Local Scene

KLCI has presented a trading opportunity despite all criticism going around. KLCI show an divergence outlook during the Apr - July period. KLCI scored a new high in July but not RSI. Market tanked for three weeks already. Extreme Fear condition also give rise to oversold of equity in short term. The gap down hammer last Friday is interesting. A classical example of bull and bear is in a fight within a single day. As usual, the programmed sale is executed fast in the early trade, but the greedy side of market emerged so furious to load up from the low of market. As smart investors, you should buy only after the gap is closed. you should trade only when edge is on your side.

Global Recession 2012

Negative news has been going around the world for the last two weeks. Take a look at the US market. For the last two trading weeks, Dow has corrected more than 10% for its peak with extreme high volume only seen during the global recession 3 years ago. US economic problem is getting into cronic situation. well what is taking stage in the US is "EGO". If you screwed-up, confess and take the paint and move on. Instead of taking the boring and conventional move (ie to deleverage its debts be it public or private) the US had choosen to inject the half dead body with another dose of deadly steriod to extend it economic life without taking a back seat to rebuild its immunisation.

QE1 & QE2, possibly QE3....these are all short term measures to the economic health. But what choice does the US has? Do you are damn, dont you are damn. Just google the google the gobal recession 2012, i m sure thousand of listing. The follow through is mounting. Fear among investors is building up typically a 10% correction in major market. As market situation is always exaggerated by news spread sporadically. with the advent of internet technology, news spreads, whether rightly or wrongly even faster than light speed. the interesting is, during bad time, investor will only focus on the negative points, positive points are ignore. Hence, market could collapse faster than you think.

Besides VIX, another best measure of fear factor in the market is Gold price.

The Gold price has doubled since 3 years ago. Probably you are aware, investemnt communities do not believe in investing in gold as it does not produce income, worst is you need to incur cost to safe keep gold. Seriouly, i believe a lot of activities has been going around to promote gold and instead of the everlasting believe that US will continue to grow. Hence, gold price always has inverse relationship equity market. why would for the last three years both have direct relationship. Interesting. for me is simple, really money has gone in the gold, where as the excess money (ie money not earned from productive acitivities has gone in the world equity market). Equity market has been pushed up artificially. Investors are not worry after all, those money are free. Hence, printing more money is theoritically boost the economy in short term but you cant control where will the money goes to. As there was no real fundamental supporting the upsurge of equity market for the last three years, the equity market has an artificial market height. It will be disasterous fall when the equity buble is prick.

Hence put your money in where real money reside. A lot of people think that Asia is going through Real Estate bubble. It is a yes to a certain extend as the demand for property has suddenly surge while supply side take times. But atleast these are real money. How do i know those are real money? Well quick money will not be put in property as the turnaround time is long. So long as the US economy does not recover in real manner, the property bubble will continue to hold. The major pressumption is the young demographic population in emerging asia. Should there is correction in property market, it would be temporary in nature. Eventually, with the growing population with concentration of urbanisation, it is a pillar to the price surge in property market. Just compare the population in Tokyo, New York, London to Jakarta, Kuala Lumpur, Bangkok. There is tremendous opportunity.

10 child steps to make one bold move.

Remember when we were born, all we know is to cry. A new born baby is heavily dependent on parent to take good care of him. After 6 month the baby starts to turn his body, in the 7^th month the baby starts to learn to sit on the floor and in the 8^th month the baby starts to crawl and in the first year anniversary, most of toddlers probably can stand and learning to walk. As the growing process continues to accelerate, not realizing that actually the kid not only can run but can mumble a few words such as mama, papa or mumum. These is what I called a bold move which the parents who spend so much time and effort to groom the baby suddenly feel all their efforts are paid off as the toddler can call them mama and papa.

Nothing could take off in a big way if without the child steps taken place. In relation to this simple principle in life, I wish to apply it into two scenarios, self development for individual and business expansion in corporate world.

In this beloved country of Malaysia is lived on with 27 million populations. According to statistic, 30% of the population is between 20 to 45 years old which made up to approximate 8 million people. These 8 million people is deemed the working forces for the country and most likely the bread winner of their own family. In short they are the ones who make money in our society. But from our own observation on people surrounding us, you will realise some of the people could earn money easier than others, of course I m referring to the legitimate means. Let’s just apply the simple 10:90 percent rule, highly likely, 90% of the working forces approximately 7 million people is working for the remaining 1 million people? Really! Is that true do you have any statistic to support? The answer is NO! Deep in your heart, you know this is absolutely correct, you probably choose to deny it as you have not seen the real proof. To give yourself more assurance, just look people around you, how many of them is working for people and who is the unique one that is an entrepreneur! I sure you get the answer now.

Ok, ok! what is there to do with child steps? It simple, this 1 million people who have planned their child steps properly over the years and they have achieved their first bold move or multiple moves in realizing where they are now. the 7 million people are still grappling with their child steps. Going back to the first paragraph, a baby would run if he has not learned to sit, crawl, stand and walk. It is a natural progression that must take place. So there is no easy way out. Don’t not get me wrong, I m not against you working for people. In fact someone always have to work for someone. Everyone in the society is inter-linked. The only question you must ask is what are your child steps for you to progress in your career if you are working for people?

Next, how would child steps apply in business world? All of us know all private businesses are owned by the 1 million people we mentioned above. These people were successful in the planning their child steps that culminated to owing a successful business. Usually a successful business leads to more successful ones. It is true? Let’s put things in perspective, once a business reached a certain size and profitability, the owner will float its business in the stock exchange. The purpose of doing this exercise is to raise public funds for business expansion apart from enriching himself and enroll into the multi-million club. Over-night, the business owner has achieved another bold move in his life. The money he received would have not been made for another 10 years if his business is not floated.

Well, as the saying goes, easy come easy go! The entrepreneur is so excited with its new fresh funds in hand that he can play with. He could have over-confident that another bold move could be achieved in a very short span of time. Now with so much money definitely you could expand your business easily. But this timely round the child steps would have been forgotten! A detail due diligence could has not been performed or expand business to new territory which is not familiar with. After all those are public monies. We have seen many newly IPO businesses and turned bad after just a few years or public funds were used up within short span of time. So no matter how big is the business is and how advance business is, a child step methodology apply all the time. Observe company like YTL, Public Bank, Genting how often do they make a bold move? They have learned the hard way!

KLCI Rebounded @ 20110413_1230pm - Follow up

My prediction was not correct! KLCI has surged added + another 7 points. Look at the LONG candle in the white box. Beyond my prediction, Axiata and CIMB has emerged as saviour. further PChem has also traded above the resistant level of RM7.25. Look like the short term bullish trend will continue tomorrow morning.

Next question, how to improve my observation or prediction of market? if you observe the chart on the regional market, Malaysian market was closed from 1230 to 1430 local time but other regional markets are trading as indicated in the box. During this period all regional market has surged to new high which i believe is the catalyst for the Malaysian Market to surge higher when it started trading at 1430. Looking back at the KLCI chart, the KLCI move up only in the first hour of trading. Something that i missed! Hence, the learning point here is we could deploy a arbitrage strategy here in the second half trading session at KLCI. Great!

KLCI Rebounded @ 20110413_1230pm

Listed above are two 30-minute chart of KLCI and PChem. KLCI has rebounded since the opening bell after last two days of fall. Obviously KLCI's rebound foundation was grounded by the third largest counter by market cap (RM57B) ie PChem. KLCI has added +1.17 points while Pchem has contributed +2.3 points to KLCI.

As the 1230pm, PChem has reached its potential for the day?? PChem will be fighting with a window resistance created on a gap down on 20110412_0930. This is critical, window resistance rarely being broken for the first attempt. Assuming the these event does not happen after lunch, who is the next saviour to further advancement of KLCI? Lets examine the list above:

AMMB + 0.7
Tenaga + 0.5

AMMB is not a market mover without RM20B market cap
Tenaga is reasonably big RM33B, but it is not in a bullish mode.

So what is the conclusion? KLCI should be at the following mode
1. retreat from here (highly likely) or
2. maintain (likely) or
3. advance (not likely - unless a new saviour appear but who?)

Sarawak Election 2011

The Sarawak Election 2011' Poll day will be on 16 April 2011 ie this Saturday. whats the big deal, you may ask! Well it is a big deal for Malaysian Political climate. Malaysian Long-time ruling party Barisan Nasional (BN) has almost lost its simple >50% majority. Where the opposition front (Pakatan Rakyat) has convincingly denied the 2/3 majority of BN which it control for more than 2 decade under the Mahathirism era.

The next question is what is there to do with Sarawak Election? well, the sudden death to cause BN to still won a simple majority was that there were full support from Sarawak people on BN.

Well the wind of change will be blown up again! BN may not be that lucky this time! i like what Dali said in this blog that in the mind of Sarawakian "you peninsular people do it without telling me first, this time i will do it before you!" Hah! remember it may sound a little bit of kids stuff, mind u, looking at the progress in Sarawak for the last 30 years, it wont be surprise that more 70 to 80 % of population (well i dont have any support, just my guess) is still not that well politically educated. On the flip side, BN may continue to win big as Sarawakian especially those from rural area are not that difficult to buy! that explain how Taib could hold on to the political grip for the such a long period of 30 years ok!

Hopefully the wind of change in middle east in Egypt, Libya and others countries could be blown to the State of Hornbill.

Maybank Xinhua08.com

Read in the FT today, Maybank has teamed up with China Xin Hua news agency to set up a news web site. The website will display Malaysian economic news in Mandarin! what a tremendous change in terms of use of Mandarin in Malaysia.

Money and wealth can really do wonders. Imagine that the Malaysian Chinese NGO has been fighting for decades on their rights to promote and use of Mandarin has been always obstructed by various parties. However, when it is promoted by the biggest bank in Malaysia of course with concurrence of Najib, everything seems to be ok.

According to the news, Malaysia has been selected as one of the 11 QDII (Qualified Domestic Institution Investors) allowing Chinese nationals to invest abroad.

So where is Perkasa, isn't it you are suppose to oppose to this idea.

Well, a mega trend on new lingua franca in world is materialising. for the last two century, English was used as the world language. and for the last 50 years, the whole word is learning Japanese as everybody wish to do business with Japan. Now, its Mandarin's turn. Wonder when will Tamil be used as the world language! Interesting isn't!

The Knee-Jerk Effect

Wow, most of the ASIAN market dropped more than 2% (including Malaysia which is rare by our standard due to low foreign shareholding compare to other regional market) yesterday. The fear factor is fast and furious! The foreign funds usually will sell first ie take profit whenever there is little disruption to their financial modeling.

Yesterday selling was mainly due to the fear that the central banks of other Asian Countries (OAC) will follow China foot step to tighten economic policy which will eventually slow down the aggregate demand. So the million dollar question now is will OAC follow suit? or rather do OAC need to slow down its economy?

Just look at two parameters, GDP growth and Headline inflation. GDP growth tell you whether your country is doing better than before or vice versa. Assuming GDP growth positive, inflation indicates whether the economy has over-speed as a result of fiscal stimuli and easy monetary policies implemented in the past two years. Over loosening of economic policy will give rise to over aggregate demand of goods and services underpinned by low cost of funding.

Overall, the stimulus packages last two years were successful in pulling the region out of recession. with most of the OAC registered positive high teens GDP growth in Q1 2010 due to low base in Q12009. The positive growth has eventually slow down to single digit on declining trend in subsequent quarters in 2010. Further, most of the analyst in town is projecting moderate growth in OAC for 2011. Hence, i really do not see any demand pull inflation is going to be significant.

Comparing with China, it is totally difference story. China continue to register positive GDP growth during Global Financial Crisis in since 2008. Its insatiable appetite for natural resources due to increase in aggregate demand of good and service for local market has been pushing inflation into new high every quarter, hence China official is concerned about the economy is over-speeding. China actions on tightening is policy i thinks is justifiable. but not OAC.

So, any pull back in OAC market will be a good time to enter?

Diverging Trend

Since the last posting in 14 December 2010, Dow has marched ahead added 800 points (7%). Dow has defying strongly against a double top in making when an shooting star appeared on 7 Dec 2010. now what is the market telling us? QE2 is effective? Market is confidence is building up? well i m not convinced.

From Shanghai and Hang Seng perspective, decoupling theory is in played. These markets have moved up a little since Dec 14 and now back to original state as opposed to Dow has advanced 7%. China has been tightening its economic policy with economy overheating in mind. Headline inflation is point up. It is interesting to see that Shanghai completing its symmetrical triangle soon, probably signaling no further tightening in near further future.

Take a closer look at BDI which measure the international shipment activities has just bottom recently. Any significant recovery in BDI may provide an indication that China economy will pick-up again.

I am sure the Big Picture remain unchanged that the global growth will be from Asia in coming years. China being the economic locomotive in Asia, any positive movement in Shanghai, will spill over to other ASEAN economy. So put on your seat belt, sit tight as Shanghai is setting to take off.

Dark Cloud is Gone?

The Dow is portraying an interesting picture now! The resistance at 11450 level was broken thanks to the supercharge fuel added on 1 Dec and 2 Dec. Look at the Marubozu candles and volume on these two days. it is sufficient to pull the market out of its gravity zone. so whats next? The Year End holiday season and Christmas holiday are just around the corner. Expect retreating in volume in coming weeks. Window dressing activities will also heat-up during this period. Hence, the upward trajectory in Dow should be discounted. Still, risk seems to be lesser now as the shooting star fear on 7 Dec is conquered by the advancement these couple of days.

Now lets examine Shanghai market. The down trend resistance at 2900 level was also broken thanks to super charged fuel on last two days. Look at the confident marubozus and volume on 10 Dec and 13 Dec. Volume raised by easily 30% from the previous week. This signifies the window dressing activities. Hence, any upward movement should be discounted. Nevertheless, the movement should be monitored as it poses great opportunity upward continuation trend after the temporary correction since early November. The correction, I would believe was part of the profit taking activity by investment communities to realise paper gain wherever possible for distribution and lock in performance. These activities subsided toward end of Nov 2010 with volume retreating.
However, the sky in Hong Kong is still gloomy. the formation of H&S is still in the making. Although the profit taking is subsided as index stabilised with volume retreating, fresh buying is still pending unlike US and China Market shown above.

Conclusion, out of 3 markets we have 2 positives and 1 negative, i would suggest nibbling activities should commence now.