend. The sector gets a doubly whammy of product news next week as Microsoft Corp., Cisco Systems, Inc. and other tech heavyweights head to Las Vegas for the annual International Consumer Electronics Show.

More job losses

Economic data starts to pile up Tuesday with releases on the services sector, pending home sales and minutes from the Federal Open Market Committee's Dec. 16 meeting. That's the meeting when policymakers threw everything they had at getting credit moving in the economy.

To a certain extent, those efforts seem to be working. Mortgage rates dropped, and yields on Treasurys steepened as investors clung less desperately to safe-haven assets. Spreads on corporate debt have narrowed slightly, suggesting investors are feeling a bit more comfortable lending companies money.

"I'm cheered by the fact that spreads have come in and mortgage rates have come down," said Stone. "But we'll see if it follows through when we actually have people trading." Economic indicators early in the week -- plus Wednesday's ADP employment report and jobless claims on Thursday -- are the opening acts for Friday's main show, the December unemployment report.

Economists are looking for more of the same sorry news on the economy. They expect about half a million jobs to have disappeared in December, contributing to a 5% to 6% drop in the fourth quarter's gross domestic product.

"As we turn into the new year, the message from the data flow is as straightforward as it is glum," said J.P. Morgan Chase economist Bruce Kasman in a report Friday. "We are in the midst of a deep global economic contraction, one that is likely to produce the sharpest four-quarter decline in global GDP in the post-World War II era." In corporate news, Constellation Brands Inc., Monsanto Co, Bed Bath & Beyond Inc. and KB Home are scheduled to report earnings. Chevron Corp.will release an interim production update.

KLCI Update and Outlook

BT: The composite index's daily trend continued to stay below its intermediate-term downtrend. It continued to stay below its intermediate-term downside support.

The KLCI ended the year on a rather weak note when it closed at 873.43 on December 31, posting a year-on-year loss of 571.60 points, or 39.56 per cent. The FBM Second Board Index tumbled 2,778.34 points, or 41.27 per cent, to 3,954.01 while the FBM Mesdaq Index plunged 2,863.91 points, or 46.88 per cent, to 3,245.25.

Its daily and weekly fast MACDs (moving average convergence divergence) continued to stay above the support of their respective slow MACDs at the market close yesterday. Its monthly fast MACD continued to stay below its slow MACD.

The index's 14-day RSI stayed at 60.87 per cent level yesterday. Its 14-week and 14-month RSI stayed at 35.39 and 32.02 per cent levels respectively.

The composite index staged an overhead breakout of its 50-day moving averages on December 30 and continued to stay above that at the market close yesterday. This signalled a shift in market momentum.

With the shift in market momentum to the upside, the KLCI is now staging a re-test of its previous resistance high of 926.65 set on November 5 2008. A decisive breach of this resistance is likely to see a major trend reversal.

Next week, the index's envisaged resistance zone hovers at the 897 to 930 levels while its immediate downside support is at the 856 to 890 levels.

* Back to school tomorrow! Happy learning and making new friends!

* RGE: DJIA's stocks performance in 2008 is the worse since 1931.

* AP: Singapore's economy shrinks 12.5% in Q4. Citigroup: " If we are correct, 2009 will mark the most severe recession in Singapore's history.

* RTTNews: Japan PM says the country will be the first to recover from the financial crisis.

* Too much to handle? Bursa experienced its 3rd technical(after the lunch break) glitch since Bursa Trade implemented more than 1 month ago.

Happy New Year 2009!!!

2008-12-31T15:57:00.004+08:00

It is the time again to celebrate a new beginning, a time to wish all my friends and loved ones a happy new year. Let this coming year be better than all others!

US will disintegrate in 2010?

2008-12-30T16:00:00.006+08:00

What, are you crazy?
Well, even if you don't believe this shocking prediction by Prof. Panarin based on "classified" data, the article below provides a good read. It will be interesting to refer back this article when June/July 2010 comes.....by then California will be part of China and Texas will be part of Mexico?

The WSJ: For a decade, Russian academic Igor Panarin has been predicting the U.S. will fall apart in 2010. For most of that time, he admits, few took his argument -- that an economic and moral collapse will trigger a civil war and the eventual breakup of the U.S. -- very seriously. Now he's found an eager audience: Russian state media.

In recent weeks, he's been interviewed as much as twice a day about his predictions. "It's a record," says Prof. Panarin. "But I think the attention is going to grow even stronger."

Prof. Panarin, 50 years old, is not a fringe figure. A former KGB analyst, he is dean of the Russian Foreign Ministry's academy for future diplomats. He is invited to Kremlin receptions, lectures students, publishes books, and appears in the media as an expert on U.S.-Russia relations.

But it's his bleak forecast for the U.S. that is music to the ears of the Kremlin, which in recent years has blamed Washington for everything from instability in the Middle East to the global financial crisis. Mr. Panarin's views also fit neatly with the Kremlin's narrative that Russia is returning to its rightful place on the world stage after the weakness of the 1990s, when many feared that the country would go economically and politically bankrupt and break into separate territories.

A polite and cheerful man with a buzz cut, Mr. Panarin insists he does not dislike Americans. But he warns that the outlook for them is dire.

"There's a 55-45% chance right now that disintegration will occur," he says. "One could rejoice in that process," he adds, poker-faced. "But if we're talking reasonably, it's not the best scenario -- for Russia." Though Russia would become more powerful on the global stage, he says, its economy would suffer because it currently depends heavily on the dollar and on trade with the U.S.

Mr. Panarin posits, in brief, that mass immigration, economic decline, and moral degradation will trigger a civil war next fall and the collapse of the dollar. Around the end of June 2010, or early July, he says, the U.S. will break into six pieces -- with Alaska reverting to Russian control.

In addition to increasing coverage in state media, which are tightly controlled by the Kremlin, Mr. Panarin's ideas are now being widely discussed among local experts. He presented his theory at a recent roundtable discussion at the Foreign Ministry. The country's top international relations school has hosted him as a keynote speaker. During an appearance on the state TV channel Rossiya, the station cut between his comments and TV footage of lines at soup kitchens and crowds of homeless people in the U.S. The professor has also been featured on the Kremlin's English-language propaganda channel, Russia Today.

Mr. Panarin's apocalyptic vision "reflects a very pronounced degree of anti-Americanism in Russia today," says Vladimir Pozner, a prominent TV journalist in Russia. "It's much stronger than it was in the Soviet Union."

Mr. Pozner and other Russian commentators and experts on the U.S. dismiss Mr. Panarin's predictions. "Crazy ideas are not usually discussed by serious people," says Sergei Rogov, director of the government-run Institute for U.S. and Canadian Studies, who thinks Mr. Panarin's theories don't hold water.

Mr. Panarin's résumé includes many years in the Soviet KGB, an experience shared by other top Russian officials. His office, in downtown Moscow, shows his national pride, with pennants on the wall bearing the emblem of the FSB, the KGB's successor agency. It is also full of statuettes of eagles; a double-headed eagle was the symbol of czarist Russia.

The professor says he began his career in the KGB in 1976. In post-Soviet Russia, he got a doctorate in political science, studied U.S. economics, and worked for FAPSI, then the Russian equivalent of the U.S. National Security Agency. He says he did strategy forecasts for then-President Boris Yeltsin, adding that the details are "classified."

In September 1998, he attended a conference in Linz, Austria, devoted to information warfare, the use of data to get an edge over a rival. It was there, in front of 400 fellow delegates, that he first presented his theory about the collapse of the U.S. in 2010.

"When I pushed the button on my computer and the map of the United States disintegrated, hundreds of people cried out in surprise," he remembers. He says most in the audience were skeptical. "They didn't believe me."

At the end of the presentation, he says many delegates asked him to autograph copies of the map showing a dismembered U.S.

He based the forecast on classified data supplied to him by FAPSI analysts, he says. He predicts that economic, financial and demographic trends will provoke a political and social crisis in the U.S. When the going gets tough, he says, wealthier states will withhold funds from the federal government and effectively secede from the union. Social unrest up to and including a civil war will follow. The U.S. will then split along ethnic lines, and foreign powers will move in. California will form the nucleus of what he calls "The Californian Republic," and will be part of China or under Chinese influence. Texas will be the heart of "The Texas Republic," a cluster of states that will go to Mexico or fall under Mexican influence. Washington, D.C., and New York will be part of an "Atlantic America" that may join the European Union. Canada will grab a group of Northern states Prof. Panarin calls "The Central North American Republic." Hawaii, he suggests, will be a protectorate of Japan or China, and Alaska will be subsumed into Russia.

"It would be reasonable for Russia to lay claim to Alaska; it was part of the Russian Empire for a long time." A framed satellite image of the Bering Strait that separates Alaska from Russia like a thread hangs from his office wall. "It's not there for no reason," he says with a sly grin. Interest in his forecast revived this fall when he published an article in Izvestia, one of Russia's biggest national dailies. In it, he reiterated his theory, called U.S. foreign debt "a pyramid scheme," and predicted China and Russia would usurp Washington's role as a global financial regulator.

Americans hope President-elect Barack Obama "can work miracles," he wrote. "But when spring comes, it will be clear that there are no miracles."

The article prompted a question about the White House's reaction to Prof. Panarin's forecast at a December news conference. "I'll have to decline to comment," spokeswoman Dana Perino said amid much laughter.

For Prof. Panarin, Ms. Perino's response was significant. "The way the answer was phrased was an indication that my views are being listened to very carefully," he says.

The professor says he's convinced that people are taking his theory more seriously. People like him have forecast similar cataclysms before, he says, and been right. He cites French political scientist Emmanuel Todd. Mr. Todd is famous for having rightly forecast the demise of the Soviet Union -- 15 years beforehand. "When he forecast the collapse of the Soviet Union in 1976, people laughed at him," says Prof. Panarin.

* GMAC gets USD5b investment from Treasury to help revive auto lending in US.

* Bloomberg: Oil trades above USD40 as attacks on Gaza raise concerns supply may be cut.

* Bloomberg: According to Barclays Capital, Japan's economy may shrink 12% this quarter, most since 1974.

* FT.com: China has been knocked off for IPOs top slot in 2008, the first time since 2005 by New York.

* TheStandard: According to The Chartered Institute of Personnel and Development's latest Annual Report, more than 600,000 people in the UK will be laid off in 2009, worse in 10 years.

* Forbes: China's forex reserves has peaked and likely to decline in H1 2009- Moody's Economy.com

Technical Analysis - December 29 2008

2008-12-29T10:11:00.008+08:00

S&P500 (873, last week 888 or-1.7% w.o.w )

The daily indicators continued to register uptrend although some weaknesses were shown last week. During the week, the index dropped below the 880 support level, ie the 20 day ema. The index needs to work hard to prop up the daily indicators so as to remain bullish. For the weekly readings, the indicators are improving slowly and the MACD is continuing to move upwards but no positive crossover yet. The weekly Parabolic SAR is also not positive yet. The uptrend will be enforced further if the daily/weekly ADX trend and DMIs (+ve and –ve) were to turn bullish too, so far still moving towards it only. Support is around 850 and resistance at 960.

KLSE CI (867, last week 876 or -1.03% w.ow)

The daily indicators improved further during the week despite a w.o.w decline. The index is still above its 20 day ema. The daily indicators of Parabolic SAR, ADX trend and DMI (+ve and –ve) are still positive but the DMI (+ve and –ve) are not strong. As indicated weeks ago, there is a likelihood the index will be under pressure again as evident from the high daily stochastic oscillator. This indicator is still correcting. The volume is also uninspiring. The weekly charts have improved and the MACD and Parabolic SAR are still positive. The uptrend will be enforced further if the weekly ADX trend and DMIs (+ve and –ve) were to turn bullish too, so far still moving towards it only. The index is expected to trade between 835 and 900.

HangSeng (14,184, last week 15,128 or -6.24% w.o.w )

A worrying trend just emerged during the week. The daily MACD and MACD Histogram and Parabolic SAR turned negative on the 24 December. The index which is the leading positive trend setter suddenly turned bearish. This was the due to the index's large drop during last week and its inability to remain above the 15,000 level or the 50 day ema. It is now below the 20 day ema of 14,500. Lets hope this could be a temporary situation as its daily stochastic indicator is poised to move upwards again. The weekly charts is also doing well, especially the MACD which had a positive crossover during the week. The weekly Parabolic SAR is also bullish. Support is seen at 13,300 and resistance at 15,500.

Nikkei 225 (8,740, last week 8,589 or +1.76% w.ow)

The daily indicators continued to improved further during the week. The index seems to be bunching around its 20 day ema of 8,500 level. It would be bullish for the index to see if the daily ADX trend and DMI indicators could show positive uptrend soon. The weekly charts are improving with the MACD crossed over on Friday. The Parabolic SAR has just turned bullish too. The index is expected to trade between 7,500 and 9,500.

* Selamat menyambut Ma'al Hijrah.

* Job losses on the rise...from Kuching to Kedah....from Nikko Electronics to Western Digital...Canon to Sony....expect more social and crime related problems to come...every one, plz stay alert and be very careful where ever you are...safety is our No 1 priority.

* Remisiers turn to part time jobs. Sigh!

* Violence and unrest greeting the new 2009....Israel/Gaza, Thailand, Sri Lanka, Pakistan, Iraq.....

* Euro currency turning 10 years old come this January 1 2009! It is seen by many analysts as fulfilling promise as a way to lower borrowing costs, ease trade and tourism, boost growth and strengthen the European community.

* Reuters via TheStar: Countdown to the coming 2009 will need to add an extra 1 second to match Earth's spin. It will be the 24th extra second to be added to the Universal Time since 1972, when the practice began.

Smart Investing/Trading for the week ending December 26 2008

2008-12-28T11:23:00.001+08:00

US Markets Update and Outlook

U.S. stocks turn to final week of 2008
Investors likely to ditch worst stocks after market's 40% drop year to date

MarketWatch: The final week of the 2008 is unlikely to be as tumultuous for stocks as the year has been to this point.

But some economic data points might provide insight on the depth of the recession, and some selling is expected in the most battered stocks by investors seeking a break on their tax liabilities. "Next week, people will be finishing their tax strategies," said Hugh Johnson, chairman of Johnson Illington Advisors. "There will also be some rearranging of portfolios to prepare for the next year." As year-end nears, investors typically sell underperforming assets to offset tax liabilities.

This trend was partly at work over the past week, which saw the Dow Jones Industrial Average lose 0.7%, the S&P 500 index drop 1.6% and the Nasdaq Composite fall 2.2%.

And most investors probably won't have any trouble locating losing assets in their portfolios. Since the beginning of 2008, the Dow industrials have lost 35.8%; the S&P 500, encumbered by financials, is down 40.6%; and the Nasdaq Composite has fallen 42.3%.

In post-holiday trade Friday, the market managed to post gains in spite of grim results from the retail sector. Crude prices gained 6.7% to $37.71 a barrel, lifting the energy sector, after a four-session drop and a 33% drop thus far in December. The Dow industrials rose 47 points to finish Friday at 8,515, with shares of General Motors Corp. pacing the gainers. The Federal Reserve approved the request by GM's finance arm, GMAC, to become a bank holding company, clearing the way for it to receive aid from the government. Online retailer Amazon.com provided some cheer after saying its 2008 holiday season had been its best ever, in spite of grim results across most of the retail sector.

Economic woes

National retail estimates were more grim. Total retail sales dropped 5.5% to 8% for November and December, according to MasterCard's SpendingPulse. A 40% drop in the price of gasoline compared to December 2007 accounts for almost half of the decline. Excluding gasoline, total sales were down 2% to 4% this holiday season versus the same period in 2007.

"Everybody is going to watch the economic numbers looking for any signs that the consensus forecast is going to be right," said Johnson. "So far the consensus is that the economy will start to recover in the second half of 2009."

Meanwhile, more economic woes will likely be on display next week, with the release of the S&P/Case-Shiller Home Price Index, a manufacturing survey for the Chicago region, and a reading of consumer confidence, all due Tuesday. Wednesday will bring weekly jobless-claims data, an update on mortgage applications and crude-oil inventories. Markets will be closed, and no economic data will be released Thursday, New Year's Day. On Friday, a survey of the national manufacturing sector is likely to be closely watched. "Manufacturing has been plunging and we expect the ISM index to fall to 34 in December, pushing it below its 1982 recession low," economists at BNP Paribas said in a note.

According to Johnson, investors will try to read the tea leaves not only in forward-looking economic indicators but also in the economic policies of the incoming administration, as well as from the behavior of markets, including the battered credit markets.

KLSE CI Technical Update and Outlook

BT: The KLCI's brief technical rebound hit its intra-week high of 888.03 on Monday, moving into the confines of this column's envisaged support zone (879 to 913 levels).

Subsequent technical pullbacks sent the index to its intra-week low of 862.29 on Wednesday, staging a re-test of this column's envisaged support zone (839 to 873 levels).

Chartwise, the composite index continued to stay below the support of its immediate downside support for the sixth consecutive week. It continued to stay below its intermediate-term downtrend yesterday.

The index's daily trend continued to stay below its intermediate-term downtrend. It continued to stay below its intermediate-term downside support .

The KLCI's daily and weekly fast MACDs (moving average convergence divergence) continued to stay above the support of their respective slow MACDs at the market close yesterday. Its monthly fast MACD continued to stay below its slow MACD.

The composite index's 14-day RSI stayed at 49.29 per cent level yesterday. Its 14-week and 14-month RSI stayed at 29.36 and 29.10 per cent levels respectively.

The KLCI staged a failed attempt in trying to take out the resistance of its 50-day moving averages. A decisive break of the 50-day moving averages is likely to signal a major trend reversal. Until then, it will continue to consolidate within range-bound trading activities.

As it turned out, the traditional year-end window-dressing rally seemed to have run out of steam. With that, the KLCI will continue to consolidate within range-bound activities.

Next week, the KLCI's envisaged resistance zone hovers at the 870 to 904 levels while its immediate downside support is at the 830 to 864 levels.

* Worse one day death toll in Gaza in 6o years. Israel "air-tack" Hamas-ruled Gaza killing atleast 205 people, destroying 40 security compounds and wounding 700 Palestinians.

* South Korea sees unprecedented economic crisis looming!

* Bloomberg: Japan's recession deepens as industrial production falls most in 55 years.

* Thailand (SEA's second largest economy) plans to spend USD8.6b (or 3% of GDP) in stimulus package to boost growth. Malaysia? What slow down? We are still doing well and confident in achieving growth next year!!!!

Merry Xmas and a Happy New Year

2008-12-24T14:57:00.004+08:00

May the spirit of the season brings you and your family love and joy to cherish! Happy holidays and a wonderful 2009!

Has OPEC stopped the slide?

2008-12-23T15:24:00.011+08:00

The Opec cartel, which controls 40 per cent of the world’s oil production, last week announced a further 2.2m barrels a day cut, on top of the 2m b/d reduction pledged this year. The market participants waited eagerly to find out what would be the reaction of oil price due to the cut. There was a hope that the cut will result in stopping the slide of oil prices. It seems that the slide in the oil price did not abate but worsened...

FT.com: Was Opec successful in stopping the slide in oil prices? It depends on how you analyse the numbers.

A look at the Nymex front-month West Texas Intermediate contract, the oil market’s main benchmark, gives the impression of Opec failure. It plunged from $43.60 a barrel ahead of the meeting to close at a 4½-year low of $33.87 at the end of last week. A drop of $10 sounds very much like a vote of no confidence in the cartel.

This view is, however, misleading. The Nymex WTI front-month benchmark – in this case, the January contract – expired last Friday, distorting prices. The February contract, which on Monday became the market’s benchmark, was far more stable, losing $2 to $42.36.
But even this measure is incomplete. To attain a fairer view, it is necessary to dig deeper into the world of physical crude oil contracts.

As the cartel pumps mostly lower quality, heavy sour crude, the cuts will affect those grades first. It is there where the market should look for clues about the impact. It seems to be working. The price difference between lower quality, heavy sour crude, such as Dubai – the Middle East benchmark – and higher quality, light, sweet oil, such as WTI, has narrowed sharply, pointing to a tighter market.

And it is not just Middle East grades. JBC Energy, the Vienna consultants, says that American lower quality grades have recently shown their best side. In the US, medium grade Mars oil is now priced at its highest level in about 1½ years against the WTI benchmark. In Ecuador, Napo oil has also recovered.

Opec still faces a daunting job delivering its promised cuts amid fast-weakening demand, but investors should not disregard the cartel because the WTI January contract was weak.

For the time being, the physical market is giving Opec a cautious thumbs up. The drop came in spite of Opec’s production cut last week and assurances by Saudi Arabia, the world’s largest oil producer and the group’s leader, that Opec will implement the cut fully.

* Picture above courtesy of ChinaDaily.

* Crude oil price for February 2009 is currently trading at USD39.45 per barrel in the Singapore market.

* Quantitative easing 101. Please read here.

* Bloomberg: China reduced its interest rate by 0.27 percentage point to 5.31% and deposit rate by the same amount to 2.25%. This will be its 5th interset rate cut in 4 months.

* BT(Singapore): HK Disneyland to expand park by a third more and may cost around USD450m.

* WSJ: Toyota sees first loss in 70 years!

* The Standard: OECD warns crisis may cost up to 25m jobs.

* Despite the indices showing uptrend, the quantity traded is uninspiring.

Technical Analysis - December 22 2008

2008-12-22T19:07:00.000+08:00

S&P500 (888, last week 880 or +0.9% w.o.w )

The daily indicators continued to register uptrend. For the weekly readings, the indicators are improving slowly and the MACD is continuing to move upwards but no positive crossover yet. The weekly Parabolic SAR is also not positive yet. The uptrend will be enforced further if the daily/weekly ADX and DMIs (+ve and –ve) were to turn bullish too, so far still moving towards it only. Expect some selling pressure this week as evident from the daily stochastic oscillator. Support is around 850 and resistance at 960.

KLSE CI (876, last week 852 or +2.82% w.ow)

The daily indicators improved further during the week. The daily indicators of Parabolic Sar, ADX and DMI (+ve and –ve) in fact just turned positive too. As indicated last week, there is a likelihood the index will be under pressure again as evident from the high daily stochastic oscillator. The weekly charts have improved and the MACD and Parabolic SAR has just crossed over positively. The uptrend will be enforced further if the weekly ADX and DMIs (+ve and –ve) were to turn bullish too, so far still moving towards it only. The index is expected to trade between 835 and 900.

HangSeng (15,128, last week 14,758 or +2.51% w.o.w )

Perhaps still one of the best looking indices chart in the world now, the daily indicators are doing well and strong. The daily MACD in particular is above 0 level showing further improvement. It would be interesting to see if the daily ADX and DMI indicators can show positive uptrend soon; a position it last register in late July. The weekly charts is also doing well, especially the MACD which had a positive crossover during the week. The weekly Parabolic SAR is also bullish. Support is seen at 14,000 and resistance at 15,500 and 16,500

Nikkei 225 (8,589, last week 8,236 or +4.28% w.ow)

The daily indicators continued to improved further during the week. It would be bullish for the index to see if the daily ADX and DMI indicators can show positive uptrend soon. The weekly charts are improving with the MACD attempting to cross over. The Parabolic SAR has just turned bullish too. The index is expected to trade between 7,500 and 9,000.

* Bloomberg: US throws lifeline to Detroit as it pledged on a USD13.4b rescue plan.

* AP: Banks that are getting taxpayer bailouts awarded their top executives nearly USD1.6b in salaries, bonus and other benefits last year.

* ChinaDaily: China's forex reserves down to USD1.89T in October.(their first monthly fall since December 2003).

Smart Investing/Trading for the week ending December 19 2008

2008-12-21T12:45:00.000+08:00

US Markets Update and Outlook

Light on data, earnings - and maybe, cheer

MarketWatch: Stock investors looking for a little year-end cheer may instead find themselves finishing the holidays with another dose of bah, humbug. Events that helped stocks post mild gains in the past week - namely, government interventions to prevent an even worse recession - may be in short supply, as Congress stays on recess and President-elect Barack Obama vacations for the holidays in Hawaii. Instead, a smattering of economic news and earnings from Walgreen Co. and Micron Technology will shape trading in the holiday-shortened week. These days, however, it's what Washington says that matters most.

"Other than the government largesse, there's really no good news," said Alec Young, equity strategist at Standard & Poor's. "It's not surprising rallies are fading." Stocks posted modest advances last week, thanks largely to the Federal Reserve's decision to cut interest rates to near zero percent, a record low, and its promise to buy up more debt to rejuvenate the housing market. The White House's decision to lend U.S. auto makers up to $17 billion also gave a lift to the indexes.

But the next big item on Wall Street's wish list - progress on another fiscal stimulus package - is likely to wait until next year, analysts said.

Fewer trading days

If holiday fizz is in low supply, investors won't suffer for long. The New York Stock Exchange closes at 1 p.m. Eastern on Wednesday and is closed Christmas Day. Other markets also have curbed hours. When they do trade, uncertainty about the length and depth of the global recession is likely to dominate. Optimism that the recession may avoid the worst projections has driven stocks higher in recent sessions.

But these gains have often evaporated by the close of trading, as fears took hold. The Friday gave up a nearly 200-point lead to end 26 points lower "People are placing bets based on how long the recession will be," Young said. A lot of bad news has been factored in already, which has helped the S&P 500 and Dow avoid undercutting their November lows. "But we're not going to get much upside," he said, "until people get the sense that things are stabilizing." Stocks have lost about 35% to 40% this year.

Economy: durables, spending

On the economic front, durable goods orders are expected to have another significant decline as business caution has postponed any capital spending. New home sales should drop to the lowest level since the 1981-82 recession, and consumer spending should drop for the fifth month in a row. "Recent economic indicators suggest that the U.S. economy fell off a cliff in the fourth quarter," said Michael Moran, economist at Daiwa Securities.

The Treasury Dept. will also test investors' appetite to buy yet more government debt at low yields. It will auction $38 billion in two-year notes and $28 billion in five-year notes. Both will set records for size. The Fed's aggressive moves supported a rush into Treasurys this week, driving yields to record lows and shaving a nearly half percentage point from yields on the benchmark U.S. Treasury note.

KLSE Technical Update and Outlook

I Capital: The KLSE CI is below its 30-day, 50-day and 50-week moving averages. Its daily MACD is bullish but its DMI is bearish.

On weekly Plantation Index. In the past few weeks, we have seen the Plantation Index starting to rebound. Many might think this is a sign of bottoming out as it has retraced towards the 50-week moving average resistance. Also, the Plantation Index has been moving sideways over the past 2 months after the sharp fall, which is common in a strong trend. Afer sinking in the negative territory for months, the daily indicators have finally turned bullish and the weekly MACD has also made a bullish crossover. However, the oil price is still dropping, despite a record oil production cut by OPEC. Would the current period of consolidation continue or are we seeing a cyclical bottom?

* Happy Dongzhi - Tang Yuen (Winter Solstice) Festival!

* Sterling near parity with Euro! 1 euro = 95.5 pence

* BT: Malaysia November inflation slows to 5.7% (October 7.6%)

* MS: Malaysia's growth for 2009 will be 0.5%.

* The Straits Times(S'pore): Japan's growth for the year to March 2010 will be zero. It recently cuts key interest rate to 0.1% and said it would buy corporate debt as a deepening recession chokes off funding for business.

One last try

2008-12-18T20:45:00.004+08:00

They say all of us must have a positive attitude towards life and whatever we do. We should not give up hope even if we have only the last minute to live. Seems that this "never give up" attitude is also being portrayed in the financial markets lately, see Weekly MACD. As evident from the charts attached above (HangSeng, KLCI, Nikkei 225 and S&P500), there were not many occasions where the Weekly MACD have a positive cross over during the year 2008. In fact, for most markets, there was only once this year (except for S&P500 which has twice). Even though there was a positive crossover during that period, the markets were quick to succumb to selling pressure. Currently we are seeing the 2nd attempt (3rd for the S&P500) of the markets, lead by HangSeng to go for the final try for the year 2008. Will the markets close for the year with an uptrending pattern embracing a brand new 2009 and leave all the worries and hardships behind? Although I believe the uptrend to be short term in nature, it will not be easy to achieve. Lets watch them closely and keep our fingers crossed.

(refer here for 10 year analysis of Weekly MACDs)

* Make some money while the sun shines? There are some selected trending stocks which may do well in this uptrend: young trend-Ramunia, Lion Ind, TMI, IJM, Sapuracrest , mature trend-IOI, Genting, Gamuda, Zelan, Kinsteel, AMMB, Sime.

* CNN: Oil sinks to 4 1/2 year to USD40.06 per barrel after OPEC decided to cut production by 2.2m barrels a day starting next month.

* BT: Macquarie: Malaysia to grow 1% next year.

* Morgan Stanley posts USD2.2b quarter losses.

* Bloomberg: Obama said to be weighing a stimulus spending plan exceeding USD850b.

* Bloomberg: British Airways, Qantas end merger talks after failing to agree on terms.

The growing risk of deflation in the US

2008-12-17T20:10:00.000+08:00

While we were busy talking about the aggressiveness of the Fed Reserve in cutting the Fed fund rates by 75 basis point to a near zero level and how the financial markets 'rejoiced" over the move, it may have slipped our attention that another important data for the US, ie November CPI also came out on the same day. The most striking news about the CPI this time was the November data declined by a very drastic rate compared with the October ones. After witnessing a significant rise in inflation over the passed half year, it seems that we are now experiencing its corresponding drastic drop. Below is an analysis of this stunning monthly drop and its significance to deflation. After reading it, I believe many of us will be waiting eagerly for the December reading which will come out on January 16 2009.

dshort.com: The November 2008 inflation rate was 1.07%, a stunning decline from October's 3.66%. In fact, the November Consumer Price Index for Urban Consumers (CPI-U) marked the largest monthly decline since January 1932 — the threshold of the Great Depression.

The Bureau of Labor Statistics began tracking the CPI in 1913. Since that time, only seven months have registered a month-on-month decline greater than 1.9%. In addition to January 1932, six occurred during the horrific deflation of the 1920s, as the above chart illustrates.

MyTake: Looks like the risk of deflation got higher! Would the US and world economies move in the following pattern ie recession, inflation, deflation, depression, stagflation or stagdeflation and recovery? We are living in very exciting times....imagine experiencing all these cycles in our life time?.....

* With the US Fed Reserve virtually abandoning Plan A (ie reducing interest rate), Plan B would include quantitative easing which means buying more long dated Treasuries and rolling out more program to boost the availability of loans - egs auto, student, credit card and to other lending customers.

* BT: Starting from April 2009, Malaysia timber companies will have to show documents that their sawn timber shipped into the US is legally sourced. Exactly how ah?

* As USD slides, Gold Bullion hits the USD850 mark.

* Goldman Sachs reported a loss for the 1st time since it went public in 1999 with a USD23b quarter loss.

Can China meet its 2009 money supply target?

2008-12-16T17:00:00.004+08:00

TheChinaPost: China said it wants to increase money supply by 17 percent in 2009 as part of new measures to keep the world’s fourth-largest economy ticking over in the face of the global slowdown.

The government has taken a number of measures to boost domestic demand and cope with the downturn, including repeated interest-rate cuts and a four trillion yuan (US$586 billion) stimulus package announced last month.

In the latest steps, posted on government Web sites late on Saturday, China said it would aim to expand the broad M2 measure of money supply by 17 percent.

It said liquidity for banks would be addressed with shorter term bills, and that more rate cuts and foreign exchange flexibility would be considered. “In order to face the attacks of the global financial crisis... we must expand the scope of financial supports,” the State Council or Cabinet said.

The new measures are “aimed at expanding domestic demand,” it said. China’s M2 money supply growth target for 2008 was 16 percent.

Among other proposals, the Cabinet urged the completion of the Growth Enterprise Board, a Nasdaq-style trading entity aimed at helping small start-ups gain better access to capital markets.

After years of blistering double-digit growth that has turned once agrarian China into a world economic powerhouse, the economy grew at only nine percent in the third quarter, and fourth-quarter numbers are set to be even worse.

China fears that growth at less than eight percent will fail to keep unemployment in check and provide jobs for the vast numbers of people entering the workforce each year in the world’s most populous nation.

“If China’s GDP growth rate falls to six or seven percent, the quality of development would be seriously impacted,” Liu Mingkang, chairman of the China Banking Regulatory Commission, was quoted as saying Saturday.

“China’s economic and financial outlook is not optimistic and Chinese banks will face stern challenges in 2009,” Liu said.

MyTake: The previous vigorous monetary tightening policy to stem the overheating economy, high inflation and hot inflows of money into China has so far created the following effect:

monetary tightening--> interest rate goes up-->economic growth slows-->m2 supply reduces--> credit growth slows-->inflation reduces

However, the tonic proves too strong as the economic numbers are weakening faster than expected. Egs economic growth faltering fast, unemployment on the rise, m2 supply rapidly declining, inflation fast becoming disinflation and probably going into deflation, credit expansion becomes credit contraction.

What China is doing right now is directly the opposite it did earlier(plus fiscal stimulus). The monetary loosening policy stance now amongst others include reducing interest rate, increasing investment and the supply of m2.

I would like to briefly elaborate on the M2 supply in China and it significance. The proposed growth rate of 17% is not considered much different from its target 2008 growth rate of 16% but it is of great hope that such figure can be achieved in view of the weak economic picture. It is important to note that a slowing M2 supply is one of the main ingredients for deflation. By printing money may create liquidity but if banks are reluctant to lend the money will not be circulated. Although the government has stepped in to spur lending, credit conditions still show a lack of liquidity in loans between banks and to consumers. However, I do agree that some progress is seen lately and hopefully improving further. In order for bankers to overcome fear of default and consumers confident to spend, counterparty risk (risk of default) must be reduced – a rather difficult proposition in a weak economy.

* Bye bye Causeway checkpoint, hello CIQ.

* Madoff fraud rocks hedge funds.

* Oil hits USD44 per barrel ahead of OPEC meeting tomorrow.

* DailyFx: Dollar losing its safe haven status as risk rises and returns plunge. What will be the cut be tonite? 50 or 75 basis points? What is next after the near zero rate? Some analysts believe the Fed may pursue unconventional options like quantitative easing such as the Fed buying long term Treasuries to push rates down.

* We are witnessing simultaneous recessions in the US, Europe and Japan since WWII.

* Reuters: Astro shares downgraded due to worsening financials and the need for a further USD21.07m provisions for the closure of its Indonesian operations. Now, Credit Suisse's TP is RM3.00 (from RM4.90) and Merrill Lynch TP RM3.25 (from RM3.45).

* Another reduction in fuel costs by 10 sen. The price for RON97 is now RM1.80 per litre while RON92 and diesel is at RM1.70.

Technical Analysis - December 15 2008

2008-12-15T16:43:00.001+08:00

S&P500 (880, last week 876 or +0.46% w.o.w )

Despite being flattish during the week, the daily indicators continued to register uptrend. For the weekly readings, the indicators are still showing weaknesses but the MACD is showing signs of bottoming. Support is around 850 and resistance at 960.

KLSE CI (852, last week 838 or +1.7% w.ow)

The daily MACD still remains in the positive as the index bounced up after touching the crucial level of decision making during the week. The MACD Histogram is also positive as it tries to go above the 20-day ema of 860. However, the Parabolic SAR continues to issue a negative signal giving the market some mix signal. There is a likelihood the index will be under pressure again as evident from the high daily stochastic oscillator at the end of Friday. The weekly charts are still in a negative territory but the MACD is showing signs of bottoming. The index is expected to trade between 835 and 900.

HangSeng (14,758, last week 13,846 or +6.6% w.o.w )

Perhaps one of the best looking indices chart in the world now, the daily indicators are doing well and strong. The daily MACD in particular is now above 0 level showing further improvement. The task of crossing above the 50-day ema, which is at 14,883 was achieved for a few sessions during the week but only to close below it on Friday. As reflected in the stochastic oscillator, there could be some short term profit taking during this week. It would be interesting to see if the daily ADX and DMI indicators can show positive uptrend soon; a position it last register in late July. The weekly charts is also doing well, especially the MACD is nearing positive crossover, a situation not seen since April 2008. Support is seen at 14,000 and resistance at 15,500 and 16,000.

Nikkei 225 (8,236, last week 7,918 or +4.02% w.ow)

The daily indicators eg MACD and MACD Histogram remained positive thanks to the index which came back to life during the week. The Parabolic SAR recovers and continues to issue a positive signal four sessions ago. However, it is important to note as reflected in the stochastic oscillator, there could be some short term profit taking during this week. The weekly charts are still in a negative territory but showing signs of bottoming. The index is expected to trade between 7,500 and 9,000.

* Bloomberg: OPEC the producer of 42% of the world's oil may make the biggest supply cut in a decade to halt the plunge in crude prices.

* Bloomberg: Japanese business confidence plunges most in 34 years as recession deepens.

* BBC: Ecuador set to default in its interest payment of external debt. Refer here for details.

* BT: Citi: KLCI will trough at "the earliest" next quarter and sees corporate earnings falling 11% in 2009.

* FT.com: Pakistan to remove its controversial market floor introduced in August this year to prevent share prices from tumbling further after many months of decline.

* Thailand's opposition leader Abhisit Vejjajiva appointed as the country's 3rd PM in 4 months. Now Thaksin's supporters have surrounded the Parliament! Wonder whether they can secure the airport too this time?

Smart Investing/Trading for the week ending December 12 2008

2008-12-14T11:48:00.002+08:00

US Markets Update and Outlook

Auto bailout likely to steal limelight from Fed

Fed seen cutting rates; OPEC to cut production; Goldman, Morgan report

MarketWatch: Efforts to prop up the ailing U.S. auto industry, along with economic data that may provide fresh clues about the depth and duration of the recession, could outweigh investor interest next week in the Federal Reserve's interest-rate decision.

The possibility that a collapse of the Big Three automakers, General Motors Corp., Ford Motor Co. and Chrysler could plunge the economy deeper into recession rattled markets last week. "We're probably going to limp through next week as Washington tries to solve the auto bailout question," said Hugh Johnson, Chairman of Johnson Illington Advisors. "There will be a lot of attention on what the Fed does and what it says, but it won't be as important as what happens with the bailout." Senate talks on the package collapsed late Thursday, paralyzing a $14 billion federal loan package for the Big Three, which had been approved by the House of Representatives. Yet by Friday, the Treasury said it stood ready to provide funds for automakers until lawmakers consider a longer-term package next year.

Separately, Canada said it will provide CA$3.5 billion, according to reports. The assurance by the White House helped the market recover on Friday, with the Dow Jones Industrial Average finishing 64 points higher at 8,629, even as it lost 0.1% for the week.

The picture was brighter for the rest of the market. The S&P 500 climbed 6 points to end at 879 on Friday, giving it a 0.4% rise on the week. The Nasdaq Composite rose 32 points to 1,540, up 2.1% from a week ago.

Besides the auto bailout, investors have been hopeful that big infrastructure spending by the incoming administration of President-elect Barack Obama and by other governments around the world will help shore up economies and markets. "With fiscal stimulus all the rage around the world, it's no surprise that equity investors have bid up related industries," said Robert Kavcic, an analyst at BMO Capital Markets, in a note. "Among the top performers in the S&P 500 over the past month have been engineering, building products and construction materials, all up more than 20%."

Fed and OPEC cuts

The Federal Reserve is again widely expected to cut interest rates by another 50 basis points on Tuesday, bringing its key Fed funds rate down to 0.5%. The Organization of Petroleum Exporting Countries will also meet in Algeria on Wednesday, and is expected to deliver a big cut in production. Such expectations helped crude oil prices surge over the past week, providing support for the broad market as it lifted the shares of oil producers such as Exxon Mobil Corp and Chevron Corp. Crude-oil futures finished the week at $46.28 a barrel, posting a weekly gain of $5.47, or 13.4%, from last Friday's close of $40.81 barrel.

Economic data, earnings

Data on manufacturing in the New York region will be released on Monday, and for the Philadelphia region on Thursday. Monday will also bring the December housing market index from the National Association of Home Builders. Late Friday, Fitch Ratings downgraded the credit ratings of a number of homebuilders, citing the difficult housing environment and expectations that housing activity will be even more challenging than previously anticipated in 2009. Among those affected by the downgrades were KB Home. Besides the Fed decision, Tuesday will bring housing starts data for November. Wednesday will bring industrial production figures and the consumer price index for November. Weekly jobless claims data on Thursday will also be closely monitored. Last week, the labor market weakened further, with the number of first-time filings for state unemployment benefits jumping by 58,000 to a 26-year high of 573,000. The data showed that businesses are laying off workers at a rapid pace, and that finding employment is ever harder for those who've lost their jobs. also announced big job cuts on Thursday and the stock ended higher Friday, even as it fell for the week.

Next week, the two remaining U.S. investment firms Goldman Sachs and Morgan Stanley are expected to post big writedowns -- Goldman on Tuesday and Morgan Stanley on Thursday.

KLSE CI Technical Update and Outlook

ICapital on daily KLSE CI. It was moving in tandem with the other major indices admidst the disapointing outlook of the global economy. However, this past week, the KLSE CI has started to consolidate while consistently trending below the 30- and 50-day moving averages. Although the longer term indicators are still showing a grim picture, the daily indicators have somehow shown little improvement. Meanwhile, sentiment is now at a crucial stage as the series of measures launched by the US government to soften the credit squeeze is being watched for its ability to restore the normal functioning of the US economy.

* A beautiful view of Colmar Tropicale Hotel, Bukit Tinggi, Pahang amongst the hills. Politicians are jumping into the ban "hillside development" wagon! No more hillside projects here and there. Yeah....we will see.....

* Economic Intelligence Unit: Malaysia politically unstable, 2009 growth at 1.5%.

* Ms Russia Kseniya Sukhinova wins Miss World contest. Click here for photos.

Getting fabulously rich

2008-12-13T12:10:00.002+08:00

TheStarBiz(by P Gunasegaram):
If you have ever wondered how to get rich in Malaysia – fabulously rich and very quickly at that – here's a model that you might want to look at very closely. Not easy to do but if you do have a couple of projects in the bag, it will set you up for several lifetimes.

First you need connections – strong ones, the higher the better and if it goes right up to the top all the better. You need this because you need to convince the powers that be that your projects are good.

But you might ask if your projects are so good, why do you need connections? Why don't you just go out and execute? Good questions, those. Here's the answer - you need the state to give you something to do the deal that will help the nation.

Still can't figure it out? See, it's like this. You want to help the country, right? The country needs say a port. But you can't build a port just like that. You need land to build a port. You tell the state or federal government you need land – cheap land, preferably free to build the port.

Or to take another example, you want to help the country by building a power plant. But look, you need land too and not only that you need the power to be sold. So you want an agreement – an iron-clad one to sell the power to Tenaga Nasional and to pass through all costs.

You see, that's your reward as an entrepreneur – you get someone else to build the power plant, they guarantee the performance of the plant and someone else guarantees to buy your power and pay for all your costs. Nice deal? You bet. Billionaires have been made that way.

Or you may want to start an air hub. If you are persuasive enough, you can even convince the government to compulsorily acquire the land and sell it to you cheap. Once you have cheap land, lucrative contracts and concession agreements, the sky's the limit.

Let's take it a step further. If you want to realise the value of all of these things that you have and still keep control of them, it's nice to have a listed company into which you can inject them. Inject one asset for shares and you gain control of the company.

And then inject others over the years for cash, taking the money out of the company. Who says you can't have your cake and eat it too? Do it right and get a flow of assets to inject in (you can do anything with discounted cash flow valuations – just change the discount rate, and presto, the value changes!), and you get a tidy flow of profits and cash into your personal accounts over the years. I mean a really tidy flow.

Just how much can you make this way, you ask? Why don't you take a guess first? Did you say RM500mil? Guess again. RM1bil? How about five times that and you may be getting into the right order of magnitude.

One Tan Sri Syed Mokhtar Albukhary actually made some RM4.5bil that way - actually more because he still controls the listed company. (refer here). We are not saying he is the only one, which makes your chances of joining the ranks better – if you are connected to high places that is.

But then again, if things change – and that's still a big ‘if’ – you might not find it so easy anymore.

MyTake: Kudos to one of my favourite award winning local news commentator and editor for another piece of "entrepreneurial" article! Do you agree with what the writer has written about how entrepreneurial "Jaguh Kampung" in Malaysia make big money? Or can you make lots of money just by being honest, hard work and lucky etc all at the same time?

* Bloomberg: Bank of America (3rd largest US banks) to cut at least 30,000 jobs over 3 years after the merger with Merrill Lynch.

* South Korea seeking help from Japan, China to stem its currency's decline which drop by 31% this year (Asia's worst performing currency).

* ADB: China's GDP to grow 8.2% in 2009!

* International Energy Agency: World's population will use less oil this year than last year. Global oil demand hasn't dropped since 1989.

It is gonna take time, patience and plenty of money.

2008-12-11T17:05:00.000+08:00

I got my mind set on you

But its gonna take money

A whole lotta spending money

Its gonna take plenty of money

To do it right child

Its gonna take time

A whole lot of precious time

Its gonna take patience and time, ummm

To do it, to do it, to do it, to do it, to do it,

To do it right child

"Got My Mind Set on You" by George Harrison

(This song which was originally recorded in 1962 and made popular again by former Beatles George Harrison reached number one on the BillBoard Hot 100 in January 1988).

Isn't it ironic ? Does this song sounds familiar to what the governments around the world (especially the US) are doing right now to fix their broken economy? What are we gonna expect from it? Well, it is gonna take time, patience and plenty of money. That's for sure!!!

* Source: "Its gonna take time and money" Refer here.

* Now to the Senate. House approves the USD14b US automakers bailout.

* Bloomberg: South Korea cuts benchmark interest rate to 3% from 4%, a record low, amid slowdown.

* BT: JP Morgan: Time to buy battered stocks as the global financial crisis is expected to retreat by the 2nd half of next year.

* DailyFx: Fed fund futures are now pricing more than 90% that Fed will cut rate to 0.25% from 1% in the coming last meeting for the year next Tuesday.

* ChinaDaily: China's November inflation falls to 2.4% (October 4%) while PPI is at 2% (October 6.6%). Meanwhile, China's exports and FDI both fell in November due to shrinking demand from overseas. Some economists are beginning to worry about deflationary effects due to prolong dampening prices due to over supply of goods in the market, reduction of money supply M2 and growing inability for loans to be paid by borrowers.

Iron ore prices set to fall?

2008-12-10T17:25:00.005+08:00

Australia and New Zealand Banking Group said China could ask Cia Vale do Rio Doce, Rio Tinto and BHP Billiton and other iron ore suppliers to cut prices by 50 percent. This was because the fall in steel prices was not felt in the iron ore prices, one of the main raw materials used for the production of steel, besides coke. As reported here earlier, China has been very upset with the Rio Tinto and BHP Billiton miners ever since both companies practice double standards in selling to them and to Europe. The latter which accounts to less than 3% of the said companies' sales revenue were sold at a much lower price than China's which accounted to nearly 50% of their sales. Will China be able to turn the table around this time to force the bullies to cut their iron ore prices or face the consequences of a potential standoff? Stay tuned!

XFN-ASIA: China said iron ore prices should more closely track the decline in steel prices, the official Xinhua news agency reported, citing Shan Shanghua, secretary-general of the China Iron and Steel Association.

"Iron ore prices should be consistent with steel prices, which have fallen to the 1994 level. We will require Rio Tinto and other suppliers to cut prices sharply," Shan said. Benchmark contract iron ore fines sold by Rio Tinto are at around 92.58 usd per ton currently. In 1994 the price was 16.69, implying a decline of up to 82 pct if current prices are made to mirror that year's levels exactly.

* Bloomberg: Rio Tinto to slash 14,000 jobs and cut USD5b in spending.

* Malaysia frees 911 suspect.

* Markets in Asia continue to climb....towards 2008's year end window dressing?

* Bloomberg: Democrats, White House agree on the US15B US automakers bailout plan. Congress may vote today.

* The Standard: After proposing a 5T Yen extra spending plan in September, Japan is reported to be considering up to 20T Yen in new stimulus spending to avoid a long and painful recession.

* Interest rate for short term US T Bills has turned negative.

"God of Stocks" tells of pain

2008-12-09T17:00:00.003+08:00

The stock markets can really humble a person....the more you learn, the less you know. You can even ask an "experienced" old timer like the god of stocks, Mr Lee Shau-kee; he will agree. The billionaire investor Lee said in May this year his investment strategy will switch to aggressive from defensive in August, and forecasts the Hang Seng Index to hit 30,000 by that time. However, in an actual scenario during that period, the Hang Seng tumbled from 25,000 to 21,000 in August and fall again to 11,000 by end October. It has since recovered to 15,000. Here is what Asia's Warren Buffett or Asia's Master of Stocks has to say now ....

TheStandard: Lee Shau-kee, even after an impressive surge in the stock market yesterday, wants everyone to forget he is known as the "God of Stocks," admitting that followers have lost money after listening to his advice. The Henderson Land Development (0012) chairman, previously tagged as "Asia's Warren Buffett," said he will not predict what level the stock market can go.

"One time, I received letters from investors who followed my opinions. One of them said he lost much money in stocks and asked me to compensate him for some losses," said Lee after the company's annual general meeting yesterday. "That person said he was so pathetic that he borrowed money from relatives to buy stocks and had to repay them. He asked me if I could lend him money."

After an investor asked Lee about his stock picks for next year, he refused to respond. The company's vice chairman, Colin Lam Ko-yin, said: "Lee is not an investment consultant."

Earlier though, the veteran investor said "bliss will come out of the depth of misfortune" for the stock market next year and he hopes it will recover soon. "The market is not as strong as before. I am neither buying nor selling now," Lee said. "Warren Buffett is buying stocks now."

Lee said he has lost much because of the financial tsunami and, even though "the recession has yet to come to an end" in Hong Kong, he expects the property market to improve next year with limited ups and downs. "The property market will remain sluggish in the first half of next year and the market will hopefully recover slightly in the second half if the global economy improves." Lee said the property market now is still better than the market during the SARS period in 2003.

* YahooFinance: Congressional Democrats and the White House worked to resolve their last disputes Monday over terms of a $15 billion bailout for U.S. auto makers -- complete with a "car czar" to oversee the industry's reinvention of itself -- that's expected to come to a vote as early as Wednesday.

* Bloomberg: Japanese economy shrinks by -1.8% in the 3Q (2Q -0.5%) as recession worsens.

* BT(Singapore): The Australian government delivered more than AUD8B in cash payments to families and pensioners from yesterday to stop the economy from sliding into recession and urged people to spend the money ahead of Christmas.

* WSJ: Merrill Lynch and Morgan Stanley will not pay bonuses this year to their CEOs and other top officials.

* Obama to spur the US economy with the nation's largest infrastructure spending in the last 50 years noting the state governors have such projects that are "shovel ready".

* China Daily: China car sales continued to fall in November as the passenger/sedan sales slip by almost 11% year on year. Apparently, the good old days of 20% growth rate has been "driven" away!

Technical Analysis - December 5 2008

2008-12-08T20:22:00.004+08:00

S&P500 (876, last week 896 or -2.23% w.o.w )

During the week, the index gave up a small percentage of its gain gathered a week earlier. The daily indicators continued to register uptrend. It is noteworthy to mention the daily index is sitting above the 20-day ema; a task it tries to do since mid November. The ability of the index to stay positive will help the daily indicators turning more bullish and give a more concrete direction for the index which has been rather hard to predict of late. For the weekly readings, the indicators are still showing weaknesses but the MACD is showing signs of bottoming. Support is around 850 and resistance at 940.

KLSE CI (838, last week 866 or -3.2% w.ow)

The daily MACD still remains in the positive but is almost touching the crucial level of negative cross over again due to its listless trading during the week. The MACD Histogram is showing weakness ahead unless the index able to come to life again. The Parabolic SAR continues to issue a negative signal. The weekly charts are still in a negative territory. The index is expected to trade between 800 and 900.

HangSeng (13,846, last week 13,888 or -0.3% w.o.w )

Similar to the S&P500, the daily indicators are doing well and strong. The Parabolic SAR has since turned positive too. It is noteworthy to mention the daily index is sitting above the 20-day ema; a position it has maintained since late November. The next task will be the 50-day ema, which is at 14,883. It would be interesting to see if the daily ADX and DMI indicators can show positive uptrend soon; a position it last register in late July. The weekly charts are still in a negative territory but there seems to be some bottoming process as evident from the MACD indicators. Support is seen at 13,300 and resistance at 15,500.

Nikkei 225 (7,918, last week 8,512 or -6.97% w.ow)

The similarity with HangSeng ended last week. The index seems to be getting weaker and did not recover after a bout of profit takings during the week. The daily indicators eg MACD and MACD Histogram which have decided to go up instead down a week earlier are now in flattish position. The Parabolic SAR continues to issue a negative signal. It is most important the index does come back to life positively during this week if to save the daily indicators from turning bad this week. The weekly charts are still in a negative territory. The index is expected to trade between 7,500 and 8,500.

* Asian and European markets are flying on hope of global stimulus plans to boost world growth. Is the worse over already?

Smart Investing/Trading for the week ending December 5 2008

2008-12-07T12:12:00.009+08:00

Weekly US markets update and outlook

Washington may steal Wall Street's limelight
With no relief seen in economic data, eyes turn to more federal bailouts

Marketwatch:Stock investors can expect little relief from economic data or corporate reports in the week ahead, making Washington's efforts to fix the broken credit system the one possible bright spot.

The Dow Jones Industrial Average and S&P 500 come to grips with the magnitude of the problem, tumbled last week as a drumbeat of bad economic and corporate news increased the likelihood the U.S. economy was in the midst of a severe recession.

"It looks like the market is starting to are already starting to get baked into prices," said Russ Koesterich, head of investment strategy for Barclays Global Investors. Economists don't see much moderation on the recession front for the week ahead. Retail sales and consumer sentiment reports are expected to show large drops and multi-decade lows. Wholesale prices are forecast to have retreated -- generally a good sign -- but one that's due to plunging oil prices. Prices have dropped as depressed consumers and manufacturers have used less.

Similarly, the handful of companies scheduled to report earnings - including consumer-oriented firms H&R Block, Inc. Costco Corp. and CKE Restaurants -- will be hard-pressed to find something good to say about the U.S. spending environment. Their reports will follow the worst monthly job loss and the grimmest month for same-store sales in more than three decades.

The dismal economic and corporate outlook leaves the heavy lifting to Washington, D.C. Lawmakers are debating bailout requests from struggling carmakers General Motors Corp., Ford Motor Co. and Chrysler LLC

Also, investors will be keyed into any announcements from President-elect Barack Obama or House Speaker Nancy Pelosi, D-Calif., on the direction of another fiscal stimulus package.

And the Treasury and Congress are expected to make further proposals on direct aid to mortgage markets, say economists at IHS Global Insight. Announcements about an alphabet soup of programs to lower borrowing costs and make loans more available have rocked credit markets in recent weeks. Some of these programs have started to achieve their ultimate purpose -- driving rates down. Spreads to Treasurys on mortgage-backed securities and debt issued by Fannie Mae and Freddie Mac have fallen sharply since the Fed said it would buy this debt Nov. 25. Mortgage rates dropped to 5.53%, a January low.

Treasury yields have also sunk, to historic lows, with declines hastened by Fed Chairman Ben Bernanke's comments Monday that the Fed might buy up Treasurys to push rates down. But borrowing costs for companies whose debt isn't backed by the U.S. government have risen in many cases. That's one more sign that risk fears are still running high, say strategists. "You'll know when risk appetite comes back into the market when yields on Treasurys start to back up," said Koesterich. The 10-year Treasury yield last week hit 2.655%, the lowest since at least 1955. Thirty-year bonds touched 3.165%, the lowest since at least 1977.

Still, a rally in stocks on Friday, the same day the Labor Department said the U.S. destroyed 553,000 jobs last month, have given some strategists reason hope for a turnaround. "In view of the 'mild' reaction to the U.S. employment report today, a modest increase in risk appetite between now and the end of the year is still not completely out of the question," wrote Stephen Gallo, head of market analysis at Schneider Foreign Exchange Ltd. More willingness to take on risk usually bodes poorly for the U.S. dollar. Like U.S. Treasurys, it's benefited from a flow into safety assets.

The U.S. dollar index gained 0.6% last week. Despite a nearly 260-point, or 3.1%, gain on Friday, the Dow-30 ended the week 2.2% lower. The S&P 500 lost 2.3%.

Oil futures plunged 25%, their worse weekly loss since Jan. 1991.

Weekly KLCI Update and Outlook

ICapital: The KLSE CI is below its 30-day, 50-day and 50-week moving averages. Its daily MACD is struggling to stay bullish and its DMI is bearish.

This week, we continue to see endless developments such as the continued bailout of the US economy, interest rate cuts by China, BOE, ECB etc leading to a short-lived rally. Locally, Bank Negara also lowered its OPR to 3.25%, the first reduction in more than 5 years. However, the KLSE CI still ended lower in lacklustre trade. Technically, the weekly MACD is still bearish but it has stalled its fall. Has it reached a bottom or has it not?

* Tmn Bkt Mewah, Ampang landslides kills 4 people and evacuated thousands of residents. (site is just a few kms away from the Highland Towers disaster in 1993 where 48 people were killed. PM: Stop all hillside projects! I am quite sure we will very soon forget about it and happily approving it all over again!

* Despite Paulson(US)'s calls for stronger RMB, some analysts were of the opinion it will not happen so soon as the currency is set to depreciate further. This is in view of the declining China exports and easier to tame inflation.

* TheStar Biz: South Korea's forex reserves fell to new lows with a drop of USD11.7b in November to USD200b (lowest since January 2005 when it was at USD199.7b). Japan's forex reserves meanwhile touches USD1T in November (October USD977.72b) on US Treasury gains as it came with lower yields.

Bloomberg: Interest rate cuts everywhere! Egs: NZ cuts its key interest rate to 5% from 6.5%. Thailand cuts its benchmark interest rate to 2.75% from 3.75%. UK cuts interest rate to its lowest since 1951 to 2% (from 3%) while ECB cuts to 2.5% from 3.25%.

* Bloomberg: Jim Rogers says commodities fundamentals are unimpaired and prices will rebound when a lack of new supply leads to shortages. Still so bullish?Merrill Lynch is predicting a USD25 per barrel for oil next year if China economy slumps. Oil is nearing USD40 per barrel now.

* US lawmakers will vote as soon as Tuesday on a proposal being worked out this weekend to help save the failing US carmakers.

Cyclical Bull in Secular Bear markets

2008-12-03T17:08:00.000+08:00

Everyone agrees that we are in a bear market. Prices are down badly and almost everybody wishes they did not dabble with stocks in the first place. Here is an article which provides some useful historical analysis of the US bear markets since the 1900. It defined the bear periods categorising them as secular and cyclical and identifying cyclical bull within the secular bear markets. It also provides some important features of the beginning and ending of a secular trend. Importantly, it was aimed to highlight investors opportunities in a Bear Market, if any. The final decision to buy stocks for the next cyclical bull is yours and it would be good if the buys are at least supported by fundamental and technical analysis, knowing the bigger picture and an exit plan, of course.

BizWeek: It has been a rotten time to be an investor. But Ned Davis Research, a financial research firm in Venice, Fla., has some good news: In times like these, during a decidedly bear market, one often gets big upswings. NDR's chief investment strategist, Tim Hayes, looked at the four secular bear markets since 1900 (as he measures them, they came in 1906-21, 1929-42, 1966-82, and 2000 to the present) and has defined 18 cyclical bull markets that took shape within them. (The defining characteristic of a secular bear market is that it starts with a bubble and ends with no one interested in stocks, Hayes says, and they typically last more than 10 years; a cyclical bull market is shorter and may occur within either a secular bull market or a secular bear.) The median upswing was 371 days, and the median rise of the Dow Jones industrial average was 55%.

BusinessWeek's Amy Feldman spoke with Hayes about secular bear markets, cyclical bull markets, and what these patterns mean for investors.

Are we headed for a lost decade?

I wouldn't say we're heading into one—we've been in this environment since 2000. Since January 2000 the annualized return of the Dow was -4%, and after inflation it was -7%. We don't think we're at the end of this secular bear market, but that doesn't mean there isn't a good cyclical opportunity.

What has happened in secular bear markets in the past?

These things go on for many years. The last went from 1966 until 1982. Some people compare today with the 1930s, a time characterized by deflation and the stock market crash. Now is closer to the 1970s in terms of market action, but there are differences in the secular trends. While commodities today have had a big decline, they have maintained their long-term uptrend. We've called that a cyclical bear market in a secular bull market.

When will the secular bear market end?

Secular trends typically end when valuations go to an extreme. You start to have a price-earnings ratio so low—typically single digits—that it cannot get lower at the same time that earnings are actually growing relatively well. When people have given up on stocks, you have reached the end of the secular trend. Our measures say we are about halfway down from the bubble of 2000. If you date this secular bear market from the beginning of the decade, you still have five years to go, maybe longer. It could end up being more like the second half of the 1970s, when the real damage was done in the first half of the secular trend and then you go through a long consolidation, or recovery, period.

With markets falling around the world, is there any reason to invest globally anymore?

seen correlations [between the U.S. and international markets] tighten up, as they tend to do at the end of a decline. But there will be longer-term opportunities in emerging markets and China, where the long-term case remains favorable. China is not in a secular bear market. It has been in a cyclical bear market within a secular bull market. While markets around the world will move in one direction when we get the next move higher, the upside will be much greater in the markets in secular uptrend, like China's.

Where's the upside at home?

You could get a cyclical bull market, where valuations expand for a period of time. The median cyclical bull within a secular bear is a rise of 55%. There have been 18 cases of this. So we are pretty hopeful about the next six to nine months.

Surprisingly, UBS has today boldly predicted that "Stocks will surge in 2009, S&P500 may climb 53% to 1,300! (read here for details) They must have read this article in the BizWeek!

* Umno sacks Zaid.

* China's sovereign wealth fund, CIC, which last year invested USD5b into Morgan Stanley, is reluctant to plow more money into foreign financial institutions until governments hash out coherent policies to cope with the global economic and financial turmoil.

* Bloomberg: GM seeks USD4b to survive the balance of days in 2008 and USD18b in total US assistance.

* BT: Now Tunku Imran quits Petra Group even after Bruce Willis has decided not to sue the Group! Enough is enough! !

* Another cut in fuel prices yesterday. Ron 97 is now RM1.90 (from RM2), Ron 92 and Diesel RM1.80 (from RM1.90)

NBER's announcement comes early

2008-12-02T17:30:00.002+08:00

What a fiery start for the US markets this December month; a month of holidays, bonuses (if any) and window shopping, or rather dressing! The first day of trading resulted a loss of nearly 9% in a single trading session for the S&P500! This is in stark contrast compared with the performance during the whole of last week- a 12% gain. The selling particularly in the afternoon session is probably due mainly to the National Bureau Of Economic Research's (the economic panel recognised as the arbitrator of business cycles) announcement that the US has entered recession in December 2007 (refer also here) based on its measures of income, employment and other factors.

The NBER's pronouncements historically come long after recessions have begun. (discussed here before in this blog). Yesterday's announcement probably surprised everyone as the US has not fallen into recession yet, technically speaking.(ie continuous 2 consecutive Quarters of negative growth). In fact, basing on the passed announcements, almost all of NBER's announcements come late either when the economy is at the tail end of recession or right after recession. Does it means that the "recession" in the US is ending or at its tail end? Does it means that the "recession" has probably ended without the economy falling into technical recession? I really doubt so.

Why is the announcement coming in early this time is interesting. Three simple deductions can be made from the early announcement. One thing for sure, I believe the NBER is very worried about the current state of economy and the numbers are worsening at a rapid rate that policy makers and public needs to be warned and be prepared. Secondly, the usual argument that the recession will be over or already over as soon as the announcement from NBER is officially out may no longer be valid. This is because based on the economic data that are coming out for the passed half a year or so, things are expected to get worse before stabilising. We are still not at the end of the tunnel yet. Thirdly, be prepared to wait longer this time for the recovery in the economy and the financial markets compared with other past recessions.

* Thailand's 2nd PM in 3 months Somchai is ousted by court today!

* Oil falls to USD47.36 barrel!

* Central Bank rates at a glance. NZ 6.5%, ECB 3.25%, US 1% and Jpn 0.3%.

* RBA cuts its interest rate by 100 basis point to 4.25% today.

Technical Analysis - December 1 2008

2008-12-01T17:20:00.001+08:00

S&P500 (896, last week 800 or +12% w.o.w )

Last week saw a major reversal for the index. It did a drastic U-turn with a weekly gain of 12%. As a result, the MACD cuts up again with a positive crossover 3 sessions ago. The Parabolic SAR has just turned positive 1 session ago. A word of cautious though, the Stochastic Oscillators are at its recent high and some profit may be taking place this week. The ability of the index to stay positive will help the daily indicators turning more bullish and give a more concrete direction for the index. For the weekly readings, the indicators are still showing weaknesses. Support is around 850 and resistance at 940.

KLSE CI (866, last week 867 or -0.00% w.ow)

The daily MACD remains in the positive and managed to gain a little strength with a dismal performance last week. However, the Parabolic SAR continues to issue a negative signal. The weekly charts are still in a negative territory. The index is expected to trade between 830 and 950.

HangSeng (13,888, last week 12,659 or +9.7% w.o.w )

Looks like the daily indicators eg MACD and MACD Histogram have decided to go up instead down when they touches the decisive and crucial level last week. However, the Parabolic SAR continues to issue a negative signal. The weekly charts are still in a negative territory. Support is seen at 12,200 and resistance at 15,000.

Nikkei 225 (8,512, last week 7,911 or +7.6% w.ow)

Similar to the HangSeng index, the daily indicators eg MACD and MACD Histogram have decided to go up instead down when they touches the decisive and crucial level last week. However, the Parabolic SAR continues to issue a negative signal. A word of cautious though, the Stochastic Oscillators are at its recent high and some profit taking be taking place this week. The weekly charts are still in a negative territory. The index is expected to trade between 8,000 and 9,300.

* XFN: China is not facing major bubbles, adjustments "benign"-Central Bank adviser Fan Gang.

* XFN: 2009 growth seen at 10% and CPI at 3%-State Councils Development Research Centre researcher Zhang Ligun.

* Sounds familiar? The Standard: Canada's opposition parties have agreed in principals of a deal to topple the newly elected government arguing the government lead by PM Stephen Harper has no solid plan to deal with the current global economic crisis.

Smart Investing/Trading for the week ending November 28 2008

2008-11-30T11:30:00.003+08:00

US markets update and outlook

Stocks seek more gains on hopes worst is past
U.S. jobs report on tap along with interest rate decisions in Europe

MarketWatch: Stocks will enter the month of December with a sense of optimism that much of the dismal environment for corporate profits has already been discounted by the market, even as upcoming reports, including the key jobs report on Friday, are expected to show the economic picture is still worsening.

Next week, "we'll have a slew of economic numbers, including what I expect to be a rise to 6.7% in unemployment in November," said Peter Cardillo, market economist at Avalon Partners. However, "the market has already priced in another quarter or two of real bad economic news, and that things could start to stabilize in the second quarter" of next year, he said.

Dow's best 5-day gain ever

The market gained on so-called Black Friday, marking its fifth-straight session of gains, with grim prospects for retailers failing to dent optimism at the traditional start of the U.S. holiday-shopping season. The Dow Jones Industrial Average finished up 102 points, or 1.2%, at 8,829. While the blue-chip average fell 5.3% for the month of November, it jumped 9.2% over the past week. Even more impressive, the Dow gained 1,277 points, or 17%, in just five sessions, marking its best five-day percentage gain since 1932, and its best five-day point gain on record. The S&P 500 Index rose 8 points, or 1%, to 896 Friday. The broad index fell 7.4% in November, but it surged 12% for the week. The Nasdaq Composite Index gained 3 points, or 0.2%, to 1,535. The technology-heavy index jumped 11% for the week and had a monthly loss of 10.8%.

A turning point for the market seemed to start a week ago, with the market gaining more confidence as President-elect Barack Obama began unveiling his economic team. On Wednesday, Obama appointed former Federal Reserve Chairman Paul Volcker to head a newly created White House advisory post. "The pool of people the president-elect has chosen has been greeted well," said Ken Tower, market strategist at Quantitative Analysis Service. "Restoring confidence is an important step for the markets and the economy." Adding to the positive tone, the government stepped in to bailout Citigroup Inc., which allowed shares of the ailing bank to rebound 120% over the past week after plunging below $4 amid fear about its future. And continued hopes for a bailout of the U.S. auto industry also helped shares of General Motors Corp. to rebound over 70%.

On Tuesday, GM, Ford Motor Co. , Chrysler and other automakers will post what are again expected to be dismal U.S. sales for the month November. Over the past week, the Federal Reserve also announced it would spend $800 billion to buy debt in order to lower borrowing costs for consumers and home buyers. The move helped to send the yields on 10-year government bonds, which are used to benchmark mortgages, below 3% to their lowest level on record. "The market is getting the message that we're looking at a stabilization process," said Avalon's Cardillo. "The credit markets are likely to be behaving in a more normal way towards the end of the year." On Thursday, Fed Chairman Ben Bernanke is also expected to speak on housing at a Fed conference in Washington.

Data, central banks

On Monday, the Institute for Supply Management will release its manufacturing survey for November. Construction spending figures for October will also be released. Tuesday will feature U.S. auto sales while Wednesday will bring the November ADP employment survey of the private sector, productivity figures for the third quarter and the ISM's November survey of the service sector of the economy. Also on Wednesday, the Fed is expected to release its Beige Book of economic conditions, which is "likely to paint an even bleaker picture than the October report," as it captured a near seizure in credit markets "and the resulting knock-out punch to consumers and businesses," said Sal Guatieri, senior economist at BMO Capital Markets. On Thursday will be weekly jobless claims. Federal Reserve Chairman Ben Bernanke is also expected to speak on housing at a Fed conference in Washington. Also on tap, the European Central Bank and the Bank of England are expected on Thursday to make decisions on interest rates. Friday will bring the jobs report. BMO Capital expects the economy to have shed 350,000 jobs in November, and the unemployment rate to have risen to 6.8%, from 6.5% in October.

Weekly KLSE Plantation Index Update and Outlook

ICap: From a technical standpoint, the Plantation Index is now trying to engineer a rebound as it has been consolidating for about a month. Its weekly stochastic oscillator has finally strengthened to the neutral position after being flattish for three months. Its weekly MACD is also showing an initial uplift from the deep bearish territory. It looks like there is potential for further recovery. The Plantation Index has been moving in tandem with oil price, and thus, it is crucial for oil price to regain its glory to boost up the index. Are we still far away from this or is the selldown in commodity prices overdone?

* GM ends an endorsement deal with Tiger Woods worth USD7m per year to cut cost in order to survive in the prevailing market condition. Tiger has been with GM for the last 8 years.

* Malaysia's economy posted a growth of 4.7% in Q3(Q2 6.7%)

* Zeti: Malaysia will not slip into recession.

* BT: Genting getting more downgrades from research houses. Citi TP for Genting RM3.79 (from RM3.88) and JP Morgan TP RM3.70 (from RM6.40)