The return of foreign investor to Malaysia?

1. Yesterday, foreign buying turned net buyers with RM159m after about 2 weeks of consecutive net seller.
2. This could be caused by positive economy data from China which shows that exports rose more than consensus estimate.
3. Conclusion: It's time to buy again... Stocks that I am looking at include PPB Group, Zhulian and Fibon.

S&P downgraded 14 US banks, upgrade China bank

Bank of America Corp., Goldman Sachs Group Inc. and Citigroup Inc. had long-term credit grades reduced to A- from A by Standard & Poor’s after the ratings firm revised criteria for dozens of the world’s biggest lenders. S&P made the same cut to Morgan Stanley and Bank of America’s Merrill Lynch unit today. JPMorgan Chase & Co. was reduced one level to A from A+. S&P upgraded Bank of China Ltd. and China Construction Bank Corp. to A from A- and maintained the A rating on Industrial and Commercial Bank of China Ltd., giving all three lenders higher grades than most big U.S. banks.(Source: Bloomberg)
Full news click here


How often do you see 14 US banks downgraded by S&P in one go with 2 China banks upgraded?
Here's my thought on the news:
1. This is negative on KLCI as Asian market likely to react negatively to this news. Downgraded banks include those big banks like Bank of America, Citibank and Goldman Sachs will need to put higher collateral in their trading and pay higher yield for their next bond raising. Hence these banks may be more cautious in lending, causing growth outlook dimmer in 2012.
2. Although Malaysia banks are generally not directly exposed to US banks, today's leading decliner for KLCI should be banks. Reason: banks may be more cautious on lending in view of higher global uncertainty, lower loan growth means lower earnings growth, hence lower share price.
3. Welcome to the new world... where the economy power is clearly shifting from West to East. But in the short term, we may have to go through another year of volatility in 2012...

Why KLCI should drop 25-35 points today?

1. Everyone knows DJIA down almost 400points yesterday. But the difference is gold also drop 1.2% to about US$1770. In normal drop, investor will flock to gold. But this time with gold also down. What does this mean? The fear is so great that investor choose to hold cash. Be prepared... this may just be the start of another major correction.
2. Futures open at about 1455-1460 points, representing 30-35 points discount to yesterday close.
3. From technical view, KLCI 14-day RSI is at 63, very close to overbought level of 70. It is also has pretty much downside to at least below 50.

DJIA up 101.79p after Berlusconi plans to resign

What's the indication?

1. Market sentiment may have turned positive, eyeing 1,500 this week which is also its 5-year average historical PE of 16.2x. Today should try to test 1,490 points.

2. Although Europe problem has not been fully resolved, market seems to have priced in the risk from Europe. Greece is gone case, but as long as Italy does not go into bailout, things should be OK.

3. Some of the KLCI stocks which RSI still below 50:
a. AMMB (44)
b. Maxis (45)
c. Maybank (46)
d. Hong Leong Bank (48)
e. MMC (48)

3 reasons KLCI may not increase above 1480 today

1. Foreign investor trading was actually at net selling of RM85m last Friday despite the increase of 15 points. Unless foreign investor come in strongly, it may be hard for KLCI to continue its uptrend.
2. Uncertainties in Europe has spread to Italy. As Italy's bond yield has increased above 6%, the market will be watching closely whether it will hit 7%. (This is the level that requires Portugal, Ireland and Greece to start receiving bailout). The market will watch closely the outcome of today's vote on the 2010 budget report.
3. From technical view, KLCI will need to retest 1500 level this week after failing to do so last week. As the RSI is at 59.5 (70 is the overbought level), it appeared that index needed more momentum to surpass 1500.

Top 30 Volume Stocks all under RM1.00, what's the indication?

1. Market may be over optimistic... more than 50% of them are ACE market counters.
2. Probably this is the end of the short lived bull run? But this still need to depend on the outcome of G-20 resolution over the weekend.
3. Ahead of the long weekend, is the market prepared to take some profit?
Maybe yes for selective stocks... especially if the counter has gained > 20% within hours.

KLCI up about 10p as ECB cut interest rate and Greece scrap referendum

1. The new European Central Bank President Mario Draghi has unexpectedly cut interest rate from 1.50% to 1.25%. It is also reported that he prefer to use interest rates than the printing press to promote growth in Europe
2. After being pressured by Germany and France, Greek Prime Minister George Papandreou finally cancelled his earlier plan to call a referendum on the latest bailout package

View: These news should be positive in the short term but may also be interpreted as signal that Europe is almost confirm will go into recession. ECB President said Europe is heading to "mild recession". He is good at managing expectation, but mild recession is still recession. Ahead of the long weekend, magnitude of KLCI increase may not be long lived.

Why KLCI drop when DJIA up 178p yesterday?

1. Europe has withhold aid payments to Greece before a referendum on a bailout agreement.This is an unexpected news to the market. German and French has stopped 8 billion euros aid to Greece. Basically, this is a very strong warning that Greece will surrender all European aid if its Parliament votes against a bailout package in the referendum
2. No QE3 this time from US, although Ben Bernanke did say that additional stimulus "remains on the table". Although this can still be an overall neutral news, market need a QE3 to respond to possible drag from Europe.

Final conclusion:
KLCI may drop below 1460 today, depending on how Hang Seng respond to the news.

KLCI trimmed losses (-4.69p to 1470.95p)

KLCI trimmed losses and declined 4.69p to 1470.95p after touching its lowest point of 1457.50p in the morning. Here's 2 reasons why KLCI recovered:
1. French President Nicolas Sarkozy has told Greek Prime Minister George Papandreou that the “only way to resolve Greek debt problems” is through a deal hammered out last wee. My view: this is a strong pressure from France to pressure Greece to just accept the deal. Although uncertainty is still there, it seems like France together with other G-20 countries will put on more pressure on Greece during G-20 summit on 3-5 Nov.
2. There is hope that US Federal Reserve may announced QE3 or something to continue to support US economy as it is scheduled to release its latest policy statement tonight.

3 reasons why KLCI should decline today.

1. DJIA declined 297.05 points or 2.5% overnight on growing concern that Greece may default if its Prime Minister referendum is rejected. My view: This is a very risky step to take from Greece. Papandreou won his last major vote on austerity measures by slim margin 154 votes to 144 on Oct. 20.
2. Yesterday KLCI drop 16.25 points to 1,475.64. This may well only the beginning as 10 points increase on Monday (31-Oct) happened when most Asian markets are down. Hence, we can say net net KLCI only down 6 points yesterday (less than 1%). My view: My guess KLCI should down between 10-15 points to 1460 to 1465 level. If that is broken, 1450 will be the next support.
3. From technical point of view, KLCI 14-day Relative Strength Index or RSI has declined from 66 to 61. This is still very close to overbought level of 70. My view: With many issues of global market (especially Europe) remain unresolved, KLCI short term bearish trend may have just begun.

Indeed KLCI down 16.25p or 1.1% to 1475.64, but why?

Check my post this morning on 3 Reasons KLCI wont close above 1500 this morning, and now KLCI down 16.25p or 1.1% to 1475.64 at close on the 1st day of trade in November.

Why KLCI down so much?
1. China growth may already be dragged by decline in Europe as its Purchasing Manufacturing Index or PMI drop to 3 year low level of 50.4 in Oct-2011.
2. At 4pm, Europe market tumbled more than 3% after Greek Prime Minister George Papandreou called a referendum and a parliamentary confidence vote, potentially derailing the European bailout effort and pushing Greece into default.
3. Foreign investor may start selling again. MYR has weakened 1.9% against USD today as of 5pm. In a normal day, you seldom see such a huge changes.

3 reasons why KLCI wont surge above 1,500 today.

1. DJIA declined 276.1 points or 2.3% overnight amid concern European leaders may have problems to raise funds to contain its debt crisis. My view: China may not necessary want to help Europe with free money, definitely they will ask for something, e.g. to allow free trade of China products into Europe.
2. Yesterday surge of 10 points happened when most Asian markets are down. E.g. Hang Seng down 154 points or 0.8% and Nikkei down 62 points or 0.7%. My view: Malaysia boleh? Maybe not today...
3. From technical point of view, KLCI Relative Strength Index or RSI has reached 66, very close to overbought level of 70. My view: With many issues of global market remain unresolved, KLCI short term bullish trend may have come to an end.

Foreign investors has started to sell Bursa shares

Last Friday, foreign investors are net seller of RM130.6m, buyer = local retail RM46.2m and Local Institution RM84.4m. (Source: The Sun)

However, there's an interesting article with title "Foreign funds buy RM3.8b stocks in two weeks" in Business Times. My first impression is "Why they look at 2 weeks instead of 1 week?"

Anyway... you can see it here http://www.btimes.com.my/Current_News/BTIMES/articles/ffund05/Article/#ixzz1Lo53jw9K

My view:
Start to be bearish, should look at day to day change instead of 2 weeks. At least, have to look at weekly changes. You can check it at The Sun daily business segment.

Foreign investors silently collecting Malaysia shares

Here's some statistics from The Sun on Daily Trading Participation...

Last Friday:
Net Buyer = Foreign (RM122.4m), Net Seller = Local Institutional ( -RM106.1m) and Local Retail (-RM16.3m)

Yesterday (Tuesday):

Net Buyer = Foreign (RM48.1m) and Local Institutional (RM14.7m), Net Seller = Local Retail (-RM62.8m).

My view:

Seems like foreign investors are slowly collecting Malaysia shares. Possibly due to continued low interest in US and money outflow from Japan. No wonder stocks with huge foreign interest e.g. AIRASIA has been moving.

Japan Quake: Losers & Gainers at KLCI

Everyone knows it now... Japan earthquake...

The latest new from Bloomberg says:

"The Bank of Japan may today inject more short-term cash into the banking system after the nation’s most powerful earthquake on record, while keeping its asset- purchase plans unchanged as officials gauge the longer-term effect on the world’s third-largest economy. Governor Masaaki Shirakawa told reporters late yesterday he’s ready to unleash “massive” liquidity starting this morning in Tokyo, as the BOJ seeks to assure financial stability..."

Which Company will benefit?

Timber sector ... according to reports from The Edge.


Meanwhile, AmResearch said following the earthquake in Japan, it had have contacted timber players, who are also unsure of the extent of damage stemming from the latest earthquake and the aftershocks.


“Though reconstructions are to be expected, the timber players do not expect a sudden and significant jump in timber exports towards the reconstruction process.
“Of the two timber companies under our coverage, Ta Ann exports 90% of its plywood production to Japan. Its timber products are shipped to trading houses in Osaka, which is located further south of Tokyo, in the central-southern region of Japan. We advise accumulate Ta Ann on weakness (UNDER REVIEW; FV: RM5.61/share) as the recent price pullback has caused an upside of more than 15% over our fair value for the stock,” it said.


Losers

1. The whole market basically due to negative sentiment. Besides, Malaysia export to Japan is RM6.1b or about 11.4% of total export in Jan-2011.
2. I do not recall many Company in Malaysia which has direct business exposure in Japan, except YTL. If you read the news at this link http://www.bernama.com.my/bernama/v5/newsbusiness.php?id=569425 it says "YTL Corp To Turn Niseko Village Into All-Season Resort‎"... they bought it for US$66m, it's a ski resort. With this quake, tourist should avoid Japan for some time, but the impact should be limited...

5 Things To Know Today: 16-Feb-2011

1. FBM KLCI gained 10.81p to 1505.33 on Monday. Yesterday, Thai Index was flat (+1.42p), Philippine Index also flat (-5.95p). These are signs that foreign selling almost done.
2. China inflation for was 4.9% in Jan-2011 which is lower than the expectation of 5.4%. This is good news as it shows inflation worry may be overdone.
3. Major news = Petronas made major "discoveries" of oil at Sarawak. This is positive for O&G sector. Stock to watch = SAPCRES, KENCANA and DAYANG.
4. Stocks mentioned in The Edge = AMMB (EPF accumulating) and AXIS REIT (reinvestment plan lauded).
5. My view = positive with 1510 as immediate target. PCHEM should lead the index today.

5 Things To Know for today's trading

1. KLCI dropped another 9.47 points last Friday to 1494.52 points.
2. Asia market was positive this morning with Nikkei up 76.3p while Australia up 43.1p. (as of 845am).
3. Major news globally = Egypt's Mubarak has finally agreed to step down, the country is now planning its stimulus plan to jump start its economy.
4. 3 companies mentioned in The Edge Weekly:
i) Metro Kajang - talks about the Company continuous effort to build in Kajang
ii) POS Malaysia - bidding for Khazanah stake coming to end-stage
iii) PFC Engineering (which is making MGO for APP Industries) is likely to get RM500m job, The Edge reported quoting unnamed sources.
5. From the economy data, watch out for Malaysia 2010 GDP which will be released on Friday 18-Feb-2011.

Overall, I am positive on today's outlook with KLCI should regain its 1500 points level.

Some latest news analysis

1. December industrial output up 4.2pct on-yr, up 2.1pct on-month - The Edge

My view: This is actually below expectation, because economists expected IPI to grow 5.0%.

2. Malaysian palm oil output falls 14.18pct in January - The Edge

My view: Good for CPO price, but slightly negative for Plantation counters as their FFB output likely to be affected as well.
 
These 2 reasons may explain why KLCI drop further from 15 points drop to 21 points drop... hopefully index manage to recover to 1520 ...

3 Reasons To Be Bullish Despite KLCI down 15 points

1. I think that the worry on China interest rate is overdone.


According to The Edge, the decline in KLCI is caused by interest rate increase in China. Is the worry valid? NO from my point of view, due to: i) inflation is still manageable in Malaysia with the latest reading at 2.2% as of Dec-2011 (vs. China's 4.6%), ii) Malaysia economy seems to be on soft landing form with GDP expected to be 7% in 2010 and 5.5% in 2011 (meaning the growth is still there) and iii) increase in world oil price and CPO actually should be beneficial to Malaysia as a net exporter of these commodity


2. Sarawak election is coming soon

There are many versions of speculation when Sarawak election will be held... some say March, some May... My thought? Wait for the Merlimau by election on 6-March-2011, if BN win with bigger majority then March version should be a reality. Sarawak counters should continue to be in the limelight. (Note that NAIM has surged slightly yesterday).

3. Generally, Malaysia is still underowned by global fund manager

Sources indicated that average allocations of EM portfolio managers for Malaysia hovers around 1.8% (vs. MSCI neutral weight of 2.8%). This suggests that the chances of Foreign Fund Managers buying is more (vs. selling).

5 Things To Know for Today's Trading

1. FBM KLCI was up by 11.88 points or 0.78% to 1,531.82 last Wednesday.


2. Asia market open on firm footing this morning... As of 8:17 am, Nikkei was up by 93.22 points to 10,636.74 while ASX200 was also up by 2.3 points to 4,865 since market open.

3. The Edge Financial Daily first page talk about Sarawak Election play stocks which include HSL, NAIM, DAYANG, PETRA and CMSB. Expect this stock to rally in the first 15 minute. If you are interested to buy these stocks, dont chase in the 1st 15 minutes, but wait for weaker price from 915am to 11am.

4. Update on Egypt issue: Mubarak still hold on to his position. Indian Deputy Governor Subir Gokarn said Egypt political crisis poses a risk to oil prices and will impact?Indian central bank actions, according to report from Bloomberg.

5. Today's economy data to watch for will be US Consumer Credit for Dec-2010 and Germany Factory Order in Dec-2010.

OVERALL: KLCI should gain today on the back of strong CPO price, increasing interest in Oil and Gas stock and Sarawak election theme play.