Sunday, November 21, 2010

Market Commentaries

Market Commentaries

The market looks set to challenge its key resistance levels now that it has corrected slightly and has been able to absorb the negative external news. The three key hurdles are the 1,512, 1,525 and 1,532 levels.

Market activity might be a bit quiet in December 2010, due to the holiday season. But, the index may hit new height in December.

However, most investors are already looking at 2011 and will be gearing their positions for next year (2011).

In the short term, there may be some profit-taking as the market nears its previous high. However, over the medium term, the market is looking friendly.

The market looked well supported at the 1497 level, which is the 30-day moving average level.

Credit Suisse said the current forward price to book ratio for the Malaysian market was 2.3 times (x), which was 9% from the recent high of 2.5x in December 2007.

This suggests an index target of 1,630. The current forward price earnings for the Malaysian market is 15.6x, versus the recent peak of 20.5x in December 2007. This suggests 31% potential upside.

Credit Suisse believed that liquidity would be the key driver for the market in 2011.

On that note, it believed that liquidity would remain high, as commodity prices had risen significantly year-to-date and the economy would continue to be robust while interest rates would remain low.

It also expected the ringgit to strengthen further.


State Of Global Economy

The China Economy: China ’s central bank, which surprised the market in Oct 2010 by raising interest rates for the first time in almost three years, is anticipated to hike its benchmark rate by 50 to 100 basis points by middle of next year (2011).

Economists say a hike of 50 to 100 points would see China normalising its interest rate “quite quickly” and propel the Shanghai Composite Index to stronger levels.

Economies and financial markets in emerging markets would benefit the sooner China’s central bank raise interest rate. China has been very slow (to raise interest) and has been negative for the whole world’s economy.

China raised interest rates in Oct 2010 by 25 basis points, thus increasing the one-year benchmark deposit rate from 2.25% to 2.5% and the one-year benchmark lending rate from the current 5.31% to 5.56% accordingly.

Asian central banks were currently (N0v 2010) “holding back” to prevent their currencies from being misaligned with the renminbi. If China allowed the renminbi to appreciate, it was expected to drag along all of the Asian currencies ex-Japan.

Market Commentaries

Concerns over a slowdown in China and talks about a bailout for Irish banks combined to push the Dow Jones industrial average to its lowest level in a month (Nov 2010).

Asian markets started a global sell-off after South Korea 's central bank raised interest rates to curb inflation. Speculation spread that China will take more steps to rein in its red-hot economy, which would dampen global demand for industrial goods.

The fact that China is taking actions to tighten things up over there is having a big ripple effect in emerging markets.

China policymakers are also preparing measures to curb rising consumer prices, with annual inflation soaring to a 25-month high of 4.4% in Oct 2010.

China is not only looking at food price controls to tame inflation, but could initiate more interest rate hikes and higher reserve requirements for banks, in addition to putting curbs on credit.

This comes at a time when Asian markets have been seeing higher levels of liquidity following further quantitative easing measures by US policymakers. This short-term fund flow has found its way into Asia for better returns, resulting in stronger Asian currencies and escalation in asset prices.

China’s measures were aimed at curbing excessive speculation and manipulation in commodity prices. This could result in the “diminishing probability of an extended rally in commodity prices, including vegetable oils”. The impact is, however, difficult to estimate due to the lack of data to measure the speculative premium embedded in commodity prices.

While Asian countries are dealing with excessive economic growth and inflation, European finance ministers were concerned that Ireland would be the latest European country to need a bailout. The country has so far refused any outside financial assistance.

A fiscal crisis earlier 2010 in Greece resulted in a global swoon in stock prices as investors questioned the viability of Europe 's shared currency, the euro. Greece was eventually bailed out in May 2010 by fellow European nations and the International Monetary Fund.

Ireland's situation is different from Greece's, but their respective debt crises are having similar effects on markets. As new doubts emerge about Europe's ability to keep its financial system sound, investors are abandoning the euro, flocking to the dollar, dumping risky assets like stocks and sending borrowing rates for countries they see as credit risks soaring.

Ireland is more troublesome for Europe than Greece because more of Ireland's debt is held by major banks, especially in England . A default by Ireland could be another blow to banks that have only recently recovered from the global credit crisis.

There are also fears that if Ireland needs a bailout it will spook investors who hold debt from other European countries. Ireland is a "precursor to Spain ”. It's a precursor to Portugal " as well.

(For reference only)


Market still remains positive.....index may cross 1520--1540 in near future or before end of December ......

Do not take loan to buy market may drop drastically if China and Korea take more drastic and "heavy" anytime! (holding power still the keyword for "winner" in today's share market!)

Good luck and aiming for better performance...

(I believe 1520---40....shouldn't be big deal/problem.......index fund/index-linked funds will be winner(even may be not much, unless like Public Index Fund I bought at 0.67 after 08/03/2008---after 308 general election....or if you bought on April, 2010 after distribution of dividend, i.e. ...going up...0.76..will go higher to 0.78, 0.79)......

But if you buy now...may be a bit expensive....