Monday, January 16, 2012

Sideways consolidation ahead of the CNY holidays

Bursa Recap: KLCI eases 2.5 points but still gains 0.6% wow
Asian markets rose amid successful Italian and Spanish bond auctions and positive ECB President’s remark that euro area showed "tentative" signs of recovery. However, SHCOMP tumbled due to profit taking on weakening 4Q11 forex reserves.

FBM KLCI lost 2.5 points as bigcaps continued to consolidate recent gains whilst interests remained on lower liners and penny stocks, reflected by a 17% jump in daily volume to 1.77 billion shares whilst trading value only inched up by 2% to RM1.61 billion.

FBM KLCI Outlook: Sideways consolidation ahead of the CNY holidays
Technically, trend and momentum indicators have turned less bullish after failing to close above 1531 points (intraday high on 31 December 11) last week. On the backdrop of eurozones crisis, the CNY long holidays weekend and continued consolidation in bigcaps, the market could be trapped within a narrow range on extended consolidation in the immediate term.

Despite short term consolidation, as long as KLCI continues to remain its posture above the 200-d SMA and mid Bollinger band supports (now at 1501), KLCI is still likely to slowly filling the huge gap between 1529-1546 which was recorded on 5 August 2011

Daily KLCI: Immediate Supports Near 10-Days SMA And 200-Days SMA
FBM KLCI 16-01-2012

Source: HLIB Research

Wednesday, January 11, 2012

Global Market Weekly Review, 3 - 6 January 2012

German unemployment fell more than forecast in December as exports of cars and machinery boomed and one of the mildest winters on record helped support jobs in construction. The number of people out of work fell a seasonally adjusted 22,000 to
2.89m. Economists forecast a decline of 10,000. The adjusted jobless rate dropped to 6.8%.

Philippine inflation eased to an 11-month low in December as gains in food and utility costs slowed, boosting scope for an interestrate cut to aid economic growth. Consumer prices rose 4.2% from a year earlier, after a 4.8% increase in November, using 2006 as a base year. The median estimate in a survey of eight economists was for a 4.7% advance. Inflation was 4% using the 2000 series.

Source: ING Funds Berhad

Malaysia Fixed Income Market Review, 3 - 6 January 2012

Fixed Income
Malaysian Government Securities (MGS) started the year 2012 with stronger weekly trading momentum as compared to the previous few months. This was mainly driven by continued interests in the Government Investment Issues (GIIs) and non-benchmark MGS. Meanwhile, there was profit-taking on the 3-year benchmark MGS sending the yield up by 3 basis points (bps) WoW to 3.01% as it touched a 3-week low of 2.98% previously. However, the 5-year benchmark fell by 2bps WoW to close at 3.20%. Both the 7- and 10- year benchmark remained stable at 3.49% and 3.69% respectively.

For Private Debt Securities (PDS) market, trading interests continued to be seen on the AAA- and AA-rated papers, mainly the finance- related names.

Fixed Income Outlook
Heightened speculations on recession in the Euro Zone amid the on-going sovereign debt crisis and protracted anemic economy outlook in the US continue to paint an unexciting global economic climate in 2012. This is coupled with further concerns of a slowing growth in China and the rest of the emerging economies. Locally, while there are domestic engines to support continual growth, external factors will remain a drag to our GDP given the significance of exports and Malaysia being an open economy.

On inflation, latest numbers suggest moderation going into 2012, in tandem with soft economic outlook as well as softer energy prices. Nonetheless, we reckon there is possibility of renewed fear on potential reinstatement of subsidy rationalization post the much speculated General Election as early as 1Q2012.

Given the above growth prospect and comfortable inflation expectation, Bank Negara Malaysia (BNM) is likely to keep interest rate stable at the current accommodative level at least for 1H2012. This is further supported by BNM’s intention to keep asset bubbles at bay. Risks to our outlook will be an unexpected dismay domestic growth and a blow-out of the external headwinds.

On demand and supply dynamics of the government bond segment, assuming an issue size of circa RM3.0 billion to RM3.5 billion for each of the 28 auctions in 2012, gross issuance may total to RM85bn – RM90bn. With total government bond maturities of RM45.56 billion, we expect the net issuance to be around RM45 billion. This is close to the net issuance of RM45.2 billion in 2011. Based on the net increase of foreign holdings in government bonds amounting to RM23 billion in 2011, a whooping 50% of the net issuance was absorbed by foreign investors. While we may not see the same quantum jump in 2012, yield differential relative to the US treasuries, the broad emerging economies theme as well as the relatively less volatile MGS may continue to be supportive of foreign participation. We also reiterate the continual demand for MGS from the local long-term insurance and pension funds.

On credit market, ample liquidity and the perpetual search for yields will continue to offer good demand for corporate bonds. However, the dim growth prospect may prevent investor to move down the credit curve and to focus on only selective non-cyclical industries. In any case, A-rated bonds in the local market have been thinly traded with limited interest for the few years.

Fixed Income Strategy
We are generally positive on local bond market given the perceived conducive environment for bond market. We continue to focus on value enhancing corporate bonds, trade on momentum when opportunities arise. Last but not least, we will continue to participate in new issuances for diversification and return enhancement.

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

FBM KLCI Eased Moderately on Profit-Taking, 3 - 6 January 2012

The local equity market bucked the regional trend in the first week of the year by losing 1.1% or 16.6 points week-on-week (WoW) . The FBM KLCI underperformed the region which registered positive gains in the New Year, within the first week the MSCI FexJ gained 0.5%. Average daily trading value for the week rose 23.9% to RM1.45 billion (RM1.17 billion previously), which recovered above the 3-month average of RM1.40 billion.

Equity Market Outlook
We expect the market to continue consolidating. As more and more investors back from year-end holidays, selling pressure should gain momentum as the underlying concern over the European sovereign debt crisis still persists. If the market fails to hold above the strong psychological level of 1,500 points, investors should expect the market to pullback to 1,485 points.

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

Source: Source: ING Funds Berhad

Dow Jones Up 69 Points To 12462, Near 5-Month High

Wall Street recap: Dow Jones up 69 points to 12462, near 5-month high
The Dow Jones climbed as much as 122 points intraday before ending 70 points higher at 12462 amid a decent start of 4Q11 reporting season by Alcoa, rising expectations for monetary easing in China as government data showed that the nation’s import growth declining to a two-year low in Dec 11 and a positive Fitch’s comments about Europe being on the right path toward solving its debt problems.

However, Fitch also indicated there's a "significant chance" of a downgrade for Italy. The ratings agency plans to make a decision on all the European countries it currently has on negative watch by the end of the month.

DJIA Outlook: Uptrend still intact
Year-To-Date, the Dow Jones jumped 2% and the early "January effect" inspired hopes that US markets were beginning to overcome headline risk from the European debt crisis and moving toward a more independent track.

The Dow Jones tumbled 8.6% from October 11’s high at 12284 to November 11 low of 11231, driven by the persistent deadlock in Euro debts crisis management and an uncompromised plan and fears of potential en-mass bonds rating downgrades by credit rating agencies, overshadowing the gradual progresses in the recent US economic data. However, the index rebounded 11% from the bottom in November 11 to end at 12462 overnight.

Despite the massive rally, overall market is not excessively overbought as RSI still hovers below 70. Following the positive ascending triangle breakout, current uptrend remains intact as long as the Dow is able to maintain its posture above 10-d SMA (now at 12339) and uptrend line supports.

Immediate resistance targets are upper Bollinger band near 12600 and July 11 high of 12753.

Daily DJIA: Upside Bias Unless The 10-Days SMA And Uptrend Line Supports Violated


KLCI IS Taking Cue From Positive Wall Street And Europe Markets

Bursa Recap: KLCI ends flat as November IPI misses estimates
Asian markets closed higher, driven by a 2.7% surge on SHCOMP as December 11 new lending and money supply in China exceeded estimates, boosting speculation the government is relaxing monetary policies to bolster economic growth and engineer a soft landing.

Sentiment was also boosted by increasing evidence of a U.S. recovery, but concerns over euro zone sovereign funding ahead of key auctions kept investors cautious.

Despite a strong regional performance, KLCI ended flat as November 11 IPI was lower than market expectations.

FBM KLCI Outlook: FBM KLCI is taking cue from positive Wall Street and Europe markets
While bigcaps continue to consolidate, second and lower liners continue to hog the limelight following the lifting of trading designation on Harvest and rash of M&A news. Today, KLCI is expected to retest 2011’s close of 1530, taking cue from positive Wall Street and European markets overnight.

In the wake of a strong breakout above the 200-d SMA (now at 1501) and 10-d SMA (1513), the KLCI is poised to trend higher towards upper channel near 1550 points. Immediate supports are 10-d SMA and 200-d SMA whilst upside targets are the huge gap within 1529-1546 dated 5 August 11.

Daily KLCI: Short Term Uptrend Intact Unless 10-Days SMA Is Violated
FBM KLCI 11-01-2012

Source: HLIB Research

Tuesday, January 10, 2012

Wall Street: Dow Jones Meanders Ahead Of The Start Of 4Q Reporting Season

Wall Street recap: Dow Jones meanders ahead of the start of 4Q reporting season
The Dow Jones ended 33 points higher at 12393 as investors continued to keep a close eye on events in Europe and geared up for the start of 4Q11 report announcements.

In Europe, German Chancellor and French President said that progress has been made on a proposed intergovernmental pact to increase fiscal discipline across the Eurozone. The leaders added that the pact could be signed ahead of the Jan 30 EU summit and go into effect as early as March.

After the closing bell, Alcoa report its 4Q11 revenue that topped estimates but incurred a larger-than-expected net loss due to slumping aluminum producer's prices and rising costs.

Daily DJIA: A Breakout Above The Ascending Triangle Resistance Will Spur A New Rally

Source: StockCharts
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