Sunday, August 7, 2011

Market Commentaries-----Some are worried that demand destruction from developed markets will hurt exports especially the electrical and electronics and crude palm oil (CPO)...More than 20% of CPO goes to Europe !!!!

index this morning
FBMKLCI 1496.07 -28.36

Market Crash !!! Can This Level 1,476 Points Hold On For FBM-KLCI ???
It is quite difficult to determine whether this level 1,476 will hold on for the FBM-KLCI as the selling pressure looks quite intensify.

NOW 2.48PM
FBMKLCI 1480.09 -44.34

Market Commentaries

Caution was still the predominant theme of the market and it would be better for investors to wait for the selling to subside.

Some are worried that demand destruction from developed markets will hurt exports especially the electrical and electronics and crude palm oil (CPO). More than 20% of CPO goes to Europe . Net exports account for about 25% of gross domestic product.

The sell off in United States and the market rout in Asia which collectively erased in excess of US$1 trillion in capital value was similar to panic selling in May 2010. The selling that is occurring now (Aug 2011) is orderly. Unlike the flash crash in May 2010 that severely shook confidence in the market itself, today (04 Aug 2011)'s selling is met with sufficient liquidity as to not result in dramatic price falls, although a 5% retracement in a day is dramatic enough.

The question is how low will the DJ go, and whether the stock market rout signals another wave of recession. Investor sentiment is already on thin ice following disappointing second quarter 2011 GDP numbers from the US and a three year low for the ISM’s Purchasing Managers Index for manufacturing.

Fears about the eurozone and its ongoing debt crisis, with the possibility of Italy and Spain going the way Greece have added to the growing pile of worries.

At the moment, most agree that it is still too early to tell what the worst scenario is. A US report released was more positive than expected, with 117000 new jobs.

One of the most pressing concerns for investors will be whether the drop with be severe enough to prompt an emergency policy responses.

The US is undergoing a secular bear market, which it has been experiencing over during 2009-2010. However, the measures taken by the FED have resulted in a more cyclical bull market.

Ultimately, any US recovery is not going to be sustainable because the fundamental economic problems remain.

The US growth story is over for now (Aug 2011) with no significant change to US’s economic structure. It still has weaknesses that are hidden beneath the liquidity pumped in by the FED’s QE.

The US economy needs to rebalance itself and deleverage. It needs to change the spending habits of its public and encourage the emergency of new economic sectors in order to drive growth.

Some believe that the US government will eventually see the need for QE3 especially if the market continues to slump. The government will feel the need to revive growth within the economy and will embark on another round of QE.

In the short term, the outlook remains bleak. Many are expecting more pain in the coming months (Aug 2011 & Beyond) as investors flee from the volatile capital markets to safe havens such as gold.

Sentiments will continue to be down for a while as fear takes grip and runs its path. However, the emerging markets in general are expected to bear the brunt better than others.

However Mark Mobius said that the emerging markets are in better shape to ride out the storm.

How Did Slowdown In US economy Impact The Malaysian Economy?

Fears of double dip recession in the US have re-emerged as its economy decelerated to a lower than expected 1.3% in 2Q2011. The ISM manufacturing Purchasing Managers Index plunged to 50.59 in July 2011.

A US recession will indirectly affect Malaysia economy, especially in terms of slower trade growth, as the US is one of Malaysia ’s major trading partners. The US accounted for 8.3% of Malaysia ’s exports from Jan 2011 to May 2011.

Meanwhile, US has been forced to cut down on public spending by as much as US$2.4 trillion over the next 10 years (2012-2022) in a debt deal.

In the short term, the scenario is clouded by the weakening of private consumption and jobless rate hovering above 9%.

As a trading nation, Malaysia will not be spared from a possible US slowdown. The impact on Malaysia ’s economy could be larger than expected as there is a strong correlation between the business cycle of the two economies.

Some optimists said that a recovery in the US economy in the second half of 2011. The downtrend in crude oil prices could provide some breathing space for the US economy and increase the level of spending there. The supply chain situation in Japan has also recovered significantly and US manufacturers will have the much needed input items to increase production.

Going forward, the external sector will likely face strong headwinds as repercussions from a weak US economy will ripple through Asia and export dependent countries like Malaysia .

Two Things May Occur From Here (08 Aug 2011) …

Firstly, markets could be overly pessimistic of the reported economic numbers from most countries which have been below expectations. This may be a possibility due to severe supply chain disruption resulting from the massive earthquake in Japan in March.

Manufacturing output was severely curtailed in the following months, with far reaching implications to manufacturing activities around the world. The lack of production activity and consumption thereafter may be blamed for the poor quarterly GDP numbers that is scaring the markets today (Aug 2011).

Secondly, if markets are proven right, and the global economy is decelerating faster than expected, then the risk of recession increases dramatically. This may force the governments to act again to inject liquidity into their respective monetary systems in order to keep the pace of economic activity from failing further.

In the near term, this will help stabilise markets and hopefully mend frayed consumer confidence to motivate consumption again.

The events unfolding could be a continuation of the rebalancing of world consumption that started with the Global Financial Crisis in 2008.

Emerging economies that are rich with population, commodities, national savings and consumption ability are now (Aug 2011) refocusing their efforts toward building their own consumer base by normalising wages, improving infrastructure and moving up the value-added chain. This rebalancing is not in a straight line, and will have times of immense volatility such as recent times.

Looking into 2012, we are going into an environment of subsidies increasing and interest rate normalisating. Fundamentally, everything will be more challenging.

Also by looking at the problems happening in Europe . You have four to five countries facing difficulties to raise money because their credit worthiness is suspect. So, we're going to see borrowing cost increase in an environment where interest rates are also high. Things can only get more difficult.

The Yen & Swiss Franc …

Will the Japanese authorities be able over the coming weeks and months to keep the yen from strengthening beyond its post war high of 76.25 yen. The Swiss National Bank, too will be watching anxiously to see whether its efforts are effective.

Indeed, many believe that efforts to drive down the two currencies are likely to prove futile given the strength of investor demand. The yen and the Swiss franc share the same problem: they are seen as safe havens times of market turmoil.

The Swiss franc has been a favored refuge from a eurozone debt worries. The yen has been boosted by wrangling in US over the debt ceiling and fears about US sovereign debt downgrade. Poor US economic data which has raised speculation of QE3 has lent more support.

Many believe no amount of unilateral intervention will be able to change the dire underlying situation. Unless we have full blown coordinated action, the Japanese and Swiss franc will ultimately fail.

To try to protect the competitiveness of its exporters, Japan will intervene but will had little impact due to the strengthening structural trend.

Technical Analysis

The local bourse has been drifting lower since hitting an all-time high of 1,597.08 in July 11 2011. After spending the past month (July 2011) in a downtrend correction mode, many people saw a good chance of the market coming out of the doldrums on optimism the debt-deal in the US would trigger a fresh bout of buying momentum and spark a rally in equities worldwide.

But it turned out otherwise, which witnessed global markets suffered a severe beating on renewed selling spree on last Friday.

With investors continuing to fret about the health of the global economy, eurozone crisis, as well as credit tightening, it appears all are not well, at least for now (Aug 2011). Hence, investors are advised to trade cautiously in the immediate term.

Based on the daily bar chart, the key index had violated the important 200-day simple moving average (SMA) line, the second time since the major rally started on March 12, 2009, at the 836.51 points.

The breakdown suggest the short-term trend is negative. However, for the longer-term it remains bullish, unless the 1,474 points solid base is taken out. Initial support is seen at the 1,500 points.

Technically, indicators are bearish, implying Bursa Malaysia is likely to stay in correction but shares may stabilise somewhat or stage a mild relief rebound, as a couple of measurements are almost oversold.


10.00 am I wrote:
The FBM KLCI will head south to 1485 very soon

if u are mid-term player, u can buy Public Index fund at 1480 or 1485( u may also buy MAA Index, value fund......)

best buy with cash( no borrowing, especially personal loan from Bank Rakyat and other commercial banks....u will be suck and fall into bigger trouble and hardship--say no to personal loan which look attractive but will trap u for 5 to 7 years --alternatively u will hv to suffer hardship for more than 7 yaers!!!!!!!)

Buy only with cash u hv...........if u borrow money and bet......very risky if the market down further to 1430 then u will hv to die or run to holland...........

The market is very fragile..........many businesses will sooner or later ..... back to 2008 gloabal and USA crisis.....(as some economists are predicting ASIA will also badly hit soon........)

(The property market will slump in SEPT and near future....the more loans you have, the faster day u will go to holland..............stop buying any property now unless u are cash-rich......................)

(Don't buy gold, too--not worth to buy high)

Keep more cash...............

and wait for better chances or opportunities to come................

Cash will be agong and sultan depicted in Arab mythology.......................


Then 12 noon today:
Market Crash !!! Can This Level 1,476 Points Hold On For FBM-KLCI ???

FBMKLCI 1480.09 -44.34



中午 12点49分



因受到国际信评机构标准普尔(Standard & Poor's)调降美国债信评等的冲击,大马股市今早狂泻,并跌破1500点重要关卡,盘中一度重挫逾48点至1476.24最低点。



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