Thursday, September 29, 2011

Daily Dow Jones Is Trading Within The Box

Wall Street Outlook: Dow Jones dips 180 points after rising as much as 126 points
The Dow Jones jumped as much as 126 points following news that orders for U.S. capital goods climbed in August by the most in three months.

However, sentiment turned bearish on news that the European Commission is resisting a push to impose bigger writedowns on banks’ holdings of Greek government debt than those agreed at a July 21 summit. The commission opposes ideas that are being floated by some government officials to get banks to accept bigger haircuts.

Dow Jones Daily Is Trading Within The Box


Wednesday, September 28, 2011

FBM KLCI: Headline Driven Market

Bursa Recap: KLCI up 7.4 points in volatile trade
Asian stocks pared their earlier gains as investors awaited news of a concrete resolution to Europe's debt crisis.

The KLCI gained 7.4 points to 1371.6 but trading volume decreased to 850 million shares worth RM1.52 billion against Tuesday’s 909 million shares worth RM1.6 billion as investors turned more cautious following fading optimism over plans to contain the euro zone debt crisis.

Plans to increase the financial firepower of the euro zone's €440 billion rescue fund face opposition in Germany, while a Financial Times report said that a split had opened up within the currency bloc over the terms of Greece's next bailout.

FBM KLCI Outlook: A headline driven market
Near term market will remain choppy on heightened concern that European leaders have differing views on resolving the eurozone’s debt troubles, as fears of a disorderly default would be similar to and possibly more damaging than Lehman Brothers’ collapse. According to newswire, the troika (EU, ECB and IMF) is scheduled to resume its mission to Athens today while the German parliament will vote on changes to the European Financial Stability Facility (EFSF) rescue fund.

Technically, there could still be legs left in this rebound but the renewed selldown on Wall St and European markets overnight could dampen sentiment again. Immediate supports are 1310 (26 September pivot low), 1300 and 1293 (38.2% FR from 311 low and 1597 high). Immediate resistance levels are the 1377-1387 gap (23 September), 1393 (10-d SMA) and 1400 psychological barrier.

Daily KLCI Has A Rocky Road Ahead Near 10-Days SMA Despite Breaching The 5-Days SMA Resistance

FBM KLCI 29-09-2011

Source: HLeBroking

SP Setia: Overweight: Takeover Offer From PNB

September 29, 2011
Price Target: RM4.12
Share price: RM3.50

# PNB and parties acting in concert (PACs) have made a conditional offer of RM3.90 per share (11.43% premium) and 91 sen per warrant (97.83% premium) for property developer SP Setia.

# As of Sept 27, they have a combined 33.17% stake in SP Setia (Skim ASB: 20.75%, PNB: 8.05% and Amanah Saham Wawasan 2020: 2.02%).

# The offeror intends to maintain the listing status of the company, while still maintaining more than 50% stake in SP Setia.

# The board of directors (BOD) has issued a statement that it feels the offer price undervalues the company, and that they would be seeking a competing offer, and will be writing to the Offeror to enquire whether they would be willing to improve on their offer price.

Financial impact

Pros / Cons
# Near-term positive, given that there is a good chance of a better offer price materialising, which in turn may drum up M&A excitement.

# We agree with the BOD that the offer price of RM3.90 significantly undervalues the company as it is at 15% discount to our RNAV estimate of RM4.58, and appears unattractive vs. the street’s target price range of RM4.12 to RM5.41

# Long-term investors who believe in the intrinsic value of the company should not accept the offer despite the premium to current share price. Investors who have
not sold out of SP Setia amidst all the external fears should stick to their conviction.

Sales slowdown; cost escalation; delays in launches.

No changes, due to lack of clarity on key details such as exact product mix or project margins.

Rating - Upgrade to Trading Buy
Now trading at 24% discount to RNAV; highly liquid proxy to property sector, strong product concepts and pipeline; consistent dividends.

High level of foreign shareholding ~20%) and liquidity means there could be more volatility in the near-term before the share price stabilises. Still trades at highest P/E multiple in the sector (19x FY11E P/E).

The M&A angle will add near-term excitement to the share price, and we now upgrade SP Setia to a Trading Buy.

Source: HLIB Research

Tuesday, September 27, 2011

Dow Jones Is Building Its Bottom Near 10600 Points

Wall Street Recap: Dow Jones jumps 272 points on hopes of progress in Euro crisis
Following the 6.4% weekly slump last week, the Dow Jones rebounded 2.2% to 11044 amid hopes of coordinated action from euro zone policymakers to contain the region's debt crisis, shrugging off the 2.3% drop in July new home sales report.

According to newswire, European policymakers are considering expanding a rescue fund known as the European Financial Stability Facility (EFSF) and Germany is set to vote Thursday on increasing the EFSF's lending capacity. Meanwhile, Congress is likely to pass a stopgap spending bill this week to ensure government agencies can keep operating past Friday.

Daily Dow Jones Is Building Its Bottom Near 10600 Points

Source: HLeBroking

Crude oil outlook: SupportsAt US$70-75; Resistance At US$90-95

Crude oil: Supports: US$70-75; Resistance: US$90-95
# Crude oil jumped 1.8% to US$81/barrel overnight on hopes of stronger action to solve the eurozone crisis and avert wider financial contagion and global recession. To recap, it tumbled 34% from 52-wk high of US$114.8 to its lowest US$75.7 in early
August amid rising risks of global recession.

# If prices can breach the mid Bollinger band of US$85, we expect more upside targets to US$88 (50-d SMA) and US$90 (downtrend line resistance). Beyond that, it is likely to face tremendous hurdles at US$92.6 (upper Bollinger band) and
US$95.4 (200-d SMA).

# On the other hand, deteriorating economic outlook and failure to tackle the euro-zone debt crisis in the near term will dampen sentiment and trigger another round of selldown towards US$75-79 territory. A global recession may see prices sliding further towards US$65-74 levels.

Weekly NYMEX OIL: Medium To Long Term Support At US$64-74/Barrel
Nymex Crude Oil 27-09-2011

Daily NYMEX OIL: Strong Downtrend Line Resistance Near US$90/Barrel
Nymex Crude Oil 27-09-2011a

HLIB Research

KLCC Property Earnings Review: Overweight: Refinancing Its Debt

27 September 2011
Price Target: RM3.46
Share price: RM2.95

# KLCC’s 50.5% owned subsidiary, Midciti Resources Sdn Bhd has agreed to fully repay its bonds outstanding to parent company PETRONAS, at a premium of RM35.31m.

# The bonds in question are the RM199m secured Bai Al-Dayn Bonds and the RM600m 13-year bond, due in Nov 2011 and Nov 2012 respectively.

# The purchases of the existing bonds are to be funded entirely via the proceeds to be raised from Midciti’s proposed issuance of a RM880m Sukuk.

Financial Impact
Uncertain. We estimate interest costs for these two bonds to be in the region of RM67m, or 47% of last year's total financing costs. However, the interest rate for the new RM880m, 10-year sukuk have yet to be announced.

Pros / Cons
Mildly positive as we believe management is likely to be motivated by the opportunity to refinance existing debt at more attractive rates, apart from extending the repayment timeline.

38% EPS dilution from RCULS conversion by the parent company, KLCC Holdings.

No change.

Rating - HOLD
- High occupancy rates (>90%), consistently strong human traffic and desirable tenant profile due to prestigious and desirable KLCC address.
- Stability of rental yield and scope for capital appreciation.

- Uncertainty over extent of dilutive impact from RCULS.

# In the absence of major catalysts, we maintain our HOLD rating and target price of RM3.46 (15% discount to RNAV).

# The RCULS issue needs to be resolved before KLCC Property can enjoy re-rating.

Source: HLIB Research

Monday, September 26, 2011

FBM KLCI Tumbles 34 Points, Off Intraday Low Of -55 Points

Bursa Recap FBM tumbles 34 points, off intraday low of -55 points
Asian stocks tumbled as lack of apparent progress on solving Europe’s sovereign-debt problems and concern of a hard landing in China’s economy fueled risk aversion and sent investors out of equities. Tracking the slump in key ASEAN markets (i.e. SET: -
5.7%; PSE: -4.2%; JCI:-3.2%), FBM KLCI skidded 34 points or 2.5% to 1331.8, off intraday low of 1310.5 (-55.4 points).

Meanwhile, persistent reversal of liquidity flows on flight to safety in the greenback weakened the Ringgit to 3.18/US$, its lowest close in 14 months.

FBM KLCI Outlook: Taking cues from overseas
The overnight strong rebounds on Wall St and Europe markets should bode well for Bursa Malaysia today. However, any rally will not be sustained unless it is accompanied by actual progress on resolving the euro-area crisis and/or supporting global growth. Hence, investors’ confidence will remain fragile, as continuous institutional liquidation activities are likely to the market in the short term.

On the monthly chart, the KLCI remains vulnerable to further downward correction towards 1259 (lower Bollinger band) and 1200 (50% FR) in the medium to long term. Immediate supports are 1310 (26 September pivot low), 1300 and 1293 (38.2% FR). Without a firm recovery in euro-zone solution, any market bounce-ups from an oversold position will likely be short-lived. Based on the daily charts, resistance levels are 1363 (lower Bollinger band), 1383 (5-d SMA) and 1409 (10-d SMA).

Daily KLCI Shows Steeply Oversold As RSI Falls Below 20
FBM KLCI 27-09-2011

Monthly KLCI Shows More Downward Correction In The Medium Term Amid Bearish Technicals
FBM KLCI 27-09-2011a

Source: HLeBroking

SP Setia: Overweight: A Second Act In Melbourne

September 26, 2011
Price Target: RM4.12
Share price: RM3.08

# SP Setia entered into an agreement with Portbridge Pty Ltd to purchase 2.23 acres of vacant freehold land located at the intersection of 557-563 St. Kilda Road and 1-23 Moubray Street, Melbourne, Victoria, for AUD25.25m, or AUD260 psf (RM807 psf).

# The said land is located in the South Yarra suburb of Melbourne, approximately 4km south-east of the Melbourne CBD, and is located close to a number of amenities as it is located in a mature neighbourhood.

# Management intends to launch an AUD250m (~RM800m) residential project within 12-18 months.

Financial Impact
# The acquisition deadline is 30 June 2012; assuming launch takes place 18 months thereafter, no major impact to earnings is expected until post FY13.

# In the mean time, management's focus will continue to be on KL Eco City, Setia Alam / Eco Park, Setia Sky Residences and Fulton Lane in Melbourne.

# No impact to net gearing, even assuming 100% loan on land cost (remains unchanged at 0.2x).

Pros / Cons
#We are positive on the deal as we believe the price is fair (AUD2,796/m2), given that SP Setia paid AUD6,912/m2 for the Fulton Lane development.

# This deal allows them to capitalise on their success of Fulton Lane, and tap the booming Australian property market, as can be seen in the 58% rise of the Melbourne HPI over the last 5 years.

# Slowdown in sales; escalation in construction and raw material costs; delays in launches.

# No changes, due to lack of clarity on key details such as exact product mix or project margins.

Rating - Maintain HOLD
Now trading at 34% discount to RNAV; highly liquid proxy to property sector, strong product concepts and pipeline; consistent dividends.

High level of foreign shareholding ~20%) and liquidity means there could be more downside in the near-term before the share price stabilises. Still trades at highest P/E multiple in the sector (17x FY11E P/E).

# Despite >20% decline in share price during the current sell-down, we see more near-term volatility on share price given its relatively high foreign shareholding
amidst flight to the safety of US$. Hence, we are maintaining our HOLD rating on the stock for now.

Source: HLIB Research

Negative Dead Cross In MACD Signals More Downside Consolidation For The Dow Jones.

Wall Street Recap:Dow Jones up 38 points ahead of IMF/World Bank meeting
After tumbling 775 points from Monday to Thursday last week, the Dow Jones edged 37.7 points higher to 10771, as a pledge from global officials to maintain financial stability alleviated some investor anxiety. The slim gains, however, was overshadowed by the Dow Jones' 6.4% weekly slide, its worst performance since October 2008, during the depths of the financial crisis.

Intraday, the Dow Jones fluctuated within positive (+75 points) and negative (-95 points) zones as Investors were watching Washington D.C. over the weekend for news on Greece as finance ministers meet at the annual World Bank and International Monetary Fund.

Daily Dow Jones: Negative Dead Cross In MACD Signals More Downside Consolidation

Weekly Dow Jones: A Breach Below Lower Bollinger Band Will Spur Index Lower Towards 10,000


Sunday, September 25, 2011

KLCI May Has Potential Relief Rally Amid Oversold Positions

Bursa Recap: FBM KLCI plunges 2.2% to 1388
Asian stocks on Friday saw further losses amid global equity sell-off but finished off their intraday lows, boosted slightly by the G20’s pledge to help stabilize Europe’s financial system.

After a 31.2-pt plunge last Thursday, FBM KLCI declined 21.9 points further to 1365.9 Friday to end 4.5% or 65 points lower wow. Lagging movers were MAYBANK (-41 sen to RM7.99), MISC (-34 sen to RM6.12), PBBANK (-16 sen to RM12.44), IOICORP (-2 sen to RM4.51) and GENTING (-19 sen to RM8.61).RM6.11) and AXIATA (+3 sen to RM4.69).

FBM KLCI Outlook: KLCI: Potential relief rally amid oversold indicators
The KLCI hit an intra-week high of 1434 on 19 September (our envisaged 10-d SMA resistance) but headed lower again to a weekly low of 1458 on 23 September before ending at 1465.9 points (our 23.6% FR support) last Friday.

Despite concerns of a possible double-dip recession in the U.S. and the lingering European debt crisis, speculation that European policy makers will announce steps to contain the debt crisis as foreign counterparts lobby for action will likely trigger potential relief rallies this week.

Overall, we continue advocate investors to capitalize on any rallies to trim their position. Alternatively, for risk-takers, adopt a short term trading oriented approach to take profit into any rebound (Please refer to overleaf tables for potential technical rebound plays).

Critical level to watch is the 1311 (23.6% FR). A breach below this level will push index to retest 1300 psychological support. In the wake of extremely oversold positions, potential technical rebound targets are 1386 (lower Bollinger band), 1400 and 1422 (10-d SMA).

Daily KLCI: Any Technical Rebound Due To Heavily Oversold Positions Will Likely To Be Shortlived Unless The 5-Days & 10-Days SMAs Resistance are Violated
FBM KLCI 26-09-2011

Weekly KLCI: No Signs Of Reversal Yet
FBM KLCI 26-09-2011a

Source: HLeBroking

Thursday, September 22, 2011

Wall Street Outlook: DJIA: Downside Risks Increased

Wall Street Recap: Dow Jones tumbles 284 points as Fed disappoints
The Dow Jones plunged 284 points as investors were obviously disappointed following the Fed US$400bn debt-swap program and its grim outlook on U.S. economy. In addition, downgrade of several Italian bank ratings by S&P kept alive investor concerns over Europe’s debt crisis.

Sentiment was also affected by Moody’s credit ratings downgrade on Bank of America and Wells Fargo and the European Systemic Risk Board’s remark that threats to the financial system have increased “considerably” amid the worsening Europe sovereign debt crisis.

Wall Street outlook: DJIA: Downside risks increased
Following the 384 points plunge on Dow in the last three sessions, the Dow Jones technical outlook has turned negative.

The short term uptrend line support near 11000 is likely to be tested soon due to weakening technical indicators.

Immediate resistance levels are 11316 (mid Bollinger band) and 11610 (50-d SMA) whilst supports fall on 11000 and 12 September pivot low of 10824 points.

Daily Dow Jones: Downtrend To Resume Amid Fragile Uptrend Line Support And Bearish Indicators

Source: StockCharts

Wednesday, September 21, 2011

Berjaya Sports Toto: 4D Jackpot – The Lucky Charm

Industry: Gaming
4D Jackpot – The lucky charm

22 September 2011
Price Target: RM4.98
Share Price: RM4.35

In line – Reported 1QFY12 net profit of RM93.8m came in within expectation, accounting for 23.1% of HLIB’s estimate and 24.2% of consensus full year estimates. Historically, 1Q results normally contributed 22-24% of full year earnings.


Declared first interim single tier exempt dividend of 8 sen per share (1QFY11: 8 sen) with ex and payment dates on 6 and 10 Oct respectively.

# 1QFY12 net profit improved 43.7% yoy, thanks to additional revenue contribution from the new 4D Jackpot game (introduced in June 2011) and lower prize payout (~62% vs ~65% a year ago).

# Qoq, net profit declined by 11.2% to RM93.8m due to seasonal factor (as 4Q has been historical stronger on the back of Chinese New Year festival) and lesser draw days in the current quarter (44 days vs. 45 days in 4QFY11).

# 4D Jackpot’s contribution towards BToto’s earnings remains exciting as sales per draw was stable at an average of RM1.6m. YTD, 4D Jackpot segment has achieved 38% of market share.

# For the jackpot games segment as a whole, total sales has been above Magnum’s sales since the launch of 4D Jackpot. It achieved total sales per draw of RM101.5m in
1QFY12 vs. RM71.9m in 1QFY11, or a 41.1% jump.

- Higher-than-expected prize payout ratio.
- PMP to possibly launch its own 4D Jackpot.
- Hike in pool betting duty/gaming tax.


Rating - BUY
(1) 4D Jackpot continues to show strong sales
(2) Monopoly of lotto games;
(3) Highest-yielding stock in the gaming sector

(1) Highly regulated industry; and
(2) Prize payout highly dependable on luck factor

Target Price maintained at RM4.98 based on Discounted Cash Flow (DCF) model at WACC of 8.8% and long-term growth of 2.5%.

Source: HLIB Research

KLCI Has Renewed Downside Risks as Fed Disappoints

Bursa Recap: FBM KLCI up 8.4 points to record its 1st gain in five days
Asian markets ended higher in the morning sessions after a 0.6% growth in China’s Aug leading indicator boosted confidence that its economy is not entering into a hard landing. However, the gains erased in late trading as European markets opened lower.

After recoding cumulative losses of 69 points in the last eight sessions, the FBM KLCI inched up 8.4 points to 1410.6 but trading volume decreased to 708 million shares worth RM1.16 biilion against Tuesday’s 785 million shares worth RM1.42 billion as broader sentiment remain cautious ahead of the conclusion of the 2-day FOMC meeting. Leading movers were SIME (+33 sen to RM8.24), CIMB (+5 sen to RM6.89), GENM (+8 sen to RM3.50), AMMB (+10 sen to RM6.11) and AXIATA (+3 sen to RM4.69).

FBM KLCI Outlook: Crucial 1400 support to prevent further slump
In the wake of the overnight sharp falls in U.S. and Europe markets, the technical rebound momentum from yesterday is likely to be under threat. Persistent foreign liquidation activities are likely to continue and depress our market in the short term.

Critical level to watch is the 1400 psychological support as a break below will trigger further pressures towards 1367 points (61.8% FR from peak 1597 and low 1224). Any technical rebound is likely to face tough hurdles near 1441 (10-D SMA) and 1453 (mid Bollinger band) points.

Daily KLCI: Technical Rebound Faces Tough Hurdles Near 10-Days SMA And Mid Bollinger Band
FBM KLCI 22-09-2011

Source: HLeBroking

Dow Jones Ends Flat After Rising As Much As 149 Points

Wall Street Recap: Dow Jones ends flat after rising as much as 149 points
Tracking strong Europe markets gains (on optimism that Greece will avoid a default), the Dow surged as much as 149 points intraday but ended only 7.7 points higher after the Troika (EU, ECB and IMF) said it will only make a return visit to Athens in October in an attempt to complete their review of the financial situation in Greece. Moreover, investors remained cautious, pending the outcome of the 2-day FOMC meeting today.

Sentiment was also dampened by IMF downgrading its outlook for global economic growth, saying the repercussions could be severe should Europe not succeed in containing its debt troubles or if U.S. lawmakers fail to reach agreement on a fiscal plan.

IMF said the world economy will expand 4% in 2011 and 2012, compared with June forecasts of 4.3% in 2011 and 4.5% in 2012. The U.S. growth projection for 2011 was lowered to 1.5% in 2011 from earlier projection of 2.5%.


Tuesday, September 20, 2011

KLCI Crucial 1400 Support With Potential Technical Rebound

Bursa Recap: FBM KLCI recorded a 4th straight losses
Asian stocks fell after S&P downgraded Italy’s sovereign-credit ratings. However, losses in stocks were limited by speculation that Fed will propose measures to boost U.S. economy when it concludes the meeting today. Tracking the regional losses, FBM KLCI closed 2.5 pts lower (from as much as -9 pts intraday) at 1410.6, the lowest level since 27 Aug 10, led by rotational selldown in key bluechips but partly offset by bargain hunting.

FBM KLCI Outlook: Crucial 1400 support to prevent further slump
Concerns of a possible double-dip recession in the U.S. and the lingering European debt crisis will keep investors nervous and sentiment fragile. Therefore, persistent foreign liquidation activities may continue to depress our market in the short term,
reflected by the rotational fierce selldown on key bluechips and a 6.9% plunge in Ringgit to RM3.13/US$.

Critical level to watch is the 1400 psychological support as a break below will trigger further pressures towards 1367 points (61.8% FR from peak 1597 and low 1224). However, some technical indicators are suggesting potential technical rebound
with immediate resistance areas at 1444 (10-D SMA) and 1457 (mid Bollinger band).

Hourly KLCI: Technical Rebound In The Offing
FBM KLCI 21-09-2011

Daily KLCI: Potential Technical Rebound Targets Are 1444-1457
FBM KLCI 21-09-2011a

Source: HLeBroking

USDMYR: To Retest RM3.24 In The Medium Term

Ringgit outlook: USDMYR: To retest RM3.24 in the medium term

Since May, the dollar index (DXY) was consolidated within the range of 72-76 until recent breakout above the downtrend line resistance in early September to as high as 77.78 before closing at 77.09 yesterday, as the US$ rose against all its major counterparts amid falling stock prices, spurring demand for safer assets amid worsening Europe sovereign debt crisis.

Based on weekly chart, DXY medium to long term outlook remain bullish to retest the 81-83 resistance zones although it may face some short term profit taking consolidation near the daily 50-d SMA.

Correspondingly, the strong DXY and persistent foreign selling had weakened the Ringgit by 6% from RM2.937/US$ on 27 July to close at RM3.114 yesterday.

Based on the bullish weekly chart, Ringgit could depreciate further towards RM3.24-3.34/US$ in the medium to long term. However, as daily chart is indicating possible profit taking consolidations amid spiking MACD and RSI is approaching 80, Ringgit is likely to find some near term support at RM3.00-3.03.

Daily USDMYR: More Profit Taking Consolidations When RSI Hits 80
USDMYR 20-09-2011a

Weekly USDMYR: Bullish Medium Term Uptrend To Retest RM3.24-RM3.34 Region
USDMYR 20-09-2011

Source: HLebroking

DJIA: Shooting Star Formation Could Signal Short Term Weakness

Wall Street Recap: Dow Jones pares losses to 108 points from 254 points intraday
Following a 4.7% surge last week, the Dow Jones retreated as much as 254 points intraday in tandem with global equities selldown amid concern Greece will fail to qualify for more financial aid needed to avoid a debt default. However, the index reduced losses in the final hour of trading as Greece said discussions with European officials about the country’s bailout were productive.

Treasury yields fell and the dollar index moved higher as investors sought safety in U.S. markets. The 10-year Treasury yield fell to 1.94% from Friday's 2.076%. USD index also gained 0.64% to 77.09.

Daily Dow Jones Shows The Shooting Star Formation Could Signal Short Term Weakness

Daily USD Index: Consolidating Above The Downtrend Line Support
USD Index 20-09-2011

Weekly USD Index: Bullish Medium To Long Term uptrend Towards 81-83 Region
USD Index 20-09-2011a


Monday, September 19, 2011

FBM KLCI Crucial Psychological SupportAat 1400

Bursa Recap: KLCI falters in line with region markets slump
A widely anticipated catch-up rally with last week’s regional gains did not materialize despite positive progress by BN to burnish Malaysia’s democratic credentials and abolish the controversial security and media laws.

The FBM KLCI disappointedly tumbled 1.2% or 17.8 points to 1413.1, along with foreign selldown in the regional markets amid rumours that Greece will default this week and a regional election defeat for German Chancellor Angela Merkel. Lagging movers were SIME (-30 sen to RM7.70), DIGI (-146 sen to RM30.50), PETGAS (-96 sen to RM13.72), AXIATA (-11 sen to RM4.68) and CIMB (-8 sen to RM6.90).

FBM KLCI Outlook: Crucial psychological support at 1400
We reiterate that Bursa Malaysia short term outlook to remain bearish as the KLCI continues to trend below the 10, 20, 30, 50, 100 and 200-day daily SMAs, despite its oversold indicators. Unless KLCI can violate the 10-d (1449) and 20-d (1462) SMAs resistance decisively, it is bracing to re-test the 1400 crucial psychological support.

If the 1400 is broken, KLCI could consolidate lower towards 61.8% FR or 1367 points in the medium term. Meanwhile, monthly MACD & RSI indicators remain bearish.

Daily KLCI: More Weakness Ahead Following The Breakdown Of Previous Low
FBM KLCI 20-09-2011

Weekly KLCI: Likely To Consolidate Lower Towards 61.8% FR In The Medium Term
FBM KLCI 20-09-2011a

Monthly KLCI: Medium To Long Term Outlook Remains Ugly
FBM KLCI 20-09-2011b

Source: HLeBroking

Thursday, September 15, 2011

Global Market Weekly Review, 4 - 10 September 2011

President Barack Obama said spending to rebuild the nation’s infrastructure is a key component of his plan to reignite the economy and boost hiring. In a speech marking the US Labor Day holiday, Obama told a Metro Detroit Central Labor Council rally that the jobs agenda he’ll unveil in a speech to Congress on Sept. 8 will include proposals that previously have had support from both parties. Obama will unveil his new jobs agenda as unemployment remains at 9.1% more than two years after the recession’s official end.

The Reserve Bank of Australia left its benchmark interest rate unchanged for a ninth straight meeting, citing unstable financial markets and weaker growth prospects at home and abroad. Governor Glenn Stevens held the overnight cash rate target at 4.75%. The extended pause on rates matched the prediction of all 25 economists in a survey.

President Barack Obama plans to propose sparking job growth by injecting more than US$300bn into the economy next year, mostly through tax cuts, infrastructure spending and direct aid to state and local governments. Obama will call on Congress to offset the cost of the short-term jobs measures by raising tax revenue in later years. Obama is set to lay out his plans in an address to Congress on 8-Sep-2011 as unemployment remains at 9.1% more than two years after the official end of the worst recession since the Great Depression.

Source: ING Funds Berhad

Malaysia Fixed Income Market Review, 4 - 10 September 2011

Fixed Income
Strong Malaysian Government Securities (MGS) trade volume resumed as the market returned to a full trading week, after the long mid-week holidays in the previous week. As investors’ fear of global recession as well as the ongoing European debt crisis remain at an elevated level, the MGS continued to rally with 3-, 5- , 7- and 10-year yields shedding 9 basis points (bps), 7bps, 5bps and 3bps week-on-week (WoW), respectively to close at 3.02%, 3.26% 3.46% and 3.57%. Meanwhile, the MGS yield curve steepened as the 3-year benchmark yield plunged more than the 10-year benchmark, following the pared down expectations of any further rate hike.

As widely expected, the Monetary Policy Committee (MPC) maintained the Overnight Policy Rate (OPR) and Statutory Reserve Requirement (SRR) at 3.00% and 4.00% respectively on 8 September. In the MPC statement, BNM highlighted the continual assessment of evolving developments surrounding inflation and the economy, in determining interest rate stance to ensure Malaysian economy growth sustainability. At the same time, Malaysia’s exports moderated to 7.1% year-on-year (YoY) in July 2011 after picking up at 9.6% In June 2011, due to a sharper decline in the exports of electronic & electrical products on the back of a slowing global demand. The Industrial Production Index (IPI) also contracted by 0.6% YoY in July 2011, after a revised growth of 1.3% in June 2011, due to a slowdown in manufacturing.

For Private Debt Securities (PDS) market, trading was largely focused on “AA” papers, primarily the financial and power sectors, and followed by “AAA” papers.

Fixed Income Outlook
Amid multiple worries on faltering US economic recovery and potential fallout from the Eurozone debt crisis, the recent local numbers are pointing to moderating growth. In addition, BNM commented that the external uncertainties are affecting global confidence, and that Malaysia’s growth in 2011 may be closer to 5.0%, the lower band of the central bank’s earlier projection of 5.0 – 6.0%. With inflation
numbers having peaked in June, focus has apparently been shifted back to growth prospect. On this account, many view that BNM is now having less pressure to further raise interest rate. We do not disagree with that.

On demand-supply dynamics, we are paring down supply risks in government-related segment. It has been disappointing thus far in terms of new supplies of government-related papers despite the anticipation of more funding needs from mega projects announced under the Economic Transformation Programme (ETP). On demand side, constant buying of MGS by long-term investors such as the pension funds and insurance companies will continue to support the government bond market. On top of this, latest foreign holdings in July continued to hit record high with foreign investors holding 34% of total outstanding MGS. Given the positive demand-supply dynamics, tapering inflationary pressures, weaker economic outlook as well as expectation of a pause in interest rate normalization, bond market will continue to be well supported.

For corporate bond market, soft economic outlook may trigger risk-aversion, hurting sentiment in the credit space. Having said, it is pre-matured to conclude major deterioration in credit fundamentals. We expect investors will continue to stay away from A-rated papers. However, with the current pent-up demand and yield enhancement requirements, we expect corporate bonds to continue to hold up well. While we acknowledge the stretched valuation along the popular high-grades, any corrections in yields will be limited given the strong demand from the local players.

Fixed Income Strategy
We have revised our previous slight underweight to neutral duration call across all Fixed Income. In terms of asset allocation, focus remains on corporate bonds. We aim to participate in new issuances for further diversification and yield enhancement.

Source for MGS levels: Bond Pricing Agency
Source: ING Funds Berhad

FBM KLCI Edged Lower On Roller Coaster Week, 4 - 10 September 2011

The local stock market went through a week of consolidation and was under selling pressure since the start of the week. The selldown was triggered by gloomy economic outlook and downgrade of corporate earnings by analysts. But the downside was capped as US President Barrack Obama initiated USD477 billion of job packages to aid the recovery, beyond market expectation. Towards weekend the FBM KLCI managed to recover some of its losses and closed the week 0.4% lower at 1,465 points.

Equity Market Outlook

For the coming week, we expect the market to trade lower amid global uncertainties. Buying momentum is slowly fading as investors choose to stay on the sidelines after getting burned every time they try to capitalize on the rebound. Meanwhile, market sentiment is being badly affected by the prolong selldown. Only a sharper-than-expected rebounded will revitalize the current situation. The level that we think will change the investment landscape is close to 1,500 points

Equity Market Strategy
Stock picking is still our strategy with preference for liquid fundamental stocks on weakness.

Source: ING Funds Berhad

Dow Jones Rebounds 141 Points In A Volatile Session

Wall Street Recap: Dow Jones rebounds 141 points in a volatile session
The Dow Jones fell as much as 112 points in the early sessions following Moody’s downgrades of two major French banks and a stagnant Aug retail sales.

However, the index rebounded strongly and extended gains into a third session after German Chancellor Angela Merkel and French President Nicolas Sarkozy reaffirmed their support for Greece and speculation that China will still invest in the troubled Italian bonds.

Daily Dow Jones Is Building Its Base Along The Uptrend Line Support


Wednesday, September 14, 2011

TopGlove: Crucial Support At RM3.98 To Prevent Further Selldown

Stock to watch – TOPGLOVE

Top Glove: Crucial support at RM3.98 to prevent Further selldown

Top Glove continued to see selling pressure lately on concerns about weak demand, oversupply and persistent high latex prices. From the all time high at RM7.38 (16 Jul 2010), Top Glove had plunged 45% to close at RM4.08 yesterday, after violating the crucial horizontal support of RM4.70 (daily chart) and weekly lower Bollinger band (RM4.50).

Overall, near term outlook for the sector remains dim as there were no strong catalysts to boost glove demand as well as profit margin, in the absence of pandemic and new markets.

Despite its oversold indicators, we expect the trading band of RM4.36 (5-d SMA) to RM4.50 is likely to be a formidable resistance for any relief rally. More downside is in place if the weekly 200-d SMA of RM3.98 is broken.

Weekly TopGlove: A Breakdown Below 200-D SMA Will Trigger More Selldown Towards RM3.50

Daily TopGlove: Still Downside Bias Until Some Divergence Signals In MACD

Source: HLIB Research

FBM KLCI: Major Supports At 1410-1423 To Prevent Further Slump

Bursa Recap: KLCI down 10.4 points, a new YTD low
FBN KLCI ended 10.4 points lower, tracking regional bourses decline amid mounting fears that Greece could soon default as well as persistent signs that foreign funds were leaving the Asian region. The KLCI jumped as much as 7 points in the early sessions on hopes China may provide support to the euro-zone economy, but buyers stayed cautious on persistent concerns over the health of the US and European economies, as well as ahead of long holiday weekend due to Malaysia Day holiday (16 September).

Meanwhile, continuous foreign selling and flight to safety (into US$) saw the Ringgit ended 0.8% lower at RM3.078/US$. The Ringgit had plunged 5.4% from as high as RM2.92 on 9 August.

FBM KLCI Outlook: Major supports at 1410-1423 points
Against external uncertainty and ahead of the 16 September Malaysia Day holiday, overall trading volume will remain lackluster despite an overnight bounce on Dow.

KLCI is still facing downside risks with no signs of a trend reversal yet, unless it could convincingly breakout two immediate major resistances at 10-d SMA (1457) and mid Bollinger band (1470). Further tough resistance levels are 30-d SMA (1484) and upper Bollinger band (1507). Major supports are lower Bollinger band (1432), 1423 (YTD low) and 1410 (50% FR).

Daily KLCI: Crucial Supports At 1423 (YTD Low) And 1410 (50% FR) To Prevent Further Selldown
FBM KLCI 15-09-2011

Source: HLeBroking

Tuesday, September 13, 2011

Dow Jones Reclaims 11000 Level

Wall Street Recap: Dow Jones reclaims 11k
The Dow Jones tumbled as much as 167 points to 10824 intraday amid fears that Greece is moving closer to a debt default and Moody’s may cut the ratings of BNP Paribas SA, Societe Generale SA and Credit Agricole SA this week. Sentiment was also dampened by news that Bank of America will cut more than 30k jobs (>10% of its work force) by the end 2013.

However, the index made a dramatic turnaround in the last 45 minutes to end 69 points higher at 11061 amid speculation that China may invest in Italy.

Daily Dow Jones Is Still Not Out Of The Woods Yet


Monday, September 12, 2011

Axiata Berhad: Overweight: Continued Growth Momentum From Overseas

13 September 2011
Price Target: RM5.48
Share Price: RM4.78

# We attended Axiata’s briefing yesterday and the company has laid a new strategy blueprint, mainly focusing on:
1. Cost leadership through procurement, network outsourcing, network sharing, etc;
2. Product and services innovation i.e. music, TV, m-commerce, m-ads, download services; and
3. Customer intimacy/centricity through analytical capabilities, bundling and new pricing business model.

# Guidance on growth: Malaysia (5.1%), Indonesia (7.8%), Sri Lanka (14.2%), Bangladesh (15-20%) and Cambodia (19.2%).

# CAPEX (Total: RM3.9bn): Malaysia (RM750m), Indonesia (RM2.2bn), Sri Lanka (RM300m), Bangladesh (RM570m) and Cambodia (RM70m).

# Celcom HSDPA network has achieved 100% coverage with 14.4Mbps capacity and target for 28.8Mbps by year end.

# Celcom’s infrastructure sharing with DiGi has started operations with the first telco site decommissioned and combined. The collaboration has identified 400 to be dismantled. The total exercise will translate to a cost savings of ~RM2.2bn over 10-years.

# 900MHz spectrum refarming negotiations among the telcos have reached a deadlock and is expected to be delayed.

# XL has geared up to face the “data tornado” in Indonesia, whereby it is estimated to serve a daily average of 38TB of data traffic. XL sees tremendous growth opportunity in data considering low 3G handset (13-14%) and smartphone (4%) penetrations.

# Revenue contribution from data increased from 14% to 21% over the past year.

# Dialog’s turnaround is nearing completion with the company targeting about 14% revenue growth. However, EBITDA margins are under pressure due to VAT rules and higher direct costs (energy).

# Robi is in a subscriber growth mode. ARPU pressure would be compensated by MOU volume. The company expects to see high-teens revenue growth in 2011.

# Hello is operating in a highly competitive market with 8 rivals fighting for only 9.5m addressable market. ARPU is estimated to be between US$2.12-2.06 for FY11-FY12. Hence, industry consolidation is expected to happen.

Regulatory risks, FOREX fluctuations & competitive risks.

Updated with latest guidance. Our FY11, FY12 and FY13 EPS are revised by –9.1%, -7.5% and –7.3% respectively.

Rating - BUY (Target Price RM5.48)
– Despite the challenging 2Q11, Axiata’s main businesses (Celcom, XL, Dialog) continue to execute well.

SOP-based target price is lowered from RM5.60 to RM5.48.

Source: HLIB Research

KLCI: A Breakdown Below Lower Bollinger Band Will Push Index Lower To 50% FR

Bursa Recap: KLCI ends 1.6% lower, milder against regional slump
Regional markets slumped, led by HSSI (-4.2%), ASX 200 (-3.7%), JCI (-2.6%) and KOSPI (-1.8%), spooked by worries about absence of permanent solution to the Euro zone and mounting fears of a Greek default. Compounding that is the possible Moody’s downgrade of French largest banks (due to their huge exposures to Greek holdings) this week.

Tracking the regional fears, FBM KLCI tumbled 1.6% to 1446.3, the steepest single day loss since 9 Aug’s 1.7%, weighed by losses in GENTING (-30 sen to RM9.47), IOICORP (-15 sen to RM4.63), TENAGA (-15 sen to RM5.14), CIMB (-10 sen to RM7.06) and PETCHEM (-16 sen to RM6.24).

FBM KLCI Outlook: Sentiment remains cautious despite Dow Jones’ overnight gains
Signs of contagion from the potential Greek default and any news of downgrade on top banks in Europe will garner investors’ attention as disorderly series of events would likely make matters much worse for the remaining four PIIGS.

Hence, we continue to advocate investors to stay defensive or sidelines. Alternatively, for risk-takers, adopt a short term trading oriented approach to buy on sharp falls in share prices and sell into any rebound. Weekly supports are 1438 (lower Bollinger band), 1423 (YTD low) and 1411 (50% FR) whilst resistance zones are situated near 1474 (mid Bollinger band), 1492 (30-d SMA) and the 1500 psychological mark.

Daily KLCI: A Breakdown Below Lower Bollinger Band Will Push Index Lower To 50% FR
FBM KLCI 13-09-2011

Source: HLeBroking

Thursday, September 8, 2011

Dow Jones Jumps 276 Points After Plunging 474 In Last 3 Sessions

Wall Street Outlook: Dow Jones jumps 276 points after plunging 474 in last 3 sessions
After plunging 474 points in the last three trading sessions, the Dow Jones surged 276 points or 2.5% as fears about Europe’s debt troubles abated and the Fed found modest economic expansion in its Beige book survey.

Sentiment was also boosted by hopes that Obama's expected US$300bn proposal to boost jobs will spur new domestic growth in its highly anticipated speech tonight.

Meanwhile, Bernanke will also deliver a speech on the economy.

Dow Jones Daily : Immediate Resistance At The Upper Upward Channel


Wednesday, September 7, 2011

FBM KLCI Shows a Sense of Calmness To Return

Bursa Recap: KLCI jumps 10.2 points on technical rebound
Asian markets staged a strong technical rebound after tumbling in the last two days, prompted by better U.S. ISM services index, strong Australian economic data and market talk that China might relax its tight monetary policy.

Sentiment was also boosted higher opening in Europe markets following a ruling by Germany’s top court that the country could participate in regional rescue plans and the Italian Senate’s approval of an austerity plan helped offset fears about Europe.

FBM KLCI Outlook: A sense of calmness to return
A sense of calmness is likely to return following the strong rebound on Wall St and Europe markets overnight.

A strong close above the mid Bollinger band (at 1476 points) on high volume would spur the index to retest the 1500 psychological level (which also coincides with the 30-day SMA at 1501). However, significant resistance levels still remain at 1510
(upper Bollinger band) and 1529 (200-d SMA).

Short term supports are 1444 points (lower Bollinger band) with further support at YTD low of 1423, followed by 1400.

Daily KLCI Shows Technical Rebound Towards 30-Days SMA
FBM KLCI 08-09-2011

Hourly KLCI Hows Bullish Indicators
FBM KLCI 08-09-2011a

Source: HLeBroking

Stock To Watch: Tenaga: Technical Rebound Amid Extremely Oversold Positions

Stock to watch –Tenaga (TRADING BUY)

Tenaga: Technical rebound amid extremely oversold positions

Tenaga’s near term prospects remain clouded by the possibility of potential gas supply constraints, which could impair FY12’s earnings visibility, despite the full-year benefit of the 2% base tariff hike. While the losses suffered by Tenaga may strengthen its case for tariff adjustment, we believe chances are slim after
receiving a tariff hike in Jun and ahead of the general election. However, the plunge in share price has more than offset the negatives given that it is trading at circa 1x FY11 P/B, which is a 30% discount to 5-year historical average

Looking at the charts, there is a high possibility that price may find near term support around RM5.00. A breach below RM5.00 will trigger more selldown towards RM4.60-4.80 zones. Since the tariff hike news on 30 May, share price has tumbled 29% from 1 June’s high of RM7.21 to as low as RM5.10 (6 September) before ending at RM5.12 yesterday (slightly above the 76.4% FR of RM5.01).

Daily charts are signaling potential bottoming up in share prices, reflected by the reversals in MACD and RSI whilst the slow Stochastics of circa 0.7% indicates limited downside. Potential technical rebound targets are RM5.55 (mid Bollinger band) to RM5.74 (30-d SMA).

Cut loss below RM4.97 (lower Bollinger band)

Weekly Tenaga Charts: Likely To Find Its Support Around RM5.00 Psychological Level
Tenaga 08-09-2011

Daily Tenaga Chart Shows Signs Of Bottoming Up Amid Potential Reversals In RSI And MACD
Tenaga 08-09-2011a

Source: HLeBroking

Global Market Weekly Review, 28 August - 2 September 2011

UK House prices fell the most in 10 months in August as a slowing economic recovery threatens to undermine demand, Nationwide Building Society said.

Australia retail sales advanced for the first time in three months and mining projects boosted business investment, sending the nation’s currency higher and prompting traders to reduce bets on interest-rate cuts.

Crude oil rose to a four-week high in New York as a low-pressure system in the Gulf of Mexico that will probably develop into a storm led energy companies evacuate platforms and rigs in the Gulf of Mexico.

Source: ING Funds Berhad

Dow Jones Daily: A Close Below The Recent Up-Trend-Line (UTL) Will Spook More Downside To Retest 10640

Wall Street Outlook: Dow Jones pares losses to 101 points from -308 points intraday
Post Labor Day holiday, the Dow played catch-up with global equity losses following a major sell-off in Europe markets on 5 September amid worsening outlook for Italy and increasing pessimism about lawmakers' ability to deal with the Europe debt crisis.

The Dow Jones plunged as much as 308 points intraday before paring its losses to 101 points at 11139 following a better-than-expected August ISM services index of 53.3 (consensus: 51), as well as unexpected move by the Swiss National Bank to depress the franc (1.20 Swiss francs against the euro), which had rallied as a safer alternative to the euro and dollar.

Major events for the rest of the week are Beige Book report (7 September) and weekly jobless claims (8 September), followed by a highly anticipated speech from Obama on 8 September.

Dow Jones Daily: A Close Below The Recent Up-Trend-Line (UTL) Will Spook More Downside To Retest 10640


Tuesday, September 6, 2011

FBM KLCI Outlook: External Factors Rule

Bursa Recap: KLCI fell 8.8 points
Regional bourses ended mixed after registering heavy losses in the early sessions. Investors’ mood remained fragile as doubts resurfaced over the political will of Italy and Greece to push through tough budget measures and as Germany hardened its stand against providing more aid, spooking concerns of a looming global recession.

The FBM KLCI lost 8.8 points while market breadth was negative with 253 gainers as compared to 423 losers.

FBM KLCI Outlook: External newsflows to dictate KLCI direction
Against external uncertainties and lack of domestic positive newsflows, we continue to advocate risk-averse investors to stay defensive or sidelines. Alternatively, for risk-takers, adopt a short term trading oriented approach to buy on sharp falls in share prices and sell into any rebound.

Given that the KLCI is still unable to violate immediate resistance levels of 10-d SMA and mid Bollinger band, near term outlook will remain negative and the index is likely to retest the 1445 points (lower Bollinger band). A breach below this support will push index lower towards YTD low of 1423 and 1400 levels.

Source: HLeBroking

Dow Jones Daily Shows More Negative Tone Ahead

Wall Street Outlook: Dow Jones closes for Labour Day holiday
The Dow Jones is expected to face further selling pressures when it reopens tonight following declines in equities around the globe, with the euro softening and the dollar and gold gaining on worries about Europe’s debts woes.

This week, key economic data to watch are Aug ISM (6 September) and Beuge Book report (7 September). Thereafter, investors will be keeping en eye on the highly anticipated speech from Obama on 8 September. Yesterday, Obama said spending to rebuild the nation’s infrastructure is a key component of his plan to reignite the economy and boost hiring.

Dow Jones Daily Shows More Negative Tone Ahead


AirAsia: Potential Rebound Targets At RM3.58-RM3.69

Stock to watch – AirAsia (Buy on weakness)

AirAsia: Potential rebound targets at RM3.58-RM3.69

AirAsia will stand to benefit on a recessionary environment amid a drop in jet fuel price as well as down trading activities as passengers from full service carriers (notably business travel) will down trade to low cost carriers. AirAsia is also building new ventures in Japan, the Philippines and Vietnam while Thai AirAsia and Indonesia AirAsia are targeted for listing in 4Q11-1Q12. These are all potentially major share price catalysts.

Despite recent plunge, its medium to long term uptrend remains intact as share prices continue to stay above the 200-d SMA and lower Bollinger band. Although there could be further consolidations amid volatile markets and its high foreign shareholding, any price weakness is an opportunity to accumulate for potential rebounds later due to its oversold indicators, an uptick in Money Flow Index and positive MACD.

Immediate resistance levels are RM3.58 (50-d SMA) and RM3.69 (30-d SMA). Supports are RM3.26 (100-d SMA) and RM3.19 (lower Bollinger band). Cut loss below RM3.19.

Daily AirAsia Chart: Potential Technical Rebound Amid Oversold Indicators And Uptick In Money Flows Index

Source: HLIB Research

KLCI: Europe's Headwinds To Dampen Sentiment

Bursa Recap: KLCI falls 11 points amid regional markets slump
The FBM KLCI fell 0.7% to 1463.1 but the decline was relatively mild against its regional peers such as KOSPI (-4.4%), HSI (-3%), TWSE (-2.7%) and FSSTI (-2.5%). The sluggish performance was attributable to renewed fears of a recession in the U.S. following zero employment growth in Aug jobs data, sustained worries about the euro zone debt crisis and weak China PMI for services.

Sentiment was further hurt by heavy selldown when Europe markets opened as major European banks nosedived after being named in a U.S. mortgage-related lawsuit, while a defeat for the party of Germany’s chancellor in regional elections ignited concerns that opposition is growing against bailouts for debt-saddled European countries.

FBM KLCI Outlook: Europe’s headwinds to dampen sentiment
Given the external woes and a disappointing August reporting season, we continue to advocate risk-averse investors to stay defensive or sidelines. Alternatively, for risk-takers, adopt a short term trading oriented approach to buy on sharp falls in share prices and sell into any rebound.

Immediate support levels are 1445 (lower Bollinger band), YTD low of 1423 and 1400 psychological mark while resistance zones are situated near 1470 (10-d SMA), 1484 (mid Bollinger band) and 1500 psychological mark.

Daily KLCI Shows More Consolidations Near The Lower Bollinger Band
FBM KLCI 06-09-2011

Source: HLeBroking

Monday, September 5, 2011

Dow Jones Daily Has More Negative Tone Ahead

Wall Street Recap: Dow Jones tumbles 250 points amid stagnant jobs growth
The Dow Jones corrected 2% last Friday after data showing zero jobs growth in August. The declines left Dow 0.4% lower wow for the sixth time out of last seven weeks ahead of the long U.S. Labor Day (5 September) holiday weekend. Sentiment was also affected by fierce selldown in bank shares as a U.S. housing regulator filed a
lawsuit against Bank of America Corp, JPMorgan Chase & Co, Goldman Sachs Group Inc and other big lenders over mortgage practices that led to losses at government-owned Fannie Mae and Freddie Mac.

This week, the question of whether the Fed will initiate another round of stimulus will take center stage with key economic data i.e. Aug ISM (6 September) and Beuge Book report (7 September), followed by a highly anticipated speech from Obama on 8 September.

Dow Jones Daily Has More Negative Tone Ahead


KLCI Investment Strategy – CY2Q11 Report Card – Disappointing

FBM KLCI Target – 1,610
September 5, 2011

CY2Q11 Report Card
# CY2Q11 reporting season was again disappointing, for the second consecutive quarter.

# Among HLIB universe, 13 were below expectations while seven surprised on the upside. Against consensus, 15 were below while nine came in above.

# Sectors that disappointed were banking (NIM compression and slower non-interest income), transport (higher fuel costs), building material (higher raw material costs) and technology (higher input costs). On the other hand, the plantation (higher production) and construction (work progress pick up) sectors were ahead of expectations.

# Major earnings downgrade was MAS while downgrades in other big/mid-caps were Boustead, CIMB, RHB Cap and YTL Power. Other than MAS, significant earnings downgrades were seen in Ann Joo, CSC Steel and JCY.

# HLIB had 12 earnings downgrades and five earnings upgrades. Although the number of downgrades were lower than post CY1Q11 results (18), the revision ratio was higher at 2.4x (i.e. for every earnings upgrade, there were 2.4 downgrades) vs. 2x.

# Thus, our 2011 and 2011 EPS growth forecasts have been cut to 11.3% and 11.4% from 12.1% to 12.3%, respectively.

# Although earnings risk has increased, we are not “jumping the gun” and call for a global recession and believe there are still ample domestically driven factors that would sustain corporate earnings. They are ETP gaining traction, wealth creation culminating in continued consumption amidst rising consumerism and Petronas contract awards.

# Among sectors that have relatively more resilient earnings are: 1) construction will be supported by rolling out of projects; 2) property by huge unbilled sales; 3) telcos with added advantage of high yields; 4) power, as worst is over for TNB while its share price has more than discounted the recent earnings disappointment; 5) plantation whereby CPO prices have held up well despite recent volatility, barring outflow of financial demand; and 6) banking as asset quality is still strong while the impact of slower loans and non-interest income growth is lower vis-à-vis provision.

- fiscal position, transformation execution risk and General Election;

– potential global recession, China over tightening and lingering European debt woes.

KLCI Target
With heighten risk aversion and earnings downgrade, we have lowered our year-end FBM KLCI target to 1,610 based on lower P/E of 14x 2012 earnings.

Stocks preference
# Defensive stocks under HLIB universe for risk adverse investors.

# For investors who have higher risk appetite amidst volatile global markets, we prefer stocks with domestically driven earnings, undemanding valuations and decent liquidity like Boustead, BToto, DRB, Maybank and WCT.

Source: HLIB Research

KLCI Brace For Another Volatile Week

Bursa Recap: KLCI jumps 27 points to end 2% higher wow
Asian stocks were in a sea of red last Friday ahead of crucial U.S. employment data, as investors took profits after strong gains recorded in the early part of the week. Sentiment was also dampened by news that Greece will miss its 2011 deficit target of 7.6% underscored concerns about the euro zone debt crisis.

Bucking the sluggish regional markets, FBM KLCI surged 27 points, playing catch up to the rebound in global markets during the three-day Hari Raya and Merdeka holidays.

FBM KLCI Outlook: Brace for another volatile week
Despite last week’s strong rebound, Asian markets and Bursa Malaysia are set to open lower today, in line with the slump on Dow Jones last Friday. The pessimistic remark by World Bank that the global economy is stepping into a "new danger zone," amid
slower growth and weakening investor confidence will further heighten volatility in this week’s trading.

Given the external woes, we continue to advocate investors to stay defensive or sidelines. Alternatively, for risk-takers, adopt a short term trading oriented approach to buy on sharp falls in share prices and sell into any rebound.

Weekly support levels are at lower Bollinger band of 1441 points and YTD low of 1423 points whilst resistance zones are situated near 1488 (mid Bollinger band) and 1500 psychological mark.

Daily KLCI Has More Upside If 10-Days SMA Is Violated As Indicators Are Hooking Upwards
FBM KLCI 05-09-2011

Source: HLeBroking

Friday, September 2, 2011

Dow Jones Daily Shows Bearish Engulfing Candlestick Formation Could Signal More Downside Bias

Wall Street Recap: Dow Jones drops 120 points after surging 464 points in four days
The Dow Jones rose as much as 104 points following a better-than-expected August ISM report. However, the gains fizzled off at the final hour and the Dow retreated 120 points on profit taking activities, halting its 4-d rally as investors were wary ahead of a crucial August jobs report tonight.

Sentiment was dampened by extended holidays ahead (Wall Street will be closed on 5 September for labour Day) as well as the White House rapid slash of U.S. GDP growth projections in 2011 to 1.7% (from 2.7% back in Feb) and 2.6% in 2012 (from 3.6% in Feb). Meanwhile, President Barack Obama will give a major speech on 8 September, outlining measures to spur hiring and growth.

Dow Jones Daily Shows Bearish Engulfing Candlestick Formation Could Signal More Downside Bias

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