Thursday, October 20, 2011

Dow Jones Drops 72 Points In Volatile Trading

Wall Street recap: Dow Jones drops 72 points in volatile trading
The Dow Jones rose as much as 57 points in early trading, in line with stronger close of European markets.

However, losses were piling up at the final hours as the Dow Jones ended 72 points lower after a tepid September Beige report on the economy and following news of persistent splits on the European Financial Stability Facility (EFSF) size by France and Germany ahead of a key EU summit this weekend. Sentiment was also dampened by disappointing earnings from heavyweight Apple.

Daily Dow Jones Continue Its Sideways Consolidation


Wednesday, October 19, 2011

KLCI Is Range Bound Trade Ahead of EU Summit

Bursa Recap: KLCI up 10 points, with focus on lower liners
Regional bourses opened higher following Guardian reports of an agreement to strengthen the euro zone's rescue fund. However, the gains were pared down as investors remained cautious ahead of the EU Summit on 23 Oct and Moody’s cut on Spain’s sovereign credit rating.

After the 1.7% plunge on 18 October, KLCI rebounded 10.3 points yesterday to 1450, driven by selective buying on index-linked heavyweights. Daily volume jumped 24% to 1.7bn shares but value dropped 14% to RM1.2bn amid focus on lower liners.

FBM KLCI Outlook:Range bound trade ahead of EU Summit
Global markets will remain volatile ahead of the crucial 23 October EU Summit as well as 3-4 Nov, when the Group of 20 nations gather to consider additional steps to stabilize the global financial system. Based on the weekly chart’s strengthening indicators, the FBM KLCI could still test resistance levels of 1470 (15-w SMA) and 1495 (20-w SMA).

However, given the formation of a Doji in the weekly chart, we continue to advocate risk-averse investors to sell into strength or trim positions.

Immediate supports for pullbacks are 1434 (10-w SMA), 1413 (30-d SMA) and the 1400 psychological levels.

Daily KLCI Upward Momentum Remains Intact Until Uptrend Line Is Nullified
FBM KLCI 20-10-2011

Weekly KLCI Facing Stiff Resistance Within The 15-Week & 20-Week SMAs
FBM KLCI 20-10-2011a

Source: HLIB Research

DJIA Major Resistance Levels Are 11600 - 11800, While Crucial Supports Are 10800 - 11000.

Wall Street recap: Dow Jones up 180 points on news of a hike in ESFS to €2trn
In line with the global selldown in equity markets, the Dow Jones dropped as much as 101 pts in early trade but ended 180 points higher (off high of +256 points) at 11577 following Guardian, citing European Union diplomats, said France and Germany had come to terms on an accord to boost the European Financial Stability Facility (EFSF) to €2trn as part of a comprehensive plan that should be endorsed at a weekend summit.

On corporate earnings, Intel, Yahoo and bank of America profits beat estimates but Apple and Goldman Sachs earnings were below consensus while Coca-Cola earnings was within expectation. Other key results this week are American Express (Wed) and Microsoft (Thu).

Wall Street outlook: Dow Jones: Range bound trade depending on headlines
Amidst the alternate gains and losses over the past few sessions, Wall St near term outlook will remain volatile, taking cues from the current ongoing reporting season and more importantly, the crucial outcome from the EU Summit on 23 Oct.

We reiterate that the Dow will continue to trade range-bound within the box. Major resistance levels are 11600-11800 while crucial supports are 10800-11000 points. A break below 10800 will drive the index lower towards 10400-10600 levels.

Daily Dow Jones: Moving Sideways Within The Mid Bollinger And Upper Bollinger Bands


Tuesday, October 18, 2011

FBM KLCI: Headlines Driven Market

Bursa Recap: KLCI drops 25 points, in line with sluggish regional peers
Asian markets plunged after Germany's finance minister said that a solution to Europe's debt crisis may not come fast enough. Investor sentiment was also dampened by lower-than-expected China 3Q GDP of 9.1% (slowest in two years) and Moody’s downgrade of France’s credit rating.

KLCI also tumbled 25.4 pts or 1.7% to 1439.9, driven by major selldown in SIME (-25 sen to RM8.65), CIMB (-18 sen to RM7.19), TENAGA (-22 sen to RM5.35), IOICORP (-14 sen to RM5.00) and MAYBANK (-12 sen to RM8.21).

FBM KLCI Outlook: KLCI: Headlines driven market
We believe global markets will remain volatile for a while, taking cue from headlines mainly from the Euro-zones debt crisis development. Hence, we continue to advocate risk-averse investors to sell into strength or trim positions on weakening
daily indicators. From the weekly chart, tough resistance levels are 1469 (15-w SMA) and 1494 (20-w SMA) while supports are 1433 (10-w SMA and uptrend line) and 1413 (30-d SMA – daily chart).

If history is a guide, we noted that there are similarities between the bear market rally in March 2008 and current rebound from September trough. Assuming a similar 12-13% rebound from the bottom, the KLCI may encounter stiff resistance zones near 1467 and 1480 points (please refer to weekly KLCI chart).

Daily KLCI: Upward Momentum To Remain Intact Until Uptrend Line Is violated
FBM KLCI 19-10-2011

Weekly KLCI: Facing Tough Resistance Within The 15-Days & 20-Days SMAs
FBM KLCI 19-10-2011a

Source: HLIB Research

Maxis Berhad: Overweight - Maxis “Home” Run?

19 October 2011
Price Target: RM5.39
Share Price: RM5.37

# Finally, Maxis has officially launched home fibre internet which only bundles high speed broadband (HSBB) and voice telephony. Partnership with FetchTV allows Maxis to include IPTV in future, completing its offering as a triple play product.

# Maxis will be competing head-to-head with four other players in the HSBB market segment which is currently led by TM (160k subs), TdC-Astro (1.5k subs), Celcom and P1.

# To date, Maxis has about 1,500 “home” subscribers, whereby 33% is served by self-built HSBB while the remaining is served by TM’s HSBB.

# We opined that Maxis has lost focused on their core mobile business over HSBB. This can be evidently observed through Maxis’ marketing campaigns.

# This has resulted in poor 1H11 profitability due to depressing net adds and high churn rate as subscribers turn to cheaper alternatives (DiGi and Umobile). This year, we do not foresee that Maxis will enjoy the Raya festive season revenue spike with the same quantum as in the past.

# As for HSBB, Maxis’ pricing is highest (RM4.27/GB) among all, not to mention that the current product offering is inferior (without IPTV) than peers. Thus, we do not think that Maxis is able to sustain premium pricing.

# Another product flaw would be imposing download quota in 2012 while rivals are providing unlimited download (TdC-Astro) or delaying this restriction (TM).

- Higher smartphone penetration boosting data ARPU
- Stronger than expected home fibre internet take up rate
- Possible savings by cascading the 6% service tax

Government, regulatory, industry and execution risks.

# We update our estimates to reflect contribution from “home” segment and tuning down in view of disappointing net adds and the economic slowdown.

# As a result, our FY11, FY12 and FY13 EPS estimates are revised by –10.9%, -8.5% and –7.3% respectively.

Rating - HOLD: Target Price: RM5.39
New business potential in converged services, strong postpaid ARPUs and smartphone penetration.

Initially low margin fixed-services would depress profitability, weakening prepaid ARPUs.

Following the earnings revision, our new DDM-derived TP of RM5.39 supersedes previous of RM5.51.

Source: HLIB Research

Global Market Weekly Review, 9 - 15 October 2011

Opponents of President Barack Obama’s US$447biliion jobs plan had enough votes to block the measure in the Senate, with two Democrats joining Republicans to derail his prime proposal to help turn around the struggling economy. More than 40 senators voted against permitting debate on the measure, effectively shelving it. The broad plan includes cuts in payroll taxes for workers and employers and provides new funding for roads, bridges and other infrastructure.

Indonesia’s central bank unexpectedly cut its benchmark interest rate for the first time in more than two years to spur growth as the global recovery weakens and inflation slows. Bank Indonesia lowered the reference rate by a quarter of a percentage point to 6.5%. All of the 15 economists in a survey expected no change.

The Bank of Korea kept interest rates on hold and the Bank of Japan said its board had discussed more monetary easing, in further signs policy makers are moving to protect growth as the global economy weakens. Governor Kim Choong Soo and his board held the benchmark seven-day repurchase rate at 3.25% for the fourth straight month. In Japan, records of a Bank of Japan (BOJ) meeting last month said “a few” members discussed extra stimulus.

Source: ING Funds Berhad

Malaysia Fixed Income Market Review, 9 - 15 October 2011

Fixed Income
During the week under review, the mid- to long-tenured benchmarks Malaysian Government Securities (MGS) closed range-bound whilst flows were heavier along the off-the run MGS and Government Investment Issues (GII). Meanwhile, the 3-year benchmark MGS was heavily traded amid the RM3.2 billion re-opening auction on Thursday. The re-opening auction was well received, with a bid-tocover ratio of 2.39x, at an average yield of 3.133%, settling towards the higher end of the past 5-day trading range of 3.08-3.15%. On a week-on-week basis, the 3-year benchmark MGS yield climbed 7 basis points (bps) to 3.15% while the 5-year yield added 1 basis point (bp) to 3.32% and the 10-year yield increased by 3bps to 3.71%. In contrast, the 7-year benchmark MGS yield fell by 1bp to 3.53%.

On economic front, Malaysia’s August 2011 Industrial Production Index (IPI) rebounded by +3.0% year-on-year (YoY), from -0.5% (revised) in July 2011. IPI rise more than expected as manufacturing and mining output improved.

For Private Debt Securities (PDS), the trading interest remains focused on AAA- and AA- segments, which are mostly banks and power sectors as well as quasi-government entities.

Fixed Income Outlook
Despite mixed economic data from the US, negative sentiment on the back of on-going Eurozone debt crisis and the latest growth concerns of emerging markets continue to cloud global financial markets. Volatilities were present across all asset classes, from equity to bond market to commodities.

Locally, we also witnessed a mixed bag of data in the recent months, pointing to moderating growth prospect. The central bank has been reiterating external uncertainties affecting domestic economy, although private consumption and investment should continue to drive growth for 2H of the year. Some had argued the possibility of a reversal of monetary policy where BNM may cut interest rate in
the next meeting. We reckon BNM will likely to keep OPR unchanged for the remaining year. We opine a tightening policy may be premature at this juncture despite the acknowledgement of a slower growth than previously expected.

On fiscal policy, the Budget 2012 announcement came in without much surprise. The targeted budget deficit of 5.4% of GDP in 2011 seems to be on track and government is estimating a 4.7% in 2012 based on GDP forecast of 5-6%. Given the current gloomy external outlook, the official GDP forecast seems to be too optimistic and thus could underestimate the target budget deficit for next year. This could be less positive from sovereign rating point of view with Malaysia running into its 16th year of budget deficit without strong political will to address the issue.

For the remaining government bond auctions, we expect market to be more cautious given the recent volatility triggered by global uncertainties as well as heightened fears of foreigner unwinding the record high holdings in MGS. On the other hand, given the current focus on growth and tapering inflationary, market may continue to extend duration. Coupled with our expectation of an unchanged interest rate, there may still be room for further flattening of MGS yield curve.

For corporate bond market, soft economic outlook may trigger risk-aversion, hurting sentiment in the credit space. 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 duration call to slightly overweight from neutral duration 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
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