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Global oil demand ready to rebound

2009-10-11T23:19:00.002+08:00

International Energy Agency says the world's thirst for crude could be revived next year as the global economy recovers.

By Ben Rooney, CNNMoney.com

NEW YORK (CNNMoney.com) -- World oil consumption will rebound next year as the global economy recovers from a deep slump, according to a report released Friday.

The Paris-based International Energy Agency said it expects global oil demand to grow 1.7% in 2010 to an average 86.1 million barrels per day. That's an increase of 350,000 barrels per day from its previous estimate.

Crude for November delivery rose 8 cents and settled at $71.77 a barrel. Oil prices had slipped earlier in the session as the U.S. dollar recovered some ground on speculation that the Federal Reserve could tighten monetary policy as the economy recovers.

In its monthly oil market report, the IEA said "buoyant economic activity in more oil intensive emerging countries" will help support demand next year. However, the group warned that next year's economic outlook "is still fraught with uncertainty."

Global oil demand in 2009 is expected to average 84.6 million barrels per day, according to the IEA. That's up 200,000 barrels per day from last month's forecast. But overall consumption in 2009 is still expected to be down 1.9% versus the year before.

Oil surged more than $2 in the previous session as the dollar fell to a 14-month low and a surprise profit from aluminum producer Alcoa (AA, Fortune 500) on Wednesday boosted economic recovery hopes.

The dollar rebounded Friday after Fed Chairman Ben Bernanke said late Thursday that the U.S. central bank could reverse its easy money policies as economic conditions improve to ward off inflation.

"My colleagues at the Federal Reserve and I believe that accommodative policies will likely be warranted for an extended period," Bernanke said. "At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road."

The greenback was up 0.3% against the euro to $1.4755. It gained 0.5% versus the British pound to $1.5993. Against the Japanese yen, the dollar rose 0.4% to ¥88.74.

Crude often falls when the dollar strengthens because a more robust greenback makes commodities priced in dollars more expensive for overseas buyers.

25 Best Warren Buffett Quotes on His Strategies, Investments, and Cheap Suits

2009-09-15T20:26:00.002+08:00

He’s called the Oracle of Omaha, and for good reason: not only is he one of the best investors of all time, but he’s also a witty communicator.

Here are twenty-five awesome quotes from the man himself. I find these quotes to be especially comforting when you’re ‘financially depressed’–after all, he views a market slump as a good thing!–so I hope these can remind everyone that we just need to do the basics, and we”ll be OK. Be a consistent net saver, buy the market through ups and downs, be a decent human being, and rest easy.

On Investing

- “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”
- “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
- “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
- “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
- “Why not invest your assets in the companies you really like? As Mae West said, “Too much of a good thing can be wonderful”.”

On Success

- “Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.”
- “The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.”
- “You do things when the opportunities come along. I’ve had periods in my life when I’ve had a bundle of ideas come along, and I’ve had long dry spells. If I get an idea next week, I’ll do something. If not, I won’t do a damn thing.”
- “Can you really explain to a fish what it’s like to walk on land? One day on land is worth a thousand years of talking about it, and one day running a business has exactly the same kind of value.”
- “You only have to do a very few things right in your life so long as you don’t do too many things wrong.”

On Helping Others

- “If you’re in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.”
- “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
- “I don’t have a problem with guilt about money. The way I see it is that my money represents an enormous number of claim checks on society. It’s like I have these little pieces of paper that I can turn into consumption. If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GNP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don’t do that though. I don’t use very many of those claim checks. There’s nothing material I want very much. And I’m going to give virtually all of those claim checks to charity when my wife and I die.”
- “It’s class warfare, my class is winning, but they shouldn’t be.”
- “My family won’t receive huge amounts of my net worth. That doesn’t mean they’ll get nothing. My children have already received some money from me and Susie and will receive more. I still believe in the philosophy - FORTUNE quoted me saying this 20 years ago - that a very rich person should leave his kids enough to do anything but not enough to do nothing.”

On Life

- “Chains of habit are too light to be felt until they are too heavy to be broken.”
- “We enjoy the process far more than the proceeds.”
- “You only find out who is swimming naked when the tide goes out.”
- “Someone’s sitting in the shade today because someone planted a tree a long time ago.”
- “A public-opinion poll is no substitute for thought.”

Funny Ones

- “A girl in a convertible is worth five in the phonebook.”
- “When they open that envelope, the first instruction is to take my pulse again.”
- “We believe that according the name ‘investors’ to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a ‘romantic.’”
- “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”
- “In the insurance business, there is no statute of limitation on stupidity.”

Obama: 'Learn lessons of Lehman'

2009-09-15T20:23:00.002+08:00

In speech on Wall Street, president says bailouts are working and economy is stabilizing, but regulatory reform is needed to prevent future collapses.

By David Goldman

NEW YORK (CNNMoney.com) -- The bailouts have largely stabilized the financial system, but regulatory reform is needed to prevent a similar crisis from happening again, said President Obama in a speech delivered Monday on Wall Street.

Marking the anniversary of the Lehman Brothers collapse, which set off a series of events that led to last fall's financial crisis, Obama cautioned Wall Street to step lightly as the economy and financial sector recover.

"Normalcy cannot lead to complacency," Obama said. "Unfortunately, there are some in the financial industry who are misreading this moment. Instead of learning the lessons of Lehman and the crisis from which we are still recovering, they are choosing to ignore them."

"They do so not just at their own peril, but at our nation's," the president added.

Step up regulation. Economists said the president offered no new proposals, but instead used the bully pulpit to get Congress and regulators on board.

Lawmakers and some regulators have been resistant to some of the changes the administration has proposed. For instance, Federal Reserve Chairman Ben Bernanke has opposed a new consumer regulator, arguing that it's the Fed's job to protect consumers.

"The president needs to create enough of a groundswell to get this done," said Dan Seiver, professor of finance at San Diego State University. "Right now he's encountering resistance from regulators like the Fed .. but they were the ones asleep at the switch."

Obama said much more work is left to be done. The president called for more stringent rules to prevent the domino-effect if one large firm collapses. He said an overhaul of regulation must be done in a way that does not smother innovation, but "the old ways that led to this crisis cannot stand."

"We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses," he said. "Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall."

Obama reiterated a number of proposals that the administration has previously made, including a new Consumer Financial Protection Agency, closing loopholes and gaps in the regulatory system, and putting an end to "too big to fail" by creating resolution authority for non-bank financial institutions. Obama also called on foreign economies to join the United States in its regulatory effort for a coordinated response to the financial crisis.

"Restoring a willingness to take responsibility -- even when it is hard -- is at the heart of what we must do," said Obama. "Here on Wall Street, you have a responsibility. The reforms I've laid out will pass and these changes will become law. But one of the most important ways to rebuild the system stronger than before is to rebuild trust stronger than before -- and you do not have to wait for a new law to do that."

Bailout era not over. "Although I will never be satisfied while people are out of work and our financial system is weakened, we can be confident that the storms of the past two years are beginning to break," said Obama. "In fact, while there continues to be a need for government involvement to stabilize the financial system, that necessity is waning."

Taxpayers have lent hundreds of billions of dollars to systemically significant financial institutions and trillions more in lending programs aimed at easing the tight grip on lending. Obama said bailout money is flowing back to taxpayers, but "that doesn't mean taxpayers will escape the worst financial crisis in decades unscathed," he said.

Why I'm Happy to Hold Wealth in Gold and Silver

2009-07-12T10:11:00.001+08:00

By Chris Weber

Now that the first half of 2009 is over, I have to say I'm very happy with the way gold, silver, and platinum have done this year. I've been keeping a large portion of my money in the metals for years.

I like the way that the spotlight has now turned away from them, but quietly – when you look back on the year so far – they all have had solid gains. Quiet gains; those are my favorite kind.

Gold has had three consecutive rising quarters now. But more important, it has been holding most of the huge gains of the bull market of recent years.

Most other assets that have jumped hugely spike up and then collapse for years: Think real estate and high tech stocks. But gold has been in a great bull market for a decade and, though still in a corrective phase, has still risen solidly for months.

It started the year at $880; at mid-year it is $926.70. That's a rise of 5.3%, or 10.6% annualized (though no one knows how the rest of the year will play out).

Again, to me, this is great action. Quietly, gold has added about one percent per month so far this year. And no one is talking about it. Huge falls have proven temporary, but these are what people focus on. All the while, over time, the price rises. I'd be happy to take a 10% annual rate of return consistently on anything.

And if double-digit annualized returns are what gold is giving when it is "sleeping," what will it do when it awakes?

Silver started the year at $11.33. At mid-year, it was $13.54. Again, maybe many are not satisfied. But do the math and you get a 19.5% return. That's nearly 40% annualized. What's to complain about? And even more so than with gold, the focus of the public is far from silver. You give me an asset that rises by nearly 20% in six months with no one watching it, and I'll be happy.

Finally, platinum climbed 27.5% in the first half of this year, the best of all. However, this one is the most volatile and thinly traded. Still, if the Dow had soared 20-something percent since the first of the year, everyone would be crowing.

And indeed, bullishness has returned on the stock markets. Most everyone now believes things will get great or continue great. But this kind of thinking for markets that have barely moved since 2009 began is misplaced. All that has happened is that they have risen from their March lows.

I expected this... Back in mid-March, when I suggested to my readers that one could buy virtually any stock, I said that a rally would cause great bullishness to return. And so it has. But one has been better off just by sitting in gold and silver and doing nothing else.

Moreover, the stock markets look quite vulnerable. The Dow Transport Index has not confirmed the last high in the Dow Industrials. And both the Dow and most other global stock markets have been doing nothing much for the past few weeks. Moreover, they have been doing it on ever-lower volume. It is possible that the bear market rally has seen its best days.

All this is why I'm happy to continue holding a large position in precious metals. Granted, their performance this year isn't as spectacular as many hoped it would be. But in gold, I own a relentlessly rising asset that benefits from the competitive currency devaluations I discussed last month. In today's world, that lets me sleep soundly every night.

Fund Managers Optimistic Over Longer Term

2009-07-12T10:06:00.000+08:00

By FINTAN NG

ASIAN equity markets look more promising over the longer term but short-term indicators and macroeconomic fundamentals will need to be firmer first before regional bourses start to make a more sustainable climb, fund managers and analysts said.

Money continues to flow into Asian equity markets with second quarter (Q2) funds flow totalling US$12.7bil, the largest quarterly inflow since 2001, in stark contrast to outflows of US$4bil in Q4 of last year, according to Macquarie Research analysts in a report dated June 26.

But they noted that cash holdings of fund managers remained high at 2.85% of their portfolios versus the long-run average of 2.4%. “This may suggest that investors remain cautious about the rally,” said Henry Hon, an analyst at Macquarie.

Liquidity is a big factor presently supporting the performance of stock prices, indicating investors are staying close to the exits while the still relatively large cash holdings suggest any market pullback may not be large, he added.

Prudential Fund Management Bhd chief investment officer Yoon Mun Thim agrees, saying the local market has risen sharply but may run a little ahead of fundamentals.

Although pent-up demand and ample liquidity may provide support for a surprise on the upside in the latter part of the year, macroeconomic fundamentals will have to catch up before the markets can move to a higher level on a sustainable basis, according to Yoon.

“The FBM KLCI has risen 20.7% in the first-half (H1) and has factored in to a large extent improvements in the global economy and rising corporate activities but the easy money has been made and the market may be more challenging in the second half,” he said.

Potential risks that may disrupt the positive momentum include a more severe outbreak of the A (H1N1) flu and worse-than-expected economic or financial data coming from the US or Europe, he warned.

Yoon said although Malaysia’s valuations were not cheap compared to regional peers, the local market remained attractive as it was less volatile, with stocks which have predictable and sustainable earnings.

“Since Malaysia has seen the largest net outflow in the region especially in recent months, with improving relative valuations, we may see some potential asset allocation to our markets,” he reckoned.

Credit Agricole Asset Management Malaysia Sdn Bhd managing director Roslina Abdul Rahman told StarBizWeek that regional markets have had a brilliant run with the MSCI Asia Pacific ex-Japan index rising 31% while the FBM KLCI rose 23% in Q2.

“It is therefore reasonable to expect a consolidation in the next few months while we expect Q3 to be fairly quiet and range-bound pending more evidence of improvement in macroeconomic fundamentals before the next push higher,” she said.

Roslina said the next leg of market re-ratings would be earnings-driven set against a backdrop of still-healthy liquidity conditions. “The upcoming (local) Q2 earnings season will be an important indicator of current conditions,” she added.

Roslina said relative to the region, Malaysia’s valuations were not as compelling as its regional peers due to higher price-to-earnings ratios and lower growth rates with low trading liquidity.

“Regional fund managers have their focus on China, India and Indonesia. These economies have the strongest domestic growth stories in Asia,” she noted.

Roslina remains positive over the local bourse’s medium to long term performance following the recent liberalisation measures announced by the government.

“The abolishment of the affirmative action policies is a significant step in addressing Malaysia’s competitive challenges. Whilst the benefits are unlikely to be felt immediately, it is a step in the right direction and sends a positive signal to the market,” she said.

Meanwhile, Schroder Investments Ltd multiregional equities head Virginie Maisonneuve said in a report that the key global trends that will drive the world economy and equity markets remain demographic changes, climate change and the continued development of emerging economies.

“This trend will continue with China and India as the two biggest emerging economies,” she said, noting that China now manufactures around half of the personal computers in the world and 85% of DVDs while India provides around 10% of the world’s software services and 60% of the research and information technology services of Fortune 500 companies.

Both countries are also significant players in the global financial markets with over 20% of global foreign reserves and being heavily invested in US treasuries, according to Maisonneuve.

“By 2020, they are estimated to account for over 17% of world growth while the combined market capitalisation of China and India already nears that of Japan,” she said.

Share Prices To Trade In Tight Range Next Week

2009-07-12T10:05:00.000+08:00

KUALA LUMPUR, July 11 (Bernama) -- Share prices on Bursa Malaysia are expected to see a tight range in trade next week, in the absence of fresh leads and renewed pessimism over the global economy recovery, said analysts.

SJ Securities technical analyst Phua Kwee Hock said that there was not much news to be expected during the month, to boost the local market.

"The market would be in consolidation mode this month," he added.

Meanwhile, MIMB Investment it its research note said there were many technical indicators to support a downside in the short term.

Low volume and the fact that the market was stuck in a tight trading range during the week, basically confirms the cautious sentiment of traders.

OSK Research in its assesment said that it maintains a bearish view towards the near-term market.

"We will likely see the sellers selling more aggressively.On the upside, continue to look for an immediate resistance level at the 1,070 points-level and support at 1,057-1,064 points," it said.

The market was mostly lower for the week ended with the new FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) making a bearish debut on Monday.

The Index comprises the 30 largest listed companies by market value with at least a 15 percent free float. Its constituents are also prime market movers and represent about 60-70 percent of the main board's market capitalisation.

Bursa Malaysia introduced the FTSE global index standard to attract instant recognition and credibility amongst international investors.

Analysts say that the adoption of the FBM KLCI will in the long run push companies to beef up their performance so as to be among the top 30 counters.

However, they also cautioned that the use of 30 counters as opposed to 100 under the KLCI, might lead to volatility as price movements in just one or two weighted counters could swing the market either way.

During the week, Bursa Malaysia also saw its first foreign listing.

China's fifth largest outdoor sportswear manufacturer, Xingquan International Sports Holdings Ltd, opened at a 12-sen premium of RM1.83 per share on its debut on the Main Board of Bursa Malaysia on Friday.

Its closed seven sen higher at RM1.78.

Xingquan expects to raise RM165 million from its initial public offering, of which 34 percent would be utilised for the company's expansion,including building a new factory costing RM132 million.

On a Friday-to-Friday basis, the FBM KLCI eased 5.53 points to close at 1,067.76 compared to last week's closing of 1,072.69.

The Finance Index improved 10.1 points to 8,552.22, the Plantation Index fell 115.02 points to 5,260.82 while the Industrial Index slipped 3.13 points to 2,372.38 and the FMBEmas declined 28.27 points to 7,197.74.

The FBM2BRD lost 15.58 points to 4,709.49, the FBMTOP 100 edged down 7.55 points to 7,007.81, the FBM70 widened 90.95 to 7,121.64 and the FBMMDQ dropped 109.58 points to 3,866.73.

Weekly turnover dropped to 3.396 billion shares valued at RM5.021 billion from 4.996 billion shares worth RM5.389 billion the previous week.

Volume on the Main Board shed to 3.0 billion shares valued at RM4.9 billion versus last week's 4.421 billion shares worth RM5.209 billion.

The Second Board's volume eased to 205.906 million shares valued at RM81.8 million from 304.794 million shares valued at RM115.711 million last week.

Turnover on the Mesdaq Market dropped to 112.37 million units worth RM18.622 million compared to 144.723 million shares worth RM24.697 million.

The volume of call warrants declined to 60.278 million worth RM10.046 million from yesterday's closing of 69.152 million valued at RM12.177 million.

-- BERNAMA

Prisoners Of Love: The New "Thriller" Re-enactment

2009-06-28T12:15:00.001+08:00

Talk about deja view all over again. Earlier on 27th June 2009, the 1,500 orange-jumpsuit-clad inmates of the Cebu Provincial Detention & Rehabilitation Center on the east coast of Cebu Island in the Philippines reprised their phenomenally popular 2007 viral performance of Michael Jackson's "Thriller" in tribute to the King Of Pop, who died Thursday.

Positive sign emerges

2009-06-20T22:15:00.000+08:00

MARKET TREND
By K.M. LEE

The ‘golden crossing’ signals a bullish reversal trend.

REVIEW: Bursa Malaysia started the week on a firmer footing, with the Composite Index (CI) advancing 2.89 points, or 0.27% to 1,093.04, tracking the higher overnight Wall Street the previous Friday.

Market sentiment was clearly upbeat in initial deals, but institutional players were not willing to chase after rising stocks, as a decline in global crude oil futures prompted them to exercise some caution.

Given the lack of compelling news, trading on the local bourse turned mixed in mid-morning, with the key index trapped within a modest band throughout.

At the end of regular session, the key index nudged up 1.02 points to 1,091.17, outperforming its regional peers. Then overnight Wall Street took an unexpected dive, plunging 187.13 points to 8,612.13, its worst slide in a month, spooked by a poor manufacturing data.

Against the negative backdrop, share prices retreated. Blue chips took a beating while institutional investors stayed on the sidelines.Elsewhere, the second and third liners were not spared on lack of support from retail players, resulting in the CI losing 17.05 points to settle at 1,074.12 on Tuesday. Thereafter, the local bourse extended the downward correction, with the key index sagging 3.22 points to 1,070.90 in mid-week and an additional 16.49 points to 1,054.41 the next day, undermined by the poor offshore performance before stabilising, up 5.09 points to 1,059.50 yesterday.

Statistics: On a week-on-week basis, the CI slumped 30.65 points, or 2.8% to 1,059.50 yesterday, versus, 1,090.15 the previous Friday.

Weekly turnover stood at 7.923 billion units worth RM8.204bil, against 10.019 billion shares valued at RM8.628bil done a week ago.

Technical indicators: The daily slow-stochastic momentum index was fast approaching the oversold area. It triggered a short-term sell at the top on Monday.

After flashing a sell on Tuesday, the daily moving-average convergence/divergence (MACD) histogram expanded negatively against the daily trigger line to stay bearish.

Also, the 14-day relative strength index weakened sharply from a reading of 80 on Monday to the 36 points on Thursday before pausing. Weekly indicators were waning, with the weekly slow-stochastic momentum index in danger of moving out of the bullish territory and the upward thrust of the weekly MACD slowing considerably.

Outlook: Bursa Malaysia fell from a nine-month peak of 1,095.91 on June 12 to a low of 1,052.48 on Thursday before halting. Unlike the two previous consolidation phases that happened in late April and mid-May, the pullback this time was steeper than expected, catching many people by surprise.

A couple of weeks ago, we pointed out that the market was looking “top heavy” and also mentioned the journey ahead would be tough, dropping hints the local bourse is due for a breather soon. Hence, the retracement is very much anticipated and needed, viewed as a healthy process and should not cause any panic in the marketplace. So, we are not talking about this issue but something of more significance and importance.

According to the daily bar chart, a positive sign has emerged, namely a “golden crossing” of the 100-day SMA over the 200-day SMA.

Investors should take note that this type of crossing usually take several months to develop and when it happens, it basically confirms a bullish reversal of the existing trend, which is more reliable for the medium to longer term, but on conditions the CI continues to retain the posture above the 100-day SMA and 200-day SMA and the “positive crossing” stays intact.

Going forward, as long as the bulls can fulfil these criteria, we are certain Bursa is on the road to recovery.

Technically, short-term indicators are deteriorating, particularly the daily MACD, suggesting the local bourse may remain in consolidation mood for a while, with the CI probably flirting within a moderate range this week.

The immediate upside is capped at the 1,100 points level for now. The higher resistance is seen resting at 1,120 points, and the next, at 1,140–1,142-point band.

Initial support is envisaged at the 1,036-1,040-point range. If the next lower floor of 1,020-point gives way, look for the 1,000-point psychological level as the next base.

Bursa Likely To Extend Gains Next Week

2009-06-07T10:45:00.002+08:00

KUALA LUMPUR, June 6 (Bernama) -- Share prices on Bursa Malaysia are likely to extend its gains next week, supported by a strong fund inflows into the market, dealers said.

They said the market was likely to attract more fund managers eyeing a higher return quickly compared to the bond market which would take a longer time to mature and the yield would be low.

"Any sign of recovery in the global economy will encourage retail investors, especially the fund managers, to invest in the equities, commodities and property," a dealer said.

However, he said, the gains may be slow as pullback or consolidation could be expected following the rally since the beginning of May and last week.

"The question is whether the momentum is sustainable. That will depend on the recovery in the global economy, especially the market in the US," he said.

On a Friday-to-Friday basis, the KLCI closed the week at 1,075.5, up 31.39 points from last week's closing of 1,044.11.

The Finance Index increased 397.02 points to 8,401.51, the Industrial Index gained 31.14 points to 2,353.24 and the Plantation Index perked 146.5 points to 5,442.27.

The FMBEmas surged 229.33 points to 7,213.54, the FBM2BRD advanced 142.84 points to 4,4717.61, the FBM30 went up 176.58 points to 6,853.85, while the FBMMDQ rose 186.35 points to 4,226.04.

Weekly turnover increased to 8.923 billion shares worth RM7.974 billion from 7.899 billion shares worth RM8.034 billion last week.

Volume on the Main Board rose to 7.609 billion units valued at RM7.509 billion from 6.324 billion units worth RM7.632 billion previously.

The Second Board's volume climbed to 547.359 million shares worth RM255.268 million from 476.139 million shares worth RM213.275 million.

Turnover on the Mesdaq Market was higher at 519.182 million shares valued at RM137.890 million compared with 411.762 million shares worth RM100.502 million.

Call warrants, however, declined to 136.063 million shares worth RM24.392 million from 224.018 million shares worth RM36.326 million previously.

-- BERNAMA

Bulls eyeing 1,100 points

2009-06-07T10:43:00.001+08:00

TREND ANALYSIS
By K.M. LEE

From here, the going will be tough, unless there is a continuous stream of positive news flow.

REVIEW: US stocks rallied for the second consecutive session the previous Friday, as investors were encouraged by a slew of positive data, such as the May consumer confidence hitting its highest level in eight months, while a run-up in commodities fuelled optimism the global economic downturn may be easing, if not already on the road to recovery.

Tracking the bullish sentiment in the US and mirroring the strong performance in major Asian stocks, equities on Bursa Malaysia started out the new week on a solid platform, with the Composite Index (CI) advancing 3.51 points, or 0.34%, to 1,047.62 in initial deals.

Trading was brisk. While blue chips topped the up list amid institutional support, second and lower liners attracted significant interest on greater retail participation, as a better-than-expected purchasing managers index (PMI) from China kept alive hopes for a rapid global economic recovery and boosting local sentiment.

In active trade, the key index rose 17.69 points to 1,061.80 on Monday.

Overnight US markets continued to improve, with the Dow leaping a huge 221.11 points to 8,721.44 in heavy volume and crude oil spiking US$2.27 to US$68.58 a barrel, as economic data showing the US manufacturing sector contracted in May at a slower rate assured investors the US recession was indeed moderating.

Against the positive backdrop, the principal Bursa index gaped up nine points to 1,070.80 and quickly raced to a high of 1,072.07 early Tuesday amid broad-based buying interest.

The local bourse also received a boost from Datuk Seri Najib Razak’s first official visit to China as prime minister. However, when the regional markets started turning mixed in mid-morning, local investors opted to book gains and because of that, the momentum soon fizzled out.

Nevertheless, the CI still ended on the plus territory, firming 1.82 points to 1,063.62 on Tuesday due to gains in banking, plantation as well as oil and gas-related issues.

Subsequently, profit-taking activity kicked in, but selling was light and concentrated on select quality issues. Elsewhere, cheaper stocks bounced back to life after a brief respite, probably lifted by marginally steadier offshore performance.

Apparently, the two-tier market trend was clearly reflected on the scoreboard. Although the key index shed 8.22 points to 1,055.40, advancers overwhelmed decliners by 420 to 250 in mid-week.

Thereafter, the local bourse turned range-bound to moderately higher, with the CI rebounding 8.57 points to 1,063.97 on Thursday and an extra 11.53 points to 1,075.50 yesterday, mainly due to local fund support.

Statistics: For the week, the CI surged 31.39 points, or 3%, to close at 1,075.50 yesterday, against 1,044.11 the previous Friday.

Weekly turnover amounted to 8.923 billion shares valued at RM7.974bil versus 7.902 billion units worth RM8.027bil traded a week ago.

Technical indicators: The daily slow-stochastic momentum index was on the rise after triggering a buy on Monday.

Likewise, the 14-day relative strength index had indicated a ticking up pictogram from a reading of 63 to the 72 point level.

However, the daily moving average convergence/divergence (MACD) histogram remained in sell mode, lingering below the daily signal line.

Weekly indicators were strong, with the weekly slow-stochastic momentum index flashing a buy at the bullish extended-move zone and the weekly MACD retaining the buy call.

Outlook: Bursa Malaysia was generally range-bound with an upward bias, which saw the CI touching a nine-month high during intra-week session.

According to the chart, it had scaled a total of 274.23 points since bottoming out at 801.27 on Oct 28 last year. That represents a 37.91% recovery of the previous bear cycle and it needs to be kept in perspective.

The market is being driven by optimism that the worst is over for the global economy. As mentioned here previously, there is no reason to go against the tide at this moment, with the underlying tone staying upbeat but we are worried the market may have already factored in the recovery news.

Like all previous upturns, the bulls always run ahead of news and they usually find it hard to sustain the upward thrust to higher levels later, as stocks get dearer and valuation becomes more demanding after a strong rally.

In short, there may be more upside potential going forward, targeting the 1,100 points psychological level, but the going will be tougher, unless there is a continuous stream of positive leads pointing to a decisive recovery. The next overhead barrier is seen at 1,120 points.

Indicators are unclear. Though the weekly MACD continues to send out bullish signals, the daily peer retains the sell order, indicating the local bourse may drift sideways to marginally steadier this week.

Support floors are pegged at the 14-day simple moving average (SMA) and the 21-day SMA, resting at 1,050 points and 1,040 points respectively.

The Recession Just Ended... Here's What to Do

2009-05-30T17:41:00.003+08:00

By Dr. Steve Sjuggerud

"Another round of job layoffs this week," my friend told me. He's worried about losing his job.

He said his company has already trimmed all the fat... But the company's business hasn't recovered yet. So more job cuts are on the way.

It's too bad. Because I believe the recession is ending right now.

Unfortunately, companies – and investors – don't get it.

Since World War II, the unemployment rate typically peaks immediately AFTER a recession ends. Said another way, companies keep laying people off even though the recession is over. Why? Because they think tomorrow will look like yesterday...

Three years ago, people thought real estate prices "can't go down." They thought the next day would look like the day before. Now, people think real estate prices can't go up for the same reason.

But, my friend, the recession is ending...

Back on March 20, I'd showed you my "Script for Economic Recovery." I said stocks had bottomed and it was time to buy. And I explained exactly how we'd see the recession end...

By now, we've moved through most of the Script... Corporate bonds bottomed, copper bottomed, stocks bottomed. And as of this week, we've seen three consecutive months of improvement in consumer confidence.

The chart above shows how consumer confidence moves during the recessions (the shaded blocks). You can see consumer confidence hits a low at the end of recessions.

This recession has been bad... consumer confidence hit a record low. But the move higher in consumer confidence has been extraordinary... Over the last three months, the index has soared by more than 100%.

I believe consumer confidence has hit bottom. Historically, that's one indicator (of many) that shows the worst has passed.

History also shows stocks tend to keep rallying for many months after consumer confidence bottoms. It's true in every instance going back to the 1970s, when monthly consumer confidence data starts.

In short, companies and investors still feel bad. Employers are laying people off. That's normal at the end of recessions. And right now, I believe we're extremely close to the end of this recession, if we're not there today.

If you're a business and you've already trimmed the fat, now is not the time to be laying off more people. It's time to gear up for an improving economy.

If you're an investor and you thought the end of the world was here in March, now is the time to be in stocks. The market can continue to rally for many more months.

The bill will come due on the government spending some day. But that won't be in 2009. The recession is ending. And things are getting "less bad" – which is the ultimate time to own stocks.

~~DailyWealth~~

If You're About to Buy Stocks, Make Sure to Read This First

2009-05-28T21:55:00.002+08:00

By Chris Weber

While I've been lucky enough to identify and forecast a strong rally in global stocks since March, I have made it clear to readers of the Weber Global Opportunities Report that I don't think this is anything more than a rally within a bear market.

The higher this rally goes, however, the more you will be hearing that a new bull market has started. But I would not be fooled.

Why do I believe we are simply in a "bear market rally"? I believe this is so because all great starts of bull markets (like the ones in 1949 and 1982) had certain important things in common. In one phrase, these things can be summed up with the words "Great Values."

When the bull markets started, companies had to offer great dividend yields to investors to entice them to invest. The dividend yield on entire indices was very high.

Second, the price-to-earnings ratio on most stocks, as well as entire indices was very low. Today, I want to focus on the dividend aspect of this idea... and to show you a chart I think every investor should copy, print out, and memorize.

You see, the great thing about a dividend is that is cannot be faked.

Either the check goes out or it does not. Either the company pays a dividend on its stock – a clear and certain dividend – or it does not. Tracking the dividend yield on either a single stock on an entire index is one of the best ways to gauge if stocks are selling at great values.

We have seen time and again that when dividends rise to a certain level, stocks become great bargains and bull markets begin. So let us turn our attention to the chart below. This is the S&P 500 Index and the dividend yield on it, going back to 1928.

From the start of the chart, you see the horrific loss in value of the S&P (in blue) from 1929 to 1932. The index lost over 90% of its value by the time it reached its lows in July 1932. Nearly three years of the most vicious bear market in history had nearly wiped out stockholders, and made almost no one even think of buying stocks.

At this very time, the absolute lows, some companies were still making money, and they were still paying out dividends. The yields they paid out (in green), as a percentage, grew to be huge. In July 1932, the yield on the S&P reached 10.5%. These double-digit yields were never to be seen since.

However, this proved to be the low of the market. In the next five years, the S&P soared hundreds of percent from that low, the low that was signified by huge yields. You can see the huge move from mid-1932 to 1937. In terms of the dividend yield, it plunged back to the 3% level.

The bull market that began the real post-depression recovery was born in June 1949. The price levels of both the Dow and the S&P were about where they'd been 20 years prior. It was very nearly a lost two decades for stocks. Wall Street during that summer of 1949 was a sleepy place. Few new faces wanted in on an area smart young people considered a dead end.

And yet look where the dividend yield was when that huge bull market began in June 1949. It was 7.6%. From 1949 to 1966 – 17 years – a great bull market was underway. It took the S&P from 17 to over 80.

By January 1973, the dividend yield on the S&P had fallen to a then-record low of under 3%. This low yield was definitely not signaling that stocks were at great values. And the action of the next two years proved this. Stocks fell by nearly half. The S&P plunged from over 120 in January 1973 to just 62 by October of the next year.

And what was the yield doing? It soared back to near 6% toward the end of 1974.

To sharp observers like Richard Russell, these high yields, coupled with very low P/E ratios, were the sign of a great buying opportunity. He had stayed out of the market after 1966, spending the next nine years in T-bills and gold stocks (gold itself was still illegal for Americans to own.) When (around Christmas of 1974) he said we could see a great buying opportunity many people were angry at him. I confess to being one of them. At the time, I was a 19-year-old know-it-all who was convinced that Russell was wrong about everything. It turned out I was wrong, and I have never since forgotten that lesson. Russell's stock picks often paid around 10% dividends and as 1975 went on, they also rose in price.

By August 1982, the Dow, which had reached nearly 1,000 back in 1966, was just 776, over 16 long years later. But what was the dividend yield saying in 1982? Were stocks finally great values again? The dividend yield on the Dow had gotten back up to over 5%, and the yield on the S&P went to over 6%.

Now, in those days, that still seemed small compared to the double-digit yields you could just get by holding T-bills, so it didn't seem so tempting. And yet, from the benefit of hindsight, we see that those levels of dividend yields were plenty high enough to mark the beginning of what would be the longest bull market in history. In the 25 years from 1982 to 2007, the Dow soared from 776 to 14,165: 1,725%. The S&P soared from 102 to 1,565: 1,434%.

By 2000, I had learned my lessons from the 1970s. I saw the dividend yield fall to around 1%, a low it had never before seen. When I pointed this out, people brushed it off.

We all know what has happened to stock prices since. They may have gotten over their early 2000 peaks again in 2007, but this was just a brief new high. In essence, by March 2009, the average stock index had gone nowhere since 1997. Another lost decade.

But in March – just a few weeks ago – a rally began. What was the dividend yield on the S&P when this rally began? Just 3.58%. In the few weeks since the March 9 lows, yields have fallen sharply and are at this writing a mere 2.46%.

I ask you again to look back at the sweep of the stock chart over the past 80 years. At every start of a real bull market, dividend yields were much, much higher than just 3%. They were over 6% in 1982, over 7% in 1949, and over 10% in 1932. Those were the beginnings of real bull markets. The kind of markets that if you got in early and just held, and reinvested your great dividends, they made you rich.

And that is why I have urged that everyone who participates in this rally use trailing stops. These stops can be staggered: some as low as 3%, others as high as 50%, and every gradation in between.

Yes, if the Dow reaches 10,000 or 12,500, or the S&P goes back to 1,000, or 1,100 or 1,200... there will be great rejoicing and optimism that the worst is over. But I will be looking at both the dividend yield and the price-to-earnings ratio on both indices. And from where I sit, if stocks do indeed go that high, it will only be a signal to tighten my stops.

Bull markets begin with stocks trading at great values. And those values are not yet here.

Economy Contracts 6.2% in 1Q

2009-05-28T05:50:00.001+08:00

Written by Surin Murugiah
Wednesday, 27 May 2009

KUALA LUMPUR: The Malaysian economy contracted 6.2% on-year in the first quarter of 2009, the worst since the Asian financial crisis, as manufacturing output shrank sharply as exports and industrial production fell.

Bank Negara said on May 27 that manufacturing contracted 17.6%, mining fell 5.2% while agriculture saw a 4.3% decline. Services also showed a decline of 0.1% but construction rose just 0.6%.

According to economists, the contraction was worse than expected. In the fourth quarter of 2008, the economy grew at only 0.1%.

The central bank said the sharp contraction in the first quarter was due to a significant deterioration in external demand, following the deepening recession in advanced economies.

Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said the large inventory drawdown, particularly in the manufacturing and commodity sectors also contributed to the decline in growth in 1Q09.

However, the economy is expected to stabilise in the second half of 2009 supported by fiscal stimulus measures and measures to enhance access to financing, she said.

She said the signs of improvement include improved labour market conditions as retrenchment stabilises; continued lending activities by financial institutions; improved commodity prices from their lows; declining inflation improves purchasing power; improved performance of capital market and improvement in consumer sentiment index.

On the first quarter economic performance, Zeti said the manufacturing sector declined significantly by 17.6% (4Q 08: -8.8%), led by the 23.1% contraction in the export-oriented industries.

“In particular, the E&E industry contracted steeply by 41.4%. The domestic-oriented industries declined by 15.9% (4Q 08: -2%) due to weakness in both consumer- and construction-related sub-sectors,” it said.

Bank Negara said the services sector was flat following a marginal decline by 0.1% (4Q 08: 5.7%), primarily affected by sub-sectors closely linked to the manufacturing sector.

The agriculture sector recorded a contraction of 4.3% (4Q 08: 0.5%) due to lower output of both palm oil and rubber, while the decline in the mining sector of 5.2% (4Q 08: -5.7%) was due to falling crude oil and natural gas production.

The construction sector, turned around to register a positive growth of 0.6% (4Q 08: -1.6%) due mainly to an increase in construction of office space and the high-end segment of the residential sub-sector.

The banking sector remained resilient supported by strong capitalisation and stable credit quality. Although profitability has moderated by the conditions in the economy, the banking system remained financially sound, and supported by ample liquidity, is well-positioned to continue meeting the financing needs of the economy.

“As at end-March 2009, the risk-weighted capital ratio (RWCR) strengthened to 13.4%, whilst core capital ratio (CCR) improved by 0.9 percentage points to 11.5%,” it said.

The strengthened capital ratios resulted from capital raising exercises by a number of banking institutions to boost their capital positions. Meanwhile, excess capital amounted to RM44.6 billion.

Pre-tax profit amounted to RM4.8 billion in the first quarter of 2009. The annualised average returns on assets and equity was 1.7% and 19.9% respectively.

Sunway Engineering gets RM326m subcontract

2009-05-26T23:19:00.002+08:00

The Edge Financial Daily
26 May 2009

KUALA LUMPUR: Sunway Holdings Bhd's 75.1% sub-subsidiary Sunway Engineering Sdn Bhd (Abu Dhabi branch) has secured a AED343 million (RM326 million) subcontract from Silver Coast-Sunway Innovpave joint venture for proposed the Arzanah Development, Sector W-57, Abu Dhabi, United Arab Emirates – Rihan Heights (Phase 1A – Plot H).

Sunway Holdings said yesterday the contract was for the supply, delivery, installation, testing and commissioning of mechanical, electrical and plumbing (MEP) works.

Sunway Engineering is a 75.1% subsidiary of Sunway Construction Sdn Bhd, a wholly owned subsidiary of Sunway Holdings.

It said the proposed project was targeted to be completed on Oct 31, 2010.

Consumer Confidence in U.S. Jumps More Than Forecast

2009-05-26T22:50:00.001+08:00

By Shobhana Chandra

May 26 (Bloomberg) -- Confidence among U.S. consumers jumped this month to the highest level since September, reflecting growing perceptions that the job market will improve.

The Conference Board’s sentiment index surged to 54.9, higher than forecast and the biggest gain since April 2003, the New York-based research group said today. Another report showed home prices continued to plunge.

Recent jumps in the stock market, low mortgage rates and smaller job losses are brightening consumers’ outlooks and fueling forecasts that the economy will return to growth in the second half of the year. Still, the loss of wealth from the slump in real estate values and still-tight credit may temper a comeback in consumer purchases, muting the recovery.

“We’re certainly moving in the right direction,” said James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. “We expect to have positive economic growth in the third quarter. The job declines will fade.”

Stocks extended earlier gains following the report. The Standard & Poor’s 500 index climbed 1.7 percent to 901.81 at 10:26 a.m. in New York. Treasury securities erased earlier gains to be little changed.

Consumer confidence was projected to rise to 42.6, according to the median estimate in a Bloomberg News survey of 70 economists. Forecasts ranged from 38.5 to 47. The index averaged 57.95 last year.

The Conference Board revised the April reading up to 40.8 from an originally reported 39.2.

Home Values

A report from S&P/Case-Shiller earlier today showed home prices in 20 U.S. metropolitan areas fell a more-than-forecast 18.7 percent in March from the same month last year, as foreclosures surged.

The Conference Board’s measure of present conditions increased to 28.9 from 25.5 the prior month. The gauge of expectations for the next six months jumped to 72.3, the highest level since December 2007.

The share of consumers who said more jobs will be available in the next six months climbed to 20 percent, the most in more than five years. The proportion of people who said they expect their incomes to rise over the next six months rose to 10.2 percent from 8.3 percent.

The proportion of people who said jobs are currently hard to get fell to 44.7 percent from 46.6 percent. The share saying jobs are plentiful now increased to 5.7 percent from 4.9 percent.

Worst is Over

“As far as consumers are concerned, the worst is now behind us,” Lynn Franco, director of the Conference Board’s consumer research center, said in a statement.

Today’s confidence figures corroborate other reports. The Reuters/University of Michigan preliminary index of consumer sentiment rose this month to the highest level since before the collapse of credit markets last year worsened the recession.

Economists say the Conference Board’s index tends to be more influenced by attitudes about the labor market.

Payrolls in April fell by 539,000, the fewest in six months, and first-time claims for jobless benefits are slowing. Still, the unemployment rate jumped to a 25-year high of 8.9 percent in April and a Bloomberg survey showed this month that it may climb to 9.6 percent next year.

The economy has lost 5.7 million jobs since the slump began in December 2007.

Home Sales

Recent data show home sales stabilizing near record-low levels and demand is likely to get a further boost from tax credits for first-time buyers and Federal Reserve efforts to trim mortgage rates.

Lower-priced merchandise is drawing shoppers as they focus on essentials and conserve cash. Ross Stores Inc., owner of the Ross Dress for Less discount chain, last week raised its sales and earnings estimates for this quarter and second half of 2009.

“Consumers are continuing to respond very favorably” to the chain’s offerings, Chief Executive Officer Michael Balmuth said on a May 21 conference call with analysts. Still, “the economic and retail climate remains difficult.”

Stocks on Bursa mostly higher led by heavweights

2009-05-26T07:13:00.000+08:00

KUALA LUMPUR: Bursa Malaysia started the week on a stronger note, with gains in tandem with regional markets on the back of higher metal prices and better shipping rates.

At 10.10am, the Kuala Lumpur Composite Index was up 6.6 points at 1,051.8 with gainers outnumbering losers 254 to 87 while 144 counters were unchanged.

Gains were led by heavyweights including Genting Bhd, Tenaga Nasional Bhd (TNB), Telekom Malaysia Bhd and Proton Holdings Bhd. Genting rose 25 sen to RM5.45, TNB was 15 sen higher at RM7.80, TM gained 10 sen to RM3.86 while Proton added 16 sen to RM3.04.

Nikkei 225 rose 1.1%, Taiwan stock exchange gained 0.6% while the Singapore Straits Times Index was up 1.6%. In contrast, Hong Kong’s Hang Seng Index dropped marginally by 0.7% and Kospi was down 0.2%.

A Bloomberg report said copper futures surged 2.3% in New York while gold rose 0.8% on Friday. The Baltic Dry Index, a measurement of the cost of shipping for commodities, leaped 2.9% on May 22, the highest since Oct 7, which is an indication of recovery in demand for vessels to carry goods.

This week is also the final one for Malaysian companies, which quarter ended March 31, to report their latest financial performance.

OSK Investment Bank, in a report, said there were more portion of big caps that outperformed market consensus in terms of earnings compared to those that underperformed.

“A closer look at the results season so far reveals that things may not necessarily be all that bleak,” it said.

While it cautioned that the market was fairly valued at current level based on its KLCI target of 1,040 points by year-end, selected oil and gas, steel and construction stocks were likely to benefit from the upcoming announcements on contracts related to the stimulus packages and higher oil prices, it added.

KLCI: Possible sideways correction

2009-05-16T19:09:00.000+08:00

TREND ANALYSIS By K.M.LEE

While blue chips consolidate, some cheaper stocks may enjoy speculative plays.

REVIEW: Shares on Bursa Malaysia traded firmer in early deals, with the benchmark Composite Index (CI) leaping 6.20 points to 1,032.98 amid continuous bargain hunting nibbling, spurred by the sharply steadier US markets overnight.

The Dow Jones Industrial Average advanced 164.80 points to 8,574.65 the previous Friday, as stress test results and reassuring jobs data fuelled hopes the worst was over for US banks and the global economy.

A smaller-than-expected jobs cut in April added to the upbeat note and a spike in light sweet crude on the New York Mercantile Exchange gave investors a reason to buy energy-related issues.

In spite of the positive setting from the US, Asian markets were however traded mixed, with major indices criss-crossing the flat line, as some caution on China’s economic recovery held back investors enthusiasm.

Tracking the regional peers, the local bourse later turned sideways, lingering mostly in the green zones before tripping into the negative side in the afternoon on weakness in certain blue chips. Elsewhere, second and lower liners attracted significant interest amid speculative plays, reflecting a two-tier market.

Though the CI settled down 1.28 points to 1,025.50 at the end of Monday’s session, the overall market breadth appeared encouraging, with 448 gainers beating 362 losers.

Asian stock exchanges traded in a mixed note once again the next day, consolidating the recent steep advance, as grim macro data from China, such as the sharper-than-expected fall in exports in April, dampened hopes of a quick recovery of the world economy.

Given the lack of fresh market-stimulating leads on the horizon, Bursa Malaysia extended the range-bound correction, fluctuating between an intra-day high and low of 1,023.73 and 1,013.36 respectively throughout.

In lacklustre trade, the CI suffered only a minor setback, easing 2.48 points to 1,023.02 on Tuesday and in another tight trading session, the key index moved in and out of the positive territory before ending almost flat, shedding 0.18 of a point to 1,022.84 in mid-week.

Thereafter, the local bourse widened losses on greater liquidation pressure in the wake of fresh worries about the health of the US economy, dropping 10.85 points to 1,011.99 on Thursday before light bargain hunting activity came to the rescue, helping the CI to rebound 2.22 points to 1,014.21 yesterday, snapping the four-day losing streak.

Statistics: For the week ended yesterday, the key index finished at 1,014.21, down 12.57 points, or 1.2% against 1,026.78 the previous Friday.

Weekly turnover stood at 13.984 billion units worth RM9.677bil, versus 12.765 billion shares valued at RM9.870bil traded a week ago.

Technical indicators: The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index were on the downtrend. They slipped below the 80% bullish line on Monday to confirm the sell signal issued on May 7.

Likewise, the 14-day relative strength index weakened significantly the past week, retracing from a reading of 81 to the 64 points level.

Meanwhile, the daily moving average convergence/divergence (MACD) indicator had tripped under the daily signal line to trigger a sell on Thursday. Weekly measurements were waning, with the weekly slow-stochastic momentum index in danger of moving out of the bullish territory and the upward pace of the weekly MACD slowing.

Outlook: Bursa Malaysia crept into correction, with the bellwether CI generally range-bound in huge turnover the past week. Many people might think high trading volume is good for the market, but looking back the past precedence revealed it is not always so, which witnessed many previous bull rallies climaxing when trading volume was at its best.

Based on the daily chart, the key index achieved a high of 1,037.81 on May 5 on volume of 3.358 billion shares. A total of 3.255 billion units was traded the following day and it ballooned to 3.850 billion shares on Monday. On both occasions, the CI failed to scale new peak and it still is unsuccessful until today while volume stays robust.

Theoretically, this is not a good sign, as it depicts distribution at work, which could lead to the market peaking out later. For now, there are no worries, as the prevailing trend still is constructive, but investors should exercise extra care in their trading approach until a breakout is detected.

Technically, indicators are pointing to more consolidation, probably within a modest range. While blue-chips may correct in the short-term, some second and third liners are likely to enjoy speculative plays.

Initial support is pegged at the 14-day simple moving average (SMA) of 1,007 points. The next lower floor is seen at the 21-day SMA of 995, of which a clear violation could lead to a longer consolidation, if not a severe downward correction. To the upside, resistance is maintained at 1,040-1,042 points, 1,064-1,070 points and the next at 1,090-1,100 points band.

Markets Face 'Vicious Correction': Kass

2009-05-15T08:01:00.001+08:00

By: JeeYeon Park

In time, markets will go higher but there’s going to be a "vicious correction" along the way, said Doug Kass, president of Seabreeze Partners.

“It’s going to be bumpy and have a lot of potholes, so we’ll have to be cautious,” Kass told CNBC. “I’m more short than long for the first time this year.”

Kass predicted that the market had reached a "generational low" in early March.

“The good news is that I believe the view that we’ve seen a 'generational low’ is intact and we’re not going to go anywhere near where we were,” he said.

He used an unusual metaphor for the market rebound — involving tween pop star Miley Cyrus:

“The second derivative rally that I expected has certainly occurred,” he said.

“And I think stocks are ahead of fundamentals. I would call the [rally] a 'Miley Cyrus' recovery. It’s very popular now, but in both cases, Miley Cyrus and the stock market may not have much talent underneath, which is reflected by prices. And perhaps, it won’t be enduring.”

Kass also said that the investment plan of buy-and-hold is “semi-dead” and that the strategy must be mixed in with “an opportunistic trading style.”

Stocks still face deflationary collapse: Prechter

2009-05-15T07:56:00.001+08:00

Written by Reuters

NEW YORK: Longtime technical analyst Robert Prechter, who forecast the 1987 stock market crash, predicted this week that U.S. equities may plunge to half their lows hit in March as a deflationary depression bites, according to Reuters.

Oil and U.S. Treasury bonds are also locked in long term bear markets, while corporate bond prices will plunge precipitously by next year as broad economy, banking system and company earnings sustain more damage from a financial crisis that's akin to the Great Depression, he said.
The U.S. S&P 500 stock index's rebound by nearly 40 percent since it sagged to a 12-year closing low of 676 points on March 9 is not sustainable, Prechter said in an interview with Reuters on May 14.

"It's not the start of a new bull market," said Prechter, chief executive at research company Elliott Wave International in Gainesville, Georgia. "Our models are (showing) right now that it is a much bigger bear market than most people realize, something along the lines of 1929-1932," he told Reuters in a wide ranging interview. "It's a very rare event," he added.

"I think the next leg down will be at least as severe if not more severe than what we just experienced. So you want to stay on the side of safety," he said.

As in his 2002 book "Conquer the Crash," which warned of the dangers of a U.S. debt bubble and deflationary depression, Prechter continues to advocate safer cash proxies such as Treasury bills.

Riskier assets such as commodities, corporate bonds, and stocks which are currently anticipating that the severe global economic downturn may be bottoming, are likely to have short lived intense rallies, but within an inexorable long-term decline that may last another seven years, he said.

As banks continue to accumulate losses and corporate earnings fall, "the difficulties will probably last through about 2016," he said. "There will be plenty of rallies along the way."

Oil may rally further from current levels just below US$60 per barrel but the upside will be capped at about US$80 per barrel as the commodity is locked in a long-term bear market, he said.

In July, U.S. crude oil hit a record peak above US$147 per barrel and was just above US$57 per barrel around noon on May14.

"Deflation is coming, it's going to lead to a depression. We're not at the bottom yet," Prechter said. "I think we are going to have bouts of deflation separated by recoveries."

Prechter also painted a bleak picture for commodities like silver and is largely unenthusiastic about gold, believing the precious metal made a major peak when it rose above US$1,000 last year.

While gold may have already topped at above US$1,000 an ounce in March 2008, Treasury bond prices are likely to fall in a long term bear market, with huge government debt issuance being the main catalyst.

The benchmark U.S. 10-year Treasury note yield, which moves inversely to its price, hit a five-decade low of 2.04 percent in mid-December.

"People got very enamored with bonds and very enamored with gold and I don't like to be invested in markets that are over subscribed," Prechter said.

"The Treasury (Department) has taken on so much bad debt" at a time tax receipts are falling, that "there will be a slow, but very steady change in the way people will view the U.S. government," said Prechter. As a result, investors in Treasury notes and bonds will ultimately demand higher yields, he said.

The U.S. central bank will not be able to control the government bond market and prevent yields from rising, regardless of how much money the Fed uses to buy Treasuries, he added.

Next year, U.S. corporate bond prices will probably fall below their extreme price lows of December during the market panic of 2008 when investors fled riskier assets, he said.

"Corporates in terms of price have the big wave down coming. This has been a prequel," Prechter said.

"Many corporations who (now) say we can borrow more money and take more risks: those are the ones who will get in trouble," he said. "Many municipalities will default," he added. - Reuters

Investors more confident with better sentiment

2009-05-14T08:33:00.002+08:00

By YEOW POOI LING

PETALING JAYA: The recent upswing in the stock market shows that confidence has improved for both local and foreign investors, according to Bursa Malaysia Bhd chief executive officer Datuk Yusli Mohamed Yusoff.

He said the confidence was due to some encouraging stimulants such as the liberalisation of the local financial sector as well as signs of stability in the US markets.

“The current market condition offers a good opportunity for investors to invest in fundamentally good stocks with attractive valuations,” he said in an email reply to StarBiz.

Some fund managers contacted confirmed that they had been bargain hunting while there were others who had taken the opportunity to trim down their holdings.

Teoh Kok Lin, managing director of Singular Asset Management Sdn Bhd, said the fund management company was bargain hunting, particularly in the Chinese and Indonesian markets, given the attractive valuations.

“In Asia, the banking and financial system is healthy, plus Asian policy-makers are making good moves in lowering interest rates and increasing fiscal spending to revive their respective economy,” he said.

Kumpulan Sentiase Cemerlang Sdn Bhd had also increased its weightings in the market due to the improved market sentiment, said fund manager Choong Khuat Hock.

“There are signs that the economy is bottoming although there is no clear sign yet of a recovery,” he said.

Fortress Capital Asset Management (M) Sdn Bhd, meanwhile, indicated that it had reduced holdings in certain stocks given that valuations had become expensive due to the rally.

“We’ve started to trim down positions this week as some of the stocks in the portfolio, including offshore investments, have risen sharply. We think first-quarter results would not show recovery yet and there might be some profit-taking,” said chief executive officer Thomas Yong.

While sentiment has improved significantly, financial performance in the first-half year is unlikely to be outperform. “People can tell that we’ve seen the worst and, even if we haven’t recovered in the second half, we can still stomach it,” Yong said.

Sellers were lacking at the current market levels, making it unattractive with blue chips seen as expensive compared with regional heavyweights, he said, adding: “The Malaysian market is likely to be flattish for a while and if it’s stuck at present levels, the smaller-cap stocks might see some activities,” Yong said.

Aberdeen Asset Management managing director Gerald Ambrose said the current market conditions were not one “to chase stocks.”

“It’s difficult to say where the market direction is as a lot of events can change sentiment quite quickly. We were doing more topping up and until recently top slice some stocks. We tend to be conservative,” he said.

Nonetheless, there were still high-quality companies worth looking at and Aberdeen was watching the stocks’ performance, Ambrose added.

~~TheStarOnline~~

Our Top Stock-Market Signal Says "Buy"

2009-05-14T08:27:00.003+08:00

By Dr. Steve Sjuggerud

Get ready. Our top stock market signal is just about to flash a "buy."

And this is big news because going back to the 1920s, this signal's track record is fantastic...

In fact, the last time this signal flashed was December 2007. Back then it said "GET OUT OF STOCKS." It hasn't wavered since... The signal has stood its ground, saying "stay out of stocks," since 2007. Don't you wish you had paid attention to it?

Here's the secret to the market-beating success of this signal: It has a history of keeping you out of the big downturns in stock prices. The signal captures most of the uptrend as well.

Let me share this signal's incredible track record. Our "baseline" is the overall stock market – the S&P 500 Index. This index has compounded at 5% a year since 1926, not including dividends. (Yes, it's true... Most people think the stock market has done better than that. But the recent bear market reduced the historical return.)

When the signal said "be in stocks" – two-thirds of the time – stocks rose at a compound rate of 11% per year (again, not including dividends).

The other third of the time, when the signal said "be OUT of stocks," stocks actually compounded at a negative 6% per year.

This incredibly simple idea comes down to one question: Are stocks above or below their recent average prices?

If stocks are above their recent average, then you want to own them. If they're below it, then you don't want to own them.

When the S&P 500 Index is above its 45-week moving average, stocks compound at an astounding 11% annual rate. And when stocks are below it, they lose money at 6% per year.

Here's a simple graph showing how much money you'd have made since the beginning of 2000 following this system, versus the index. We own stocks above the moving average and move to cash earning 3% (just to keep the math easy) when stocks are below the moving average.

The blue line is the money in our little "system." You're in cash when the blue line goes "straight." The black line is your money if you just held the market (not including dividends).

You can see a few things right away...

The first is, you did significantly better than buy and hold. Most importantly, you cut your losses in the two big falls – the one from 2000 to 2003 and the one from 2007 to today.

With results like these, why doesn't everyone simply own stocks when they're above the line?

Before I go on... there is one small issue here that can eat into your returns... something called "whipsaws." That's when the market crosses over the line one week and then crosses back the next week. The argument goes that the transaction costs associated with jumping in and out on these false signals would eat up your excess gains.

This worry has merit, but you can nearly get rid of whipsaws quite easily by increasing the threshold it takes to get into a trade. When you raise the threshold to enter the trade to 2% above the moving average, you cut the whipsaws down by over 80%.

And even though you've made it tougher to get into a trade, the amazing part is, you don't affect your results much. In this example, not only would you have ended up with more money, but you'd have had far fewer transactions, meaning lower costs.

You might disagree with this system. You might say it's too simple or dumb. But it's worked darn well over the last 80 years... and over the last decade.

And right now, this signal is about to say "buy" – because the old high data points are about to drop out of the 45-week average, and low ones will replace them.

Remember, when it says "buy" stocks rise at 11%+ a year... Ignore it at your own risk.

~~DailyWealth~~

Buy Stocks While Valuations are Attractive: Strategist

2009-05-13T22:09:00.002+08:00

By JeeYeon Park

The recession is likely to continue throughout the year, but valuations for stocks are looking attractive right now, said Jack Liebau, president and portfolio manager at Liebau Asset Management.

“There are some encouraging signs,” Liebau told CNBC. “I don’t think we’re going to have a sharp ‘V-shaped’ recovery, but inventories are very lean and that bodes very well for some industrial machinery companies.”

Libau said historically, stocks anticipate economic recoveries by 6 to 9 months. He said if the economy starts recovering from the spring of 2010, then that would indicate that the stocks would bottom at the middle of this year, if they haven’t done so already.

Why China Does Stimulus Best

2009-05-13T22:06:00.002+08:00

By: CNBC.com

Global stocks were higher Wednesday despite data out of China showing the country's industrial output rose less than expected in April. But experts tell CNBC there is real growth potential in the Asian economy.

China's Stimulus Measures Are Working

The Chinese government's stimulus measures are working, says Ben Simpfendorfer, chief China economist at Royal Bank Of Scotland. He tells CNBC that the stimulus can sustain growth for a few years.

China's Economy May Be Stabilizing

Chinese April retail sales were better-than-expected, and Daniel Soh, regional economist at Forecast says this may indicate that the economy may be bottoming in the second quarter. However, he tells CNBC he doesn't believe that China's in for a robust recovery any time soon.

China Has Real Domestic Growth

There is a real inner growth story happening in China, especially when one looks at the second- and third-tier cities, notes Tim Mulholland, MD at China-America Capital Company.

Landing Returns in China

Great opportunities are emerging in China's commercial real estate market, notes Jack Foster, head of global real estate at Franklin Templeton Investments.

Upside Risk Seen in Euro-Dollar

Over the short term, Jan Lambregts, Asia head of research at Rabobank International sees a lot of upside risk in the euro-dollar cross.

Risk Appetite for Currencies Wanes

We are at a crossroads with regards to investor attitudes towards taking on risk, Dwyfor Evans, vice president and senior macro strategist at State Street Global Markets said.

Australia's Mild Recession

Experts are expecting a mild recession for Australia, mainly because of the country's massive budget deficit, Colin Whitehead, analyst at Fat Prophets, said.

Malaysia to merge main, 2nd boards of stock market

2009-05-11T12:11:00.001+08:00

KUALA LUMPUR: Malaysia will merge the main and second boards of its stock market under new equity fund-raising guidelines to take effect in August this year, the stock exchange regulator said on Friday.

The reforms, first announced in March last year by then Prime Minister Abdullah Ahmad Badawi, are aimed at allowing a more efficient access to capital and investments. The two boards have a combined market capitalisation of around 740 billion ringgit ($211 billion).

The reforms will bring Malaysia’s equity guidelines in line with regional bourses, said Zarinah Anwar, the chairman of the Securities Commission (SC).

“This is by far the most robust process that we have undertaken in reviewing our regulatory approach,” she said in a speech.

Companies currently listed on the main and second boards will be migrated to the new unified board known as the “Main Market”, Zarinah told reporters later.

“There will be no delisting (of companies) pursuant to the merger of the two boards,” she said.

Companies currently listed on a separate market, the Malaysian Exchange of Securities Dealing and Automated Quotation (MESDAQ), will be subsumed into a new market to be called the ACE Market. Its capitalisation is around 4.75 billion ringgit.

Among the rules, applications for private placements and rights offerings will no longer require the commission’s approval, Zarinah said at the launch of the new framework.

Approval will still be required for initial public offerings, acquisitions resulting in a significant change in business direction or policy, secondary listings and cross listings, and transfer of listings from the ACE Market to the Main Market.

Dr Doom: "How To Repair A Failed System"

2009-05-08T09:05:00.002+08:00

Today on CNBC Nouriel Roubini, the NYU Stern School of Business professor aka "Dr Doom" said that the stress tests for 19 major banks are not "stressful enough."

The results are supposed to be released later today and without even waiting for them - Roubini charges the tests lack credibility and don't even go far enough because the way he sees it, the actual economic data are far worse than the worst case scenario of these tests.

Over the past few days, there has been a slow leak of the results of stress tests on the nineteen largest banks. While many in the media will view today’s formal announcement of the results as anti-climatic, it could well be a watershed moment of the financial crisis.

The reason is that the regulators will effectively be moving towards a model for separating the good banks from the bad banks.

As pointed out in the NYU Stern School of Business book project, “Restoring Financial Stability: How to Repair a Failed System”, this is a necessary step for resolving the financial crisis.

Up until now, the market has had to surmise which banks were in trouble based on whatever limited information was available.

Over the past year, using this information, the stock market has certainly picked winners and losers.

Of the nineteen banks, seven of them – Bank of America, Capital One Financial, Citigroup, Fifth Third Bancorp, KeyCorp, Regions Financial and SunTrust Banks -- have lost more than 70% of their value.

Because the market usually knows best, our guess is that these banks are at the forefront of those that have been told to raise additional capital. Of course, the chances that these banks can raise outside money are slim to none.

The reason is that, while it was not the government’s intention, the results of the stress test will show which banks are insolvent, that is, which institutions have expected future losses on loans and toxic securities in excess of their ability to cover them.

The government will try and spin the results positively, and argue that most financial firms are in good shape and no one firm “failed” the test. But the market should know differently. Because the stress tests applied consistent standards across banks, the relative ranking of the banks will be quite accurate. The losers will be out there for us all to see.

And that is all we need because there are four pieces of evidence that suggests things are much worse.

First, even with the recent economic news, the stress tests weren’t worst case scenarios; in fact, for some of the components, like unemployment, reality is actually already worse than the more adverse scenario. And at the rate at which job losses are taking place, the unemployment rate in the fall of this year may be already higher than the unemployment rate assumed in the more adverse scenarios of the stress tests for 2010.

Second, in just the past six months, the IMF has doubled its estimates of aggregate losses for loans and corresponding securities to $2.7 trillion, resembling our estimates at RGE Monitor of $3.6 trillion. If true, these estimates put the financial system on the brink because the financial sector holds half of the losses. Since the nineteen largest banks own the vast majority of assets, it therefore follows that they must also be holding the losses.

Third, each bank clearly had the incentive to sugarcoat their expected losses to regulators. Nothing good could come from aggressively marking down their books. So while the losses are calibrated to be consistent across all nineteen banks, the overall level of the losses will be downward biased. This explains why the stress tests don’t completely jive with either the above market estimates or the stock market drops.

It therefore follows that those who were ranked worst, and need the most capital, are most likely to be near insolvent.

And, finally, the market capitalization of banks will respond not just to announced capital needs (or lack thereof) but also to what news is contained for bank prospects in future. Whatever precise details are provided today will be crucial. Of particular note, the stress tests go out just two years while a number of assets on the bank’s balance sheets come due later, such as option adjusted rate mortgages in 2011 and leveraged loans in 2012 and 2013.

We have seen this issue before. Put simply, a bank may be deemed well-capitalized from a regulatory standpoint today as losses will be recognized only in future; however, investors will anticipate these losses and bank’s market capitalization may get eroded much faster. A case in point here is Bear Stearns which was deemed to be well-capitalized from regulatory standpoint even as its market capitalization approached zero in March 2008.

Banks deemed insolvent or near insolvent will thus find it hard to raise fresh private capital unless they take tough decisions to restructure their assets and convert some existing claims – notably debt – into equity capital.

It is unlikely that even forbearance, time and low borrowing costs because of government subsidies and guarantees, will heal their wounds. Now that deposit rates are close to zero, and banks have borrowed over $300 billion at cheap rates with FDIC guarantees, they can earn a net interest rate margin (the difference between their lending rate and borrowing rate). This will help rebuild capital with earnings before provisioning for loan losses. But such loan losses will be so large for some banks that time and high net interest margins will not resolve their insolvency problems.

It begs the question: when should we start dealing with these insolvent banks? The stress tests have addressed one market failure – they have provided information not available to markets and separated healthy banks from troubled ones. Governments and regulators should now address the second failure – put a stop to the waiting game played by controlling management of insolvent banks and enforce a “pre-packaged bankruptcy”, availing of necessary options such as asset sales, debt-for-equity swaps and good-bank/bad-bank separation.

Victor Hugo, perhaps the most influential French writer, once said: Nothing is stronger than an idea whose time has come. It is time to resolve insolvent banks.