OSK Market Views

** this posting has been edited - sorry clicked publised too fast! Earlier posting had been deleted and a new one has been posted! **

On 1st Sep 2009, OSK wrote an report called Rangebound Trading. That report was featured on the Financial Edge Daily today. OSK sets new FBM KLCIfair value of 1,144 for 2009.

• KUALA LUMPUR: OSK Research Sdn Bhd has derived a new 2009 fair value of 1,144 points for the FBM KLCI as it rolled over its KLCI valuation to 14.5 times 2010 earnings, and upgraded its recommendation to neutral from “sell into strength”....

On 2nd today OSK report was highlighted in the posting The Earnings Results: Best Since 2006

So two days, two research reports.

I wonder if it's just a bit too much.

First one was a sell into strength.. here's another snippet from that article on the Edge Financial daily.

• “Going forward, we see investors pulling money out of the region as valuations look expensive. Nonetheless, there remains sufficient liquidity locally and with investors looking 12 months ahead, we roll over our KLCI valuation to 14.5 times 2010 earnings to derive a new fair value of 1,144 points,” it said in its September outlook strategy report.
  
  OSK Research said markets worldwide generally languished as the modest increase in US markets was not met with similar enthusiasm in East Asia. In fact, fears that the Chinese government would impose more controls on speculation led to a 16% drop in the Shanghai bourse and this capped further gains across the region.
  
  It said the FBM KLCI hit a strong resistance at the 1,190-point level, which was the theoretical maximum it had earlier forecast, and then languished range-bound during the month.....

Yeah.... so was a SELL INTO STRENGTH as valuations look expensive.

Now in yesterday's report, one had OSK declaring the best earnings result as it had more upgrades than downgrades.

• While we had expected Upgrades to exceed Downgrades for the first time since 2Q07, we were still surprised by the number of Upgrades, which brought the Upgrade to Downgrade ratio to 1.6, the best since 4Q06. Upgrades were particularly evident among the Small caps, where 42% had their earnings upgraded. In terms of our OSK universe, both 2009 and 2010 earnings saw upgrades with 2009 KLCI earnings raised from a 6% contraction to a 4% contraction while 2010 earnings growth was raised from 12% to 15%.

Here's a screen shot...

Look at the number of Upgrades it have on individual stocks. And most 'maintained' are usually 'trading buy' maintained.

So how?

On one hand, OSK says SELL INTO STRENGTH but on the other hand, despite knowing that valuations are looking expensive, OSK had been giving out more and more upgrades.

Wouldn't some be so confused? One day, it says sell into strength. The next day, another report comes out filled with more upgrades than downgrades.

And the reason OSK is asking to sell into strength is because valuations are looking expensive.

Now as most know, as it is now, one of the stock that has the huge weightage on the FBM KLCI is Bumiputra Commerce.

Here is snippet of OSK recommendation on Bumiputra Commerce.

How?

They upgraded Bumiputra-Commerce from 9.15 to 12.30!!! That's an upgrade of 3.15 or an upgrade of some 34.4%.

And let me requote them. "Even as OSK anticipates a better set of results, it maintains the view that the market has run ahead of fundamentals." (highlighted from the posting Featured Report: OSK On Perwaja II ).

Now some would be asking how?

One minute OSK says market valuations is looking expensive and that the market has ran ahead of fundamentals, the next, it was giving huge, huge market upgrades!!!

??

Yeah, some would be asking who gave the market a huge helping hand to become expensive?

And here is the chart of Bumiputra-Commerce.

See where the stock was trading some 6 months ago? Hasn't the stock price already appreciated a lot? To give it another target price upgrade from 9.15 to 12.30, wouln't such price upgrade be a bit too overly aggressive?

LOL! Yeah.. no wonder 2Q earnings Results was the best since 2006 since price upgrades were more than downgrades!

.... Sorry clicked publish posting too early.... continue...

Now if that's not bad enough, if you read the research report on 2nd Sept 2009, with upgrades more than downgrades ( lol ) OSK has now upgraded the general market.

oO

And there you have it.

One day it was a SELL INTO STRENGTH, the next day it was UPGRADE TO NEUTRAL!!!

On Business Times..

• Another broker, OSK Research, this week raised the index year-end target to 1,144 from 1,040. The gauge may rise to 1,265 by the end of next year, according to OSK's forecast.
  
  "While we continue to see the market as expensive, we note the continued liquidity and that investors are looking towards 2010 earnings," OSK said in a report.
  
  It has upgraded the local market to "neutral" from "sell into strength", saying that investors may trade on small-cap stocks in the oil and gas, rubber, steel and construction sectors.

How now my dearest?

Don't you just love OSK Research????

Experts From OSK Says Uptrend Still Intact

Technical experts from OSK says FBM KLCI uptrend is intact. No worries be happy. :D

Saw the following posting on The Edge Financial Daily..

• No dent in KLCI’s uptrend, says OSK Research
  Written by Bloomberg
  Wednesday, 19 August 2009 11:17
  
  KUALA LUMPUR: Malaysia’s benchmark stock index, which has risen 32% this year, will remain on a “bullish uptrend” as long as the gauge trades above its 10-week moving average line, said OSK Research.
  
  The 30-member FTSE Bursa Malaysia KLCI Index (FBM KLCI) dropped 2.2% to 1,159.44 in the past two days, about 2.5% higher than its average level of 1,126 for the past 10 weeks, data compiled by Bloomberg show.
  
  “The market has risen so aggressively since bottoming out” from the 50-day moving average in June “that even a more than 50-point correction will not harm the uptrend”, OSK analyst Shin Kao Jack said in a report yesterday. The index faces “no dent” on its gains, he said.
  
  The FBM KLCI’s immediate support lies at the 1,165-point level, followed by the 1,135 level, he said. The next support points after that will be “crucial”, which are the 10-week moving average line and the 200-week moving average, he said.
  
  For the upside, the initial resistance is seen at 1,189, followed by 1,200, he said. At 1,200, the index would be at its highest since June 24, 2008. — Bloomberg
  
  
  This article appeared in The Edge Financial Daily, August 19, 2009.

Hmmm....

So the FBM KLCI can drop 50 points. No worries up trend still intact. The KLCI uptrend is still intact.

However.... hmmm... if one just entered a position based on the numerous buy calls from OSK, I wonder if one should just sit tight?

Can one handle a 50 points drop?

What if it drops more?

How?

Hold ah?

Or buy on dips?

What if the dip turns into a deep? oO

How?

Sell profits and not sell losses?

Ride the horsie?

Getting Hotter Or What?

The market is hot or what? :D

Have you not seen this some where before?

:D

Tickling With Ticks

Hey, the boss wanted the new tick system.

Smaller ticks is assumed to generate more liquidity.

More liquidity means more business.

And more business means Bursa more profits.

And the more profit Bursa have, who does it benefit?

Hmmmm....... how?

So how do you like the new ticks?

In case you are not up-to-date with the latest, Bursa has changed all stock trading bid systems. Stocks priced from 1.00 to 9.99 will see bid price change in multiples of 1 sen and stocks trading above 10.00 will see bid price change in multiple of 2 sen.

The so-called idea with this new tick changes is that it should increase the trading volume.

Sounds great, eh?

However, what about the other side of the fence? What about the traders? What about the punters?

Do you think they like it at all?

Smaller ticks or smaller price bid movement means the stock has to move up by more ticks for the trader to make money. And for them day traders, this could prove to be a big handicap.

And needless to say, the day traders would be asking 'Why bother trading in this market when everything is handicapped against them?'.

Imagine buying a stock trading above .... say 5.00. How many bids is required for the day trader to make money?

How?

Do you really like it when the Bursa thinks like a money-minded businessman?

Is The Local Retailer Not In The Market?

Some had been concerned with the lack of volume in the local market.

Without volume, it means that there is not much buying interest.

And without the buying interest, how high can the stock market go?

On Star Biz on Saturday Whither stock market?

• Of volumes and liquidity
  
  A dealer who has been trading the Malaysian market over the last 10 years says it is getting increasingly difficult to do so. He adds that foreign transactions have been insignificant. Over the last two weeks, locals made up some 80% of the volumes.
  
  “Yes, you see 1 billion volumes being transacted in the last two weeks, but there’s no real liquidity in the market. Retailers are definitely not in. They are actually very few participants in the market. It is just the institutions that are supporting the market,” the dealer says.
  
  On this note too, he says foreigners do not view Malaysia as an attractive market.
  
  “They cannot short our market because it goes up very easily. Under the FBM 30 index, the top 5 stocks already make up some 50% of weightage. Once these stocks move, the index goes up, hence there is no opportunity to short. And for the foreigners to buy now, there is no upside. Hence what do they do? Exit the market of course,” says the dealer.

Firstly, who the dealer? Dealer from which company?

Anyway, this unknown dealer does have a point or two.

• ......... but there’s no real liquidity in the market. Retailers are definitely not in. They are actually very few participants in the market. It is just the institutions that are supporting the market,”

Is this point valid?

Is there a lack of volume?

If so... is the retailers not in the market?

Why?

How Is Our Stock Market Doing?

Yo!

Market so 'panas'!!!



How now my dearest?

Care to join the fun?

Or are you simply desire-less?

What Hope For Malaysian Investing Public When Research House Makes Such Calls?

Here's a simple question.

If you are a research house and you lower a stock target price from 1.75 to 1.48, how should you classify your stock call?

1. Buy?
2. Neutral?
3. Sell?

Well, OSK calls it a TRADING BUY, Maintained!

LOL! I joke you not!

• Reiterate Trading BUY but at a lower fair value. The rebound in crude oil price is converse to the company’s decision to unwind all its fuel hedge positions in FY08, which also suggests operating cost will be higher. This prompts us to revise downwards our FY10 earning by 15.5% and our fair value to RM1.48. However, as the company’s ongoing fund raising exrcise may provide some excitement for its share price performance, we maintain our Trading BUY recommendation.

Price revised downwards by 15.5%

I am so confused, if it lowers the target price by so much, why can't OSK call it a sell?

Anyway, to recap, posted last month Here's A Nice Stock 'Tip' From OSK. If I take down all the buy calls from 2nd December 2008 to now, this is what I will get.

• 2nd December 2008. AirAsia is still a SELL with a target of 67 sen
• 9th December 2008. AirAsia is still a SELL with a target of 67 sen
• 23rd December 2008: AirAsia is now NEUTRAL with a target price of 0.93!!!!
• 29 May 2009, AirAsia is now a TRADING BUY with a target price of 1.78!!!!
• 14 July 2009. TRADING BUY maintained with a target price of 1.45!!!!

And my favourite Bahasa Malaysia phrase to reflect all of this, just has to be 'Macam mana ni?'.

In a span of just 8 months, how could a 'value' of a company move from 67 sen to 93 sen to 1.78 and back down to 1.45?

What hope does the Malaysian investing public have when a research house like OSK makes recommendations like this?

Maybank's Warning That KL Market May Start To Falter And Some Comments On Kinsteel

On Business Times: KL market may start to falter: Maybank Investment

• KL market may start to falter: Maybank Investment
  Published: 2009/05/27
  
  A 'recession in corporate profits' may have just begun as 63 per cent of companies under Maybank's coverage had reported lower sequential quarterly net profits.
  
  THE Malaysian stock market rally has reached a point where it may start to falter, says Maybank Investment Bank.
  
  "We believe this market rally has pushed valuations to the point where growth expectations have reached implausible levels. In fact, (corporate) profits have just begun to turn down," its analyst Andrew Lee said in a report yesterday.
  
  A "recession in corporate profits" may have just begun, he said, pointing out that 63 per cent of companies under Maybank's coverage that had released their first quarter financial results had reported lower sequential quarterly net profits.
  
  "History tells us the bear market isn't over," Lee remarked.
  
  Still, Maybank isn't overly bearish on the market. It has more "buy" recommendations on companies than "sells".
  
  "We are not overly bearish but we caution that optimism over growth can disappear as quickly as it appeared," he said.
  
  The Kuala Lumpur Composite Index (KLCI), which rose at an eighth-month high of 1053.14 on Monday, may fall to 990 by the year-end, he said. Yesterday, it eased 1.51 points to 1051.63.
  
  The market had risen in recent weeks, fuelled by liquidity and optimism that the worst of the global recession is over.
  
  It currently trades at 15.2 times this year's estimated earnings, up from 12 times earlier in the year, which Lee considers too expensive seeing as corporate profits may contract by 7.7 per cent this year.
  
  "While we recognise this rally may well have room to run, we believe it is beginning to look expensive relative to growth," he said.
  
  He noted that two previous bear cycles, from 1981-1985 and 1993-1998, lasted 57 and 58 months, respectively.
  
  It has now been 17 months since the present bear market began in January last year.
  
  "Those bear markets had 22 to 38 trend reversals of 5 per cent or more; we have now seen 12 since January 2008. These comparisons suggest we are, at best, half way through this bear market," Lee said.
  
  Maybank's strategy is to go for stocks in the construction and building materials sector, as well as selected consumer and high-yield stocks.
  
  Its top picks include Resorts World, Telekom Malaysia, Berjaya Sports Toto, WCT, Kinsteel and Hock Seng Lee.

I am confused.

Let's see...

• "We believe this market rally has pushed valuations to the point where growth expectations have reached implausible levels. In fact, (corporate) profits have just begun to turn down,"

Would you agree?

Don't you think a lot of stocks had rallied far too much? And what was the basis of the rally? Wasn't it the 'there are signs that the worst is over'?

And some of these companies, there are STILL recording losses for the current reported quarterly earnings.

So earnings should improve.... but when? by how much?

Let's take a random stock, Kinsteel.

Aug 2008. Quarterly rpt on consolidated results for the financial period ended 30/6/2008

Kinsteel made some 103 million. ( Good times! :D )

Nov 2008. Quarterly rpt on consolidated results for the financial period ended 30/9/2008

Kinsteel made only 57.9 million. (Bad times... coming! )

Feb 2009. Quarterly rpt on consolidated results for the financial period ended 31/12/2008

Kinsteel lost some 185 million! ( Due to falling steel prices, Kinsteel said it wrote down their inventory to reflect the plunging steel prices)

May 2009. Kinsteel announced it lost some 34.8 million. Note that there is no inventory writedown mentioned.

How?

Here we have a company that is still losing money.

Signs are there 'that the worst could be over'.

Here are some comments from a research report.

• Offer prices of inputs such as scrap and iron ore have crept up by 7-8% in the past month, alongside a slight 5% increase billet prices to USD430/t, arising from expectations of demand trickling in. While pockets of development exist in the region, particularly Vietnam, a definite road to recovery remains to be seen, given that most regional steel mills are still underutilized and saddled with high inventory levels. Price elasticity remains high and resistance from steel buyers makes the steel market intensely competitive for now.

Sounds reasonable that the worst could be over, yes?

So how is Kinsteel the stock doing?

From that screen shot, I see that back in March 20th 2009, Kinsteel traded as low as 36 sen.

Yesterday, the stock closed at 89 sen!!!!!!!!!

oO

So would you agree now with what was stated?

• "We believe this market rally has pushed valuations to the point where growth expectations have reached implausible levels. In fact, (corporate) profits have just begun to turn down,"

And would you agree..

• "While we recognise this rally may well have room to run, we believe it is beginning to look expensive relative to growth," he said.

And this is where I am confused.

Must be my flawed mindset.

Kinsteel looked like a stock that reflected what the research analyst, Andrew Lee is saying here.

And if that is so, why is Kinsteel one of its TOP PICKS?

Incredible yeah?

And the comments earlier on Kinsteel were taken from Maybank's reports. Here's the rest.

• Buy, with TP of RM1.30. There are no changes to our forecasts, which incorporate strong earnings recovery in 2010. The group’s diversified range of products will benefit from the spectrum of steel demand, starting with the construction sector recovery post-2009. Our TP of RM1.30 is based on 8x 2010 PER. Valuations continue to look attractive. Currently trading at 4.9x 2010 PER, the stock is at a discount to its domestic sector average of 5.4x and regional average of 6x.

For a stock that FLEW from 0.36 sen to 89 sen in just two months, Maybank's target price for Kinsteel is 1.30????

Ok.. all the valuations is based on 2010 earnings.

It's Maybank's research projected earnings for Kinsteel. Their estimated earnings.

And what's Maybank's estimate?

Only some 152 million!

So from my flawed understanding, Kinsteel valuation looks cheap because based on 2010 earnings (that's a 2 year estimate), Kinsteel is trading at 4.9x 2010 PER.

Of course, I guess I have to determine if the 2010 earnings is achievable or not. Let's look at Maybank's estimate.

2008, Kinsteel made some 32 million.

2009, Kinsteel is ESTIMATED to be able to make 55 million.

2010, Kinsteel earnings should FLY to 152.6 million!!!

How now my dearest beloved Brown Cow?

You reckon it is possible under current business economics? ( see Would You Have A Punt On The Steel Stocks? for reference too )

Can mah?

If possible, then Kinsteel surely has to be the TOP buy!

*whistle*

Oh... remember this is my flawed view.

Stock Rally Really Unsustainable!

I chuckled when I read the Business Times.

Yesterday Business Times posted the following article: Malaysia's stock rally 'unsustainable': Deutsche

Here's the screenshot.

• MALAYSIA's stock rally is “unsustainable” and investors should sell palm oil producers such as IOI Corp, Kuala Lumpur Kepong Bhd and banks including AMMB Holdings Bhd, Deutsche Bank AG said.
  
  “The market is in denial of worsening economic conditions; this is a market far from offering bargains,” Deutsche said in a report today. “The short-term rally” won’t continue beyond March and this is an “excellent opportunity to take profits.”
  
  Malaysia’s Kuala Lumpur Composite Index, which dropped 39 per cent last year, has risen 3.9 per cent this year, the second best performing benchmark measure in Southeast Asia. Official data in Malaysia points toward a weaker-than-anticipated economy while the government’s fiscal deficit may widen and capital outflows continue, Deutsche said.
  
  Malaysia’s industrial production fell the most in four years in November as a global recession and weakening business confidence eroded demand for goods. Loan approvals in the country slumped 44 per cent in November while applications sank 33 per cent, signaling a “worsening economic environment,” the report said.
  
  Malaysia’s fixed income market is bracing for a “considerable” amount of refinancing this year, estimated at RM50 billion, the report said.
  
  “Much of this has yet to be priced in by the market,” it added.
  
  Shares of IOI, Malaysia’s largest palm oil producer, slid 0.5 per cent to RM3.78 as of 10:07 am, headed for its lowest close since December 31. Kuala Lumpur Kepong lost 0.5 per cent to RM9.80. AMMB, the No. 5 lender, declined 0.8 per cent. Deutsche also said investors should sell SP Setia Bhd, the biggest Malaysian property developer, and Parkson Holdings Bhd, an operator of department stores in China.
  
  The Composite Index is trading at a price-to-earnings multiple of 12.7 times 2009 estimated earnings, a 15 per cent premium to the region, Deutsche said in the report.
  
  Malaysia’s central bank in November cut interest rates by a quarter of a percentage point to 3.25 per cent, the first cut since 2003, and the government announced a RM7 billion (US$2 billion) spending plan to revive economic growth. - Bloomberg

Today, the Business Times carried the following article Deutsche: KLCI rally unsustainable

• MALAYSIA'S stock rally is "unsustainable" and investors should sell palm oil producers such as IOI Corp Bhd and Kuala Lumpur Kepong Bhd (KLK) and banks including AMMB Holdings Bhd, Deutsche Bank AG said.
  
  "The market is in denial of worsening economic conditions; this is a market far from offering bargains," Deutsche said in a report yesterday. "The short-term rally" will not continue beyond March and this is an "excellent opportunity to take profits".
  
  The Kuala Lumpur Composite Index (KLCI), which dropped 39 per cent last year, has risen 3.9 per cent this year, the second-best performing benchmark measure in Southeast Asia.
  
  Official data in Malaysia point towards a weaker-than-anticipated economy, while the government's fiscal deficit may widen and capital outflows continue, Deutsche said.
  
  Malaysia's industrial production fell the most in four years last November as a global recession and weakening business confidence eroded demand for goods.
  
  Loan approvals in the country slumped 44 per cent in November while applications sank 33 per cent, signalling a "worsening economic environment", the report said.
  
  Malaysia's fixed-income market is bracing for a "considerable" amount of refinancing this year, estimatd at RM50 billion, the report said.
  
  "Much of this has yet to be priced in by the market," it added.
  
  Shares of IOI, Malaysia's largest palm oil producer, rose 0.5 per cent to RM3.82 yesterday, while KLK fell 1 per cent to RM9.75.
  
  AMMB, the No. 5 lender, fell 0.8 per cent to RM2.51.
  
  Deutsche also said that investors should sell SP Setia Bhd, the biggest Malaysian property developer, and Parkson Holdings Bhd, an operator of department stores in China.
  
  The KLCI is trading at a price-to-earnings multiple of 12.7 times 2009 estimated earnings, a 15 per cent premium to the region, Deutsche noted.
  
  Last November, Bank Negara Malaysia cut interest rates by a quarter of a percentage point to 3.25 per cent, the first cut since 2003, and the government announced a RM7 billion spending plan to revive economic growth. - Bloomberg

Yesterday already published. Today still want to publish?

LOL!

Ok. Business Times, I got your point and Deutsche Bank's point too.

:D

KLCI, see ya at 691: One Report, Two Views, Same Papers

Published on today's Business Times: KL mart may hit bottom early 2009: Citi

• KL mart may hit bottom early 2009: Citi
  
  Published: 2008/12/16
  
  Citi Investment's top buys are AMMB, BCHB, IGB Corp, KLCC Property, Tanjong plc and IOI Corp while its top sells are Public Bank and Maybank
  
  "With the macro risk rising, the market could fall below the 1.4 times price-to-book ratio (P/B) it hit during the 2000-01 recession ... taking a more cautious approach, we are now using our benchmark the average Asia P/B of 1.2 times - implying a further decline to 691 points," Citi Investment Research said in its report last Friday.
  
  The research house expects the bear market to hit the bottom as early as the first quarter next year.
  
  "In three of the last four recessions, the bear market ended in or immediately after the worst quarter of GDP growth. Our CITI Investment Research expects the benchmark Kuala Lumpur Composite Index (KLCI) to fall by another 18 per cent to 691 points, as earnings per share (EPS) growth expectations continue to fall amid the uncertain market.
  
  economist forecasts GDP to bottom at around two per cent in the first quarter 2009, down from 2.6 per cent in the fourth quarter of 2008. If history repeats itself, first quarter 2009 is the earliest the market could bottom," it said.
  
  It also revised downwards its projections on EPS for 2009. Companies in the utilities sector are expected to see a 23.7 per cent decline in EPS, banks (-8.3 per cent), telecoms (14.4 per cent), plantations (-20.6 per cent) and tobacco (-10.5 per cent).
  
  It advised investors to go for stocks that has low P/B or with high earnings visibility.
  
  "Be they cyclical or defensive, stocks trading at trough P/Bs or have strong earnings visibility are on our top buys list - AMMB, BCHB, IGB Corp, KLCC Property, Tanjong plc and IOI Corp. Our top sell ideas are Public Bank and Maybank," it added.

Yesterday afternoon, the following article did appear on Business Times too. KL bourse may fall for another quarter. It was a reproduction of a Bloomberg news article.

• MALAYSIA'S stock market may continue to fall for at least another quarter as earnings shrink and a possible drop in domestic spending threatens economic growth, Citigroup Inc said.
  
  The domestic market typically recovers from a slowdown during or after the worst quarter of economic expansion, Wai Kee Choong, Citigroup's Malaysia head of research, said in a report. The index will trough at "the earliest" next quarter, when there's a risk of a "sharp" fall in economic growth, he said.
  
  Corporate earnings in Malaysia will drop 11 per cent in 2009, wrote Choong, who previously forecast a 4 per cent decline. The biggest losers will be media companies, plantation owners and utilities, Citigroup said.
  
  The Kuala Lumpur Composite Index has lost 41 per cent this year, better than the main indexes in Indonesia, Singapore and Thailand. Still, investors haven't fully priced in slower-than- expected economic growth in Malaysia, and the nation's stocks may now be overpriced, according to Citigroup.
  
  The measure is valued at 9.8 times reported earnings, the highest among Southeast Asia's benchmark stock indexes.
  
  Investors should sell shares in Public Bank Bhd, Malaysia's biggest bank by stock-market value, and Malayan Banking Bhd, which may be hurt by higher credit costs, Citigroup said.
  
  The Kuala Lumpur Composite Index, which fell in the first three quarters of this year, climbed less than 0.1 per cent to 852.48 at 11:31 am. Citigroup said its new target for the index is 691.
  
  In the current slowdown, Malaysia's slowest growth in gross domestic product might occur in the first quarter of 2009, with expansion of 2 per cent, Choong said. The government expects growth to slow to 3.5 per cent for the whole of 2009 from about 5 per cent this year.
  
  Sime Darby Bhd, the world's biggest palm-oil producer and Malaysia's largest company by market value, and IOI Corp, Malaysia's second-largest plantation company, have already said profit in their current financial year will fall. - Bloomberg

Two news article reporting what was commented on a Citigroup equity report.

How?

KLCI, see ya at 691!!!

Time To Retink Accounting Reporting?

Posted on Business Times: Time to rethink reporting?

• Some quarters argue that the numbers that come out in quarterly reporting, especially during an economic downswing like now, may not fairly or accurately reflect a company's true value
  
  MANY companies listed on Bursa Malaysia have reported a steep drop in quarterly profit, or even losses, as a result of current market turmoil.
  
  While their results this quarter were clearly under pressure, the fundamentals behind some of these companies remain firmly intact.
  
  Some quarters believe it may be timely for Malaysia to make its listed companies report their financial results on a half-yearly basis instead of quarterly.
  
  Their argument is that quarterly reporting encourages short-term focus on immediate results by both management and investors.
  
  As such, the numbers that come out, especially during an economic downswing like now, may not fairly or accurately reflect a company's true value..... (read rest of article here )

I don't buy such arguments.

The current earnings reporting reflects how a company is performing currently.

And yes, CURRENTLY, the business economics have turned really bad for many business sectors but what the article is suggesting is really lacking.

Are they telling us to discount the weakness and pretend that what is happening is not real?

Are we living in a delusional world?

Do we want to live in one?

• MANY companies listed on Bursa Malaysia have reported a steep drop in quarterly profit, or even losses, as a result of current market turmoil.

Think of that statement for a moment.

Some of these companies that are reporting losses now, why are they reporting the losses?

Doesn't it clearly reflect the lack of the companies' competitive advantage or the lack of the management? Or perhaps were theses companies highly geared?

See also: Half-yearly versus quarterly reporting: Which shall it be?

• TAN SRI MEGAT NAJMUDDIN MEGAT KHAS, president of the Malaysian Institute of Corporate Governance and chairman of SEG International Bhd.
  
  I think it is a good idea, and should be taken into serious consideration. Companies should be given an option to report quarterly or half-yearly. If companies report their numbers once every six months, investors and the public can get a clearer picture and better understanding of a company's financial health.
  
  ANNUAR MARZUKI ABDUL AZIZ, chief financial officer of PLUS Expressways Bhd.
  
  I think it is better to report quarterly. In such economic times, investors, stakeholders cannot be left in the dark for too long. Besides, as long as there is a proper system and process in place, quarterly reporting is not all that troublesome as compared to half-yearly reporting.
  
  JOSEPH TAN, chief financial officer of F&N Holdings Bhd.
  
  "It would be less work for us. But these days, certain investors are concerned over how companies perform. Quarterly numbers will give them more input. But it really depends on a company's business. For FMCG (fast-moving consumer good) companies like us, the industry changes very quickly. So, quarterly reporting will help reflect those changes to investors very quickly.
  

Market Predictions & Outlook

Featured on Star Bizweek: Better predictions

The following passage was so interesting for me.

• Airy-Fairy projections
  
  The worst kind are airy-fairy ones. For example: “The KLCI will reach 2000 over the next few years.”
  
  What good are such statements!? What does “few years” in this context mean? Three? Maybe 5 years? Could it even mean 7 years? These are the predictions one ought to be wary of, as the pundit is trying very hard to avoid making the wrong call whilst seemingly issuing a strong call/statement.
  
  Talking about big calls, here’s one - Goldman Sachs’ recent prediction that oil prices will reach US$200 within the next 12-18 months.
  
  On the other hand (deliberate use of that phrase here), making a forecast that the market will hit 2000 is a very weak call. One might as well not make one. I’ll tell you why. Let’s start with the 1300 point level. Based on a 10% annual compounded gain, we could see the CI in 2008 at 1430 points; 2009 at 1573; 2010 at 1730; 2011 at 1903; 2012 at 2093.
  
  See what I mean? It’s not a major call at all, and definitely not when used alongside an ambiguous time horizon of a “few years” or even worse still “in future”.
  
  Predictions are meant to be useful to guide investors to make investment decisions. Vague calls that are essentially hedged bets serve no such purpose.
  
  There seems to be just too many well-hedged views by analysts, fund managers, economists as well as CEOs. The media fraternity should probe more when faced with such vague calls.

I chuckled for I had just read a forwarded weekly market commentary from iCapital.

• Strength from weakness ? Subscribers must have been shocked when we wrote that in last week’s i Capital. Since then, it looks like not only is Malaysia getting strength from weakness, but the weak is getting stronger. Don’t ask us how it can be done but our Malaysian magician politicians are of world-class standards, at least as world-class monkeys instead of world-class administrators. As the price of oil refused to budge, our politicians have also refused to budge.

That world-class monkeys statement certainly raised my eye-brows!

However, I was so confused about the the statement: Malaysia getting strength from weakness, but the weak is getting stronger. What are they talking about?

• With the latest sodomy charge emerging, our political monkeys, both in the ruling coalition and the opposition, have managed to turn the whole country in just a few months into a zoo, a zoo full of asses (pardon the pun). With one leader having to defend his back (again pardon the pun) and another leader having to face statutory declarations, the weak is actually getting stronger. For now, Malaysians are not bothered with this twist of event. Malaysians are more interested in wanting to know (or rather to gossip) who did it and why. The two most obvious persons that coffee-shop talk is focusing on are the 4th prime minister and the current prime minister. Both have a lot to gain.
  
  The list of “who done it” does not stop there. There are so many possible politicians, all with plenty of political mileage to gain, who would gain from this sodomy addiction. There are so many theories as to who did it and all of them seemed plausible. Since you guys, aka political monkeys, are having so much fun at our expense, let us Malaysians have some fun too by gossiping. While your fun destroys the whole country and make all us poorer, at least our fun is harmless and helps to establish the truth behind this political hedonism. Business at coffee shops should be roaring. Can we do a coffee shop IPO ? At least its NAV would not drop. So, please do not sue us or make us sign statutory declarations of all kinds. Some theories are so interesting that we would not dare to publish it. Some even say that it is a powerful woman who did it. He…he…. As everyone is gossiping and no one is managing the country and the economy, we better stop here, as we need to pay attention to the economy and the stock market. One thing is for sure though. Looking at how dirty and unscrupulous our politicians can be, the May 1969 riot was certainly orchestrated by our unscrupulous politicians.
  
  As Malaysia gets deeper into an oily patch, the price of crude oil gets deeper into stratosphere. The Malaysian government has promised no more price hikes after the recent jump. Can we afford it ? Can Malaysia with years of budget deficit afford to live beyond its means ?
  
  When the government raised the price of petrol and diesel, many protested. Why should we have to pay higher oil price when Malaysia is an oil producer and net oil exporter ? The argument of the protestors is that we should not compare our oil price with Thailand’s or Singapore’s as they are net oil importers. Malaysia should compare its price with those of the oil producers which are absurdly low. Is this argument complete ?
  
  Due to the unproductive and wasteful spending under the 4th prime minister, Malaysia has been “enjoying” many years of budget deficit. Although Badawi has been controlling it and reducing it gradually, by 2007, it was still 3.2% of GDP. When we were asked to compare our petrol price with those of the oil producers, how many of us know that these oil producers are running massive budget surplus in contrast to Malaysia’s budget deficit ?
  
  Instead of protesting the rise in petrol and diesel price, Malaysians, be they from the opposition or ruling coalition, should be asking where are all our spending going to ? Why are oil-producing countries like Saudi Arabia, Venezuela, Kuwait, Libya, etc all enjoying massive budget surpluses when Malaysia, an oil producer and a net oil exporter, is suffering from its 11th year of budget deficit ? Where are we spending our taxpayers money ? Why is our spending more than our revenue ? Get our budget into surplus, then, we can talk about our “high” petrol and diesel prices.
  
  In Malaysia, the price of flour is still controlled. In Indonesia, the price of flour is not. In 2007, the price of flour in Jakarta jumped more than 100%. Incidentally, the Jakarta stock market is holding up very well despite the global turbulence and inflation and interest rates rising in Indonesia. Pakistan, with a budget deficit expected to rise to 6.5% of GDP, is getting her people ready to totally phase out fuel subsidies by Dec 2008. When is Malaysia getting ready to do the same ?
  
  When will our political monkeys remember that they have a duty and responsibility to all Malaysians to ensure that the economy is managed successfully and responsibly ? Are there not effective and better ways of having a democracy AND a better economy ? Do not turn this beautiful country into a zoo.

I do understand the point of argument stated by iCapital as they see much wrong with the country.

However, I was truly baffled by their conclusion.

• First, the KLSE was sodomised by worries of a global meltdown. Then, it was sodomised by the 2008 election results. Now, the KLSE looks like getting it again. Maybe after getting sodomised so many times and with investors getting sore, the KLSE may already be numbed. i Capital revises its immediate-term outlook of the KLSE to a range of 1,150 to 1,300. For the short-term, i Capital retains its outlook to a range of 1,150 to 1,400. For the medium and long-term outlook of the KLSE, i Capital still expects the KLSE CI to hit 2,000 points. With the 2008 election results now history but with the political comedy still being acted out, i Capital will review its medium- and long-term outlook at a relevant time.

It's immediate-term outlook of the KLSE to range from 1150 to 1300? ( Despite all the issues mentioned, iCapital's immediate outlook was adjusted from 1200-1300 to 1150-1300! Major adjustments?)

Short-term outlook is at 1150 to 1300?

And medium to long-term outlook of the KLSE to hit 2000?

Seriously, what is immediate-term? And what's the difference between short-term and immediate? I mean, isn't immediate a relatively short term period?

And what exactly is medium to long-term outlook?

What time period are we talking about? What are they even talking about?

Perhaps they could be more precise, yes? As it is, from a immediate (or short) to a long term outlook, iCapital is saying KLSE outlook is from 1150-2000 pts. Now this is simply way to vague, yes?

ps. Hmm.. the lowest range starts from 1150. Looks like iCapital is not covering its rear as it is stating boldly that KLSE would not be below 1150!

More Market Comments

Posted on Singapore Business Times:

• Aberdeen Asset Management, which manages more than US$40 billion in Asian ex-Japan stocks, said it continued to overweight Malaysia and favoured financials such as Public Bank.
  
  'It's not as if the government has changed. The mandate is much weaker than previously, but it doesn't change the fundamentals and growth rates,' said Aberdeen investment manager Andrew Gillan, whose other picks included retailer Aeon and food and beverage firm Fraser & Neave Malaysia.
  
  'We think the market overreacted,' said Eubee Ong, a fund manager at Phillip. 'The political situation is still very stable. In 1969, there were riots when the opposition won big, this time it went smoothly.'
  
  Fund managers were, however, less bullish on palm oil producers such as IOI and Sime Darby as valuations remained relatively high despite Monday's selldown.
  
  'Commodity plays are the most attractive sectors, but they are also the most expensive,' said Leslie Phang, head of investments at Schroders Private Clients in Singapore. 'Our preference is to own the underlying physicals rather than stocks.'
  
  Mr Phang and other fund managers said investors will continue to shun developers and construction firms, in particular those with projects in Opposition-controlled states, such as Equine Capital.
  
  'There is ambiguity regarding the actual implementation of previous decisions made by the government,' said David Ng, who helps manage RM6.1 billion (S$2.64 billion) as chief investment officer of HwangDBS Investment Management.
  
  These projects include the Northern Corridor, which will link the Opposition-controlled state of Perak to other northern states and a bridge to link Penang island to the Malaysian mainland.
  
  Mr Ng and other investors also cited possible delays to hikes in electricity tariffs and a reduction in natural gas subsidies that would dent earnings at firms such as power generator Tenaga.
  
  Deutsche Bank said in a note to clients it expects the proposed tariff review to be delayed until 2009.
  
  However, looking further ahead, investors said the election setback may be the catalyst to force badly needed political reform in Malaysia, which would involve modifying policies that discriminated against the country's minority Chinese and Indians.
  
  'Prime Minister (Abdullah) Badawi has acknowledged electoral discontent and how divisive cultural differences have become,' said Stephen Corry, investment strategist at Merrill Lynch's private bank.
  
  'Mr Badawi's priority and emphasis is now to unite Malaysia with a clear objective emphasis to grow the economy and open up further to foreign investment. This, if it happens, has to be a positive,' Mr Corry said.

Macam Mana Ni?

So what did Credit Suisse said?

Got a copy of Credit Suisse report today. I was interested to read their opinions on our markets.

Here's a snippet of what's said.

• The market appears to have ignored the government.s continued control of parliament, with its 63% majority. Parliament now has an intelligent & eloquent opposition who will get heard.
  
• We believe the opposition success was an .accidental. result due to a coincidence of protest votes by Malaysians of all races.
  
• The opposition is an uncomfortable alliance held together by Anwar Ibrahim. The first act of the PKR controlled Selangor state government has been to declare the state an .NEP-free. zone.
  
• It has so far been a peaceful process. The fighting will begin when opposition state governments interfaced with the coalition controlled federal government, causing transaction delays.
  
• It is possible for the opposition to take control of parliament if it can persuade 30 MPs to defect or if invited back into UMNO.
  
• The ruling coalition must reform to survive, in our opinion. It has, again, been given the mandate to do this. All eyes will be on PM Badawi.s cabinet line-up as to whether he is listening this time.

Market over-reacted
You would have thought there had been a military coup in Malaysia if you had simply observed the one-day 10% drop in equity prices following the general election. The fact that the ruling coalition retains a 63% majority in parliament appears to have been over-looked.

Why did the government do so badly?
In our view, it was an .accidental. result. Malaysia.s politics has historically been race based. The ruling coalition is dominated by Malays who have historically persuaded the Chinese & Indian minorities to support them as a better option to the obvious alternative, which is an Islamic government. In our view, protest votes by all three ethnic groups accidentally coincided to produce meaningful success for the opposition.

The Malays were generally unhappy with the level of obvious corruption (ironically visible due to a more liberal press) and inflation. Anwar Ibrahim was effective at hustings, by asking the crowd .hands up who has received a government contract?. He effectively used this to demonstrate that the government.s policy of affirmative action (NEP) has only served to enrich the political elite. The opposition also made the very safe, but popular, promise that they would reduce the price of petrol.

The Chinese were generally unhappy with the overt racial harassment evident at the UMNO assembly when the UMNO youth leader waived a dagger (kris) in a statement of defence of Malay rights. The Indians were generally unhappy. Having taken to the streets in protest over their economic marginalisation, the government responded with riot police & liberal use of the internal security act.

Who is the opposition?
The opposition is a disparate group comprising three parties, namely Anwar Ibrahim.s multi-racial justice party (PKR) which won 31 seats in parliament, the Chinese dominated DAP which won 28 seats in parliament and PAS, the Islamic party, which won 23 seats in parliament. The opposition won 5 of 13 states, with PKR dominating in Selangor, DAP dominating in Perak & Penang while PAS dominated in Kelantan & Kedah.
PKR, being a multi-racial party has to act as a unifying force within the opposition coalition. PAS has moderated its religious stance significantly due to the infusion of young blood, while DAP has always focused on protecting Chinese rights. While intellectually capable, it will not be an easy task. Indeed, it is fair to say that the opposition is probably not prepared for government.

An end to affirmative action?
The Anwar led PKR has already declared Selangor an .NEP-free. zone. He has long maintained that affirmative action should be for the benefit of all lower income Malaysians, regardless of race. While NEP reform has always been perceived to be an election loser, Anwar appears to have found an appealing angle to it which potentially could unlock Malaysia from this historic economic burden.

Business as usual in parliament, almost The ruling coalition still has control of parliament and therefore over the economy. This includes federal initiatives such as the GLC transformation process and other projects funded and driven at the federal level, such as the IDR in Johor. The main difference is that there is a meaningful, highly educated and eloquent opposition who will provide a check and balance in Malaysian politics that has been absent for years. This should help curb the excesses of the past.

A peaceful revolution, but the fighting has yet to begin All parties have reacted with great restraint folowing the shocking election result, such that there has been no violence. This is partly as a result of each race believing that it has secured election victory.

The real fight begins when opposition state governments have to interface with the coalition controlled federal government. There is real risk that each side may try & thwart the endeavours of the other party, in order to score points. This may cause delays in implementation of certain infrastructure and property projects and transactions given that land and water matters are controlled by the state.

Can the opposition ever gain control of parliament?
The key for control of parliament lies in East Malaysia, where Sabah & Sarawak contribute a whopping 25% of seats in parliament. If Anwar can persuade just 30 MPs to defect, then he would have control. It is always possible that Anwar could be invited to re-join UMNO (for the sake of unity) a possibility denied by all parties, but never say never!

What next for the ruling coalition
The ruling coalition must reform to survive. This election result again gives PM Badawi (or his likely successor Najib) the mandate to do just that. All eyes will be on his cabinet line-up to determine if he is listening. We would expect all .bad news. to be deferred for the moment, such as energy price increases.

The Day After The Plunge!

The active stocks.



Top Gainers!

Meat Loaf - It's All Coming Back To Me Now

Some comments from S'pore Business Times

• S&P sees Malaysian deficit widening
  
  This could happen if govt fails to raise fuel prices after poll setbacks, it says
  
  (SINGAPORE) Malaysia's budget deficit may widen if the government fails to raise fuel prices after losing its two-third majority in Parliament in weekend elections, according to Standard & Poor's (S&P).
  
  South-east Asia's third-largest economy also faces the risk that private investors will 'stand aside' amid concerns about the nation's political stability, said Sani Hamid, S&P's director of sovereign ratings on Malaysia.
  
  'This is something really new,' he added.
  
  Malaysia's ruling Barisan National coalition suffered its worst defeat since the nation's independence in 1957, winning 63 per cent of the legislature compared with 91 per cent in 2004. It is also now out of power in five of the country's 12 states.
  
  'We will be watching to see if the government's plans for investments in the northern corridor will fall through now that the states involved there have lost out to the opposition,' Mr Sani said.
  
  Prime Minister Abdullah Ahmad Badawi's government last July said it expects to generate RM177 billion (S$76.8 billion) of investment by 2025 to spur growth in the country's northern states. The northern corridor includes Penang, Perak and Kedah, three states that fell to opposition parties in this election.
  
  'We will be watching closely for any significant policy changes or potential impediments to the policy-making process and passing of legislation,' said Elena Okorotchenko, S&P's senior director for Asian sovereign ratings in Singapore.
  
  Still, Ms Okorotchenko said the weekend election result would have 'no immediate impact' on Malaysia's credit rating.
  
  S&P has an 'A-' rating on the country's long-term foreign currency debt with a positive outlook. Its last revision was in July 2007, when it raised the ratings outlook to positive from stable.
  
  S&P said it will be monitoring Malaysia's budget deficit, especially fuel subsidies.
  
  'If oil prices stay above US$100, the budget deficit will definitely widen if the government can't pass on some of these costs to the public,' Mr Sani said. He warned that Barisan National's reduced majority in Parliament could make it harder for the government to cut fuel subsidies to keep the budget target on track.
  
  Mr Abdullah's government aims to trim the budget shortfall to 3.1 per cent of gross domestic product this year from 3.4 per cent in 2007. The government spent RM35 billion in subsidies to keep fuel prices low last year. A pledge not to increase fuel costs expired at the end of 2007\. \-- Bloomberg

And

• Malaysian economic outlook uncertain after polls shock: analysts
  
  KUALA LUMPUR - Malaysia's shock election results, which have left an untested opposition ruling key states, have raised fears over economic growth and investment prospects, analysts said on Tuesday.
  
  The stock market plunged 9.5 per cent on Monday in a panicky reaction to the gains by the opposition, which on Tuesday moved to reassure investors that it would implement 'business-friendly' policies.
  
  Economists said growth could be affected if the new coalitions running five states clash with the federal government over planned infrastructure mega-projects and funding allocated under a national development blueprint.
  
  But they said that while the stock market will remain under substantial short-term selling pressure, when the political dust settles it could reveal a brighter future under a revitalised government.
  
  In Saturday's watershed elections, the Barisan Nasional coalition failed to secure two-thirds of the vote for the first time in almost 40 years, and conceded four states to the opposition in addition to one it already held.
  
  They include Selangor and Penang - Malaysia's most developed and industrialised states which account for nearly half the national economy.
  
  A funds manager with an insurance firm said the changeover could derail contracts that have already been awarded, and jeopardise the government's stated plans to lure billions of dollars in investment to Malaysia's regions.
  
  'The country's political risk premium has gone up a few notches because of the uncertainties. Land approvals are handled by the states. The fear is that projects could be scrapped,' he told AFP on condition of anonymity.
  
  Credit Suisse analyst Stephen Hagger predicted a bearish mood on the local bourse until questions over beleaguered Prime Minister Abdullah Ahmad Badawi's future are resolved.
  
  'Malaysia will be dead money until there is some political clarity that emerges over the next six to 12 months,' he said.
  
  Foreign research firm Merrill Lynch said the negative reaction on the stock market, which staged a partial recovery on Tuesday, was due to an expected slowdown in the decision-making process with a strong opposition in parliament.
  
  'There will also be some short-term uncertainties with regards to investment growth especially in states which are now held by the opposition parties,' it said.
  
  Anwar Ibrahim, the former deputy premier who rallied three opposition parties to the resounding election result, said on Tuesday that there could be a review of state projects.
  
  'We will have to respect the existing agreements. But where adjustments are required, we have to look at it, especially those that imposed hardship to the people,' he told reporters.
  
  He nevertheless downplayed concerns projects could be cancelled.
  
  'I may be in the opposition but I will not sacrifice the economic performance of this country. I assure that we will be market friendly and implement all the initiatives (of the previous administration),' he said.
  
  'The country should be stable and we should be able to instill confidence among domestic and foreign investors.' -- AFP

Market commentaries from Dow Jones

• KUALA LUMPUR (Dow Jones)--Malaysian stocks staged a mild recovery Tuesday after a 9.5% plunge Monday, helped by a technical rebound and gains in regional markets.
  
  However, analysts said the market's rebound may be short-lived due to prevailing political uncertainty and a slew of downgrades by brokerages and research houses after the ruling coalition Barisan Nasional emerged weaker from a poll Saturday. In an unexpected result, the ruling coalition failed to garner a two-thirds majority for the first time in four decades.
  
  The benchmark Kuala Lumpur Composite Index ended up 2.8% at 1206.54, to close off an intraday high of 1211.75 points at the midday break, led by gains in shares of construction, plantation and government-linked companies.
  
  The modest recovery in equities helped the Malaysian ringgit to close marginally firmer at MYR3.2030 against the U.S. dollar from Monday's two-week low of 3.2020.
  
  Several houses have already slashed their market forecasts. AmResearch lowered its fair value for the KLCI to 1,300 from 1,590; Aseambankers reduced its year-end target to 1,350 from 1,450; OSK shaved its year-end target to 1,340 from 1,650 and CIMB cutting its year-end target to 1,380 from 1,700 previously.
  
  "Investors should avoid getting distracted by taking trading positions until the dust settles," said Citigroup Malaysia's Head Of Research Choong Wai Kee in a report Tuesday. "We advocate a strategy of staying focused, targeting just blue chips. Our picks are Telekom Malaysia, IOI Corp, Public Bank, Malayan Banking and Resorts World."
  
  ING Funds (Malaysia) Head of Investment Wu Yah Ning is less bearish on Malaysian equities.
  
  "We expect some degree of volatility in the near term but there's good value in this market. The KLCI is now trading at a price-to-earnings ratio of around 13 which is close to the lower end of its historical P/E trading band of 12 to 16 times," she said, maintaining a positive stance on plantation stocks and oil and gas related companies for solid earnings growth.
  
  Edward Ong of Macquarie Research also maintained his positive outlook for Malaysian equities.
  
  The ruling coalition's "loss of a two-thirds majority is likely to be perceived as negative in the short-term but this could also mean stronger checks and balances, particularly in terms of constitutional changes, and potentially spur reform in the medium term," Ong said in a note.
  
  "In the larger context, with ongoing global liquidity contraction, we foresee more potential multiple contractions in the short term. This would be amplified by the recent election results, which would also dent market sentiment in the immediate future," he said.
  
  Among the biggest gainers, IOI Corp added 3.8% to close at MYR6.90, Sime Darby rose 4.3% to MYR9.80, Bumiputra-Commerce Holdings gained 6.3% to MYR9.35 and property concern Equine Capital jumped 31.7% to 93.5 sen.

How Now TK?

The market, it rebounded!

Meat Loaf - Alive!


Here is a snippet from Dow Jones.

Mild Recovery? Market at this moment of time is up 24.68 pts! Mild?

• Malaysian stocks staged a mild recovery Tuesday from yesterday's 9.5% plunge, helped by a technical rebound across all sectors, although analysts warned that market uncertainty is likely to continue.
  
  "We see the sharp correction as a buying opportunity. In our view, Malaysia's economic and corporate fundamentals remain intact," said UBS analyst Colber Nocom in a note, adding that near-term uncertainty is likely and the KLCI will test support at 1,170 points in the coming months.
  
  At the midday break, the benchmark Kuala Lumpur Composite Index was 2.1% higher at 1197.90 points, off the intraday high of 1211.75, led by gains in shares of construction, plantation and government-linked companies.
  
  The Malaysian ringgit also staged a slight recovery, recently trading at 3.2000 against the dollar, strengthening from yesterday's intraday two-week low of 3.2090.
  
  Stocks rebounded from yesterday's plunge to a seven-month low of 1173.22 when the market reacted negatively to the weekend's general election results.
  
  Still, dealers remained cautious, warning strong selling pressure may emerge in late afternoon trade as investors sell into strength and stay on the sidelines.
  
  "Investors should avoid getting distracted by taking trading positions until the dust settles," said Citigroup Malaysia's Head Of Research Choong Wai Kee in a report Tuesday. "We advocate a strategy of staying focused, targeting just blue chips. Our picks are Telekom Malaysia, IOI Corp, Public Bank, Malayan Banking and Resorts World."

Other news clip showed that Macquarie Resarch been positive.

• Macquarie Research remains positive on Malaysia equities despite ruling coalition Barisan National failing to win two-thirds majority; analyst Edward Ong says market may impute higher perceived risk factor in immediate term but BN still retains power with simple majority. "Its loss of a two-thirds majority is likely to be perceived as negative in the short term but this could also mean stronger checks and balances, particularly in terms of constitutional changes, and potentially spur reform in the medium term"; elections a victory for democratic process and opposition wins demonstrate election process is transparent and fair. Adds, potentially lower petrol and diesel subsidies could delay public transport infrastructure spending; Northern Corridor Economic Region plan could also be reassessed after loss of 3 states in north, potentially raising perceived risk for construction firms. Likes DiGi.com (6947.KU), Maybank (1155.KU), Genting (3182.KU), KL Kepong (2445.KU), AMMB (1015.KU) Telekom (4863.KU) Mah Sing (8583.KU) and Berjaya Sports Toto (1562.KU).(VGB)

From UBS:

• UBS tips Malaysian market's sharp selloff yesterday following election results as buying opportunity. "In our view, Malaysia's economic and corporate fundamentals remain intact. Barisan Nasional (BN) still controls 62% of Parliament and opposition parties have declared they will pursue market-friendly policies on states they control." Says post-selloff, Bumi-Commerce (1023.KU), IJM (3336.KU), UEM World (1775.KU) offer good value. Says in plantation space, Asiatic (2291.KU), IJM Plantations (2216.KU) look attractive. Says after revisiting EPS estimates, believes these companies should not be materially affected by political uncertainty.
• UBS says Malaysian market de-rating offers bargains. Says post-correction, three lowest-P/E stocks under coverage are Kinsteel (5060.KU) at 5.8X, Sunway Holdings (4308.KU) at 6X, and Sunway City (6289.KU) at 6.5X. "We think the sell-down on Kinsteel and Sunway Holdings have more than priced in earnings risk from potential delays in infrastructure spending." Notes highest dividend yield stocks under coverage now Gamuda (5398.KU) at 7.8%, Bursa (1818.KU) at 7.1%, Public Bank (1295.KU) at 7%. "Clarity on politics could trigger a rebound for the KLCI. While it is difficult to second-guess the political news flow, we think both BN and the opposition parties will unlikely want to see a sharp slowdown in economic activity in the near-term. Thus, we believe the political posturing on both sides could be short-lived." Says UMNO elections next key event to watch. KLCI up 2%.

Finally we are seeing more bullish statements on the planters (see HwangDBS goes Overweight on Planters) ! (Where were they when the CPO were above 4400?)

• UBS reiterates Buy ratings on Malaysian plantation stocks despite recent consolidation of vegetable oil prices. Notes palm, soybean oil prices have corrected sharply after hitting March 3 high, with consolidation initially sparked off by upward revision of Brazil soybean crop, news of Chinese canceling contracts; adds, unwinding of speculative long trades since then driving momentum. "While the current newsflow is negative, we think the demand-supply fundamentals remain supportive of price;" notes 2008 opening world inventory of soybeans down 15.4 million tonnes, or 25%, vs 2007. "The revision of 1.2 million-1.6 million tonnes in Brazilian soybeans does not in our view change a fundamental tightness in vegetable oil supplies globally in 2008." Tips attractive valuations on stocks; says Hap Seng Plantations (5138.KU) offers 6.9% net yield on FY2009 estimates, Sime Darby (4197.KU) trades at 12X FY09 earnings after falling 30%, IOI Corp. (1961.KU) trading at 22X earnings after falling 23%

Note how the planters fared this morning: Market firmer at midday, CPO surges

• Plantations were higher, led by Asiatic, which gained 50 sen to RM7.75, Sime Darby 35 sen higher to RM9.75 while United Plantations, Chin Teck and KL Kepong gained 30 sen each to RM13.60, RM7.30 and RM15.20 respectively. IOI Corp added 15 sen to RM6.80.

And the folks at Kuwait Finance House is rather positive with the market according to Business Times. ( see KFH maintains KLCI can hit 1,500 by year-end )

• Its optimism was based on Malaysia’s firm macro fundamentals, take-off of Ninth Malaysia Plan infrastructure projects, sustained corporate profit growth of 13 per cent and the stronger ringgit, KFH said in a review of the results of the election today.
  
  Despite the knee-jerk selling on the market, “we foresee strong fundamental support backed by the resilient economy,” the investment banker said.
  
  “We do not expect any change in the current macroeconomic policies such as monetary and fiscal policies as the Barisan Nasional remains the federal government despite the reduced majority,” KFH said.
  
  However, it reiterated its optimism that the 9MP infrastructure projects would be implemented as planned.
  
  Among them are the Iskandar Development Region, Eastern Corridor Economic Region, Sabah Economic Corridor and the Sarawak Corridor of renewable energy.
  
  “The victory for BN would also mean that the Prime Minister can continue with efforts on clamping down on corruption, improve the efficiency of public services, provide an enabling business environment for local and foreign investors and government-linked companies (GLC) restructuring,” it said.
  
  The ringgit is expected to hover at 3.16 this week at the expense of the dollar as the US Federal Reserve is widely expected to cut interest rates further.
  
  KFH said its sector pick included construction, infrastructure-related namely steel, cement and aluminium, property and real estate as well as GLCs.
  
  “We expect the economy to continue on a steady growth path, maintaining our gross domestic product growth of 5.7 per cent this year.” “Government initiatives to develop new economic growth areas will help to revitalise the economy and further raise domestic demand,” KFH said

However, RHB suggests one should go defensive in their strategy report this morning. Here are two screen shots.

Some interesting sector downgrades!

Meat Loaf - Couldn't have said it better!

Morning Market Notes: 11th March 2008

Santana Featuring Chad Kroeger - Into The Night
The US Markets closed much lower again: Stocks stumble on recession fears

• NEW YORK (CNNMoney.com) -- Stocks closed lower Monday, the third day in a row, amid signs that the financial services sector could see more writedowns and concern that upcoming economic reports will point to recession.
  
  The Dow Jones industrial average (INDU) fell nearly 1.3%, falling to its lowest level since Oct. 3, 2006.
  
  The broader Standard & Poor's 500 (SPX) index lost 1.55%, putting it at its lowest level since Aug. 14, 2006. The Nasdaq composite (COMP) was nearly 2% lower, its worst level since Sept. 8, 2006.
  
  Stock losses were broad based Monday with 26 of the Dow 30 declining. McDonald's Corp led gainers while banking giant Citigroup (C, Fortune 500) led decliners.
  
  Meanwhile, oil prices surged Monday setting a new closing record of $107.90 a barrel and gas prices appeared set to break their previous record of $3.227 a gallon at the pump.

And market strategist doesn't reckon the bottom as been seen yet. Here are some reasons posted in a CNBC article.

• "Even statistically, we're knocking on the door of a bear market," Putnam's Jeff Knight said. "I think that's probably the right frame of mind, frankly, to approach portfolio strategy for the near term."
  
  "We're in a bear market, you bet, because the credit markets are in disarray, and until the credit markets get some smblance of normalcy, I don't see how the stock market can have any kind of sustained rally," Rich Bern of Performance Trust Capital said.
  
  "My biggest fear is that credit is not going to be available to worthy borrowers," Scott Wren of A.G. Edwards told CNBC.
  
  James Paulsen of Wells Capital Management is already looking past the near term.
  
  "I just think the downside from here is getting more and more limited," he said. "We've had a lot of discounting already in the price of the stock market."
  
  He encouraged investors to look ahead 12 to 18 months.
  
  Berg indicated that's not a popular view, especially among the experts.
  "The major risk takers don't want to take risks," he said. "You can throw all your rational market strategy out the window right now."
  
  Wren doesn't expect to have to wait a year or a year and a half.
  
  "We're expecting some easing in the tightness of this credit over the next four to six months," he said. "We're expecting the market to anticipate growth in the second half and a better `09. The market's going to turn higher long before this slowdown...is over, and I think you're going to see the results of that in a pretty big way by the end of 2008."
  
  He urged investors to change their portfolios to a more cyclical orientation over the next few months.
  
  Knight doesn't even see conditions right for investors to go "bottom fishing."
  
  "There's a lot of capitulation to go," he said.
  
  He encouraged investors to be diversified, even if it means "defying the normal cyclical playbook."
  
  "In the really big picture, we've had wealth in terms of real estate and financial markets outpace GDP for a long time, and I think those things are coming together," Knight said. "It's not necessarily `buy the dips,' it's more `construct a wealth-building strategy around the broadest array of asset classes, including active strategy as well as market exposure."
  
  And in the midst of all the bearishness, Barry James of James Advantage Funds sees the prospect of a rally.
  
  "Within every bear market, there are rallies," he said. "They kind of come out of the blue."
  
  He said his research is "4-to-1 positive" for the short term, but he warned that it's not a time to be loading a portfolio with stocks.
  
  "Within that phase, it probably will be pretty smart for folks to start cutting back on equities," he advised. (hsource of article )

In the blog sphere, Dr.Brett has posted his indicators for the day here: Indicator Update for March 10th. Trader Mike notes the relative mild volume and the lack of fear. hmmm..

• We had another meltdown on mild volume today. The Nasdaq made a new 18-month low today and the S&P is just a few points from doing the same. Despite the ugly price action I’m not seeing much fear. The VIX is about 20% beneath its January peak and volume shows no sign of panic.

No panic? Well over at Bespoke Investment it's noted that the amount of shorts has increased.

• As reported last week, short interest on the New York Stock Exchange rose to a record high last month to 14.4 billion shares. Looking at the S&P 500 and its ten sectors, we calculated the percentage of each stock's float that was sold short. For the S&P 500 as a whole, the average stock in the index has 5% of its float sold short. Not surprisingly, the Consumer Discretionary and Financials have the highest percentage of their floats sold short (8.12% and 6.11% respectively). ( link )

And blogger Kirk reckons that there's even a chance for a counter rally ( see here )

Market commentator, Rob Kirby, piece for Financial Sense market wrap is definately worth a read, The World's Worst Kept Secret. Well the part where he speaks about how the Silver market traded was certainly most enlightening.

• So, when we see market movements like this one in the silver market – with no discernable reason – that we were ‘treated to’ this morning:
  
  
  
  Odds are, we’ve been witness [or victims, perhaps?] to what Bill Gross terms “a crafty dodge” or worse.
  
  What folks would be well advised to remember is this: market moves like the one depicted above are “paper plays,” achieved through selling futures [derivatives] in a thin market. We are given further evidence that these “paper plays” are orchestrated manipulations due to the fact that the market for ‘physical tangible silver’ remains tight and in short supply, evidenced by the stiff price premiums of physical metal over the futures price.
  
  Price manipulations, like the one above, involving “selling down” the paper price of a commodity have historically failed when manipulators run-out-of or are unwilling to part with dwindling physical supply.
  
  There are many who follow the metals markets closely who feel that time is now close at hand.

And finally for investors who uses low PE as their sole guide, here's another article for you: Are Low P/Es A Valid Reason To Buy Stocks?

How?

Doesn't look good for today's market given yesterday's plunge, yes?

And the following comments were made in today's Business Times article.

• "Fears of a US recession, coupled with uncertainties arising from the ruling coalition's worst-ever performance in the recent general election, triggered the steep fall," said Choo Swee Kee, chief investment officer at TA Investment Management Bhd. ( link here )

And as expected, everyone seemed contended to downgrade KLCI fair value

• The intensive selling activated the circuit breaker at around 3pm. Trading was halted for an hour when the benchmark index plunged 130 points, or 10%, to 1,166. This was the first time the market-wide circuit breaker was activated on Bursa Malaysia.
  
  “The magnitude of the fall was bigger than expected,” said Kenanga Asset Management Sdn Bhd chief investment officer Chen Fan Fai.
  
  Chen described the market as currently in “uncharted territory”.
  He said the direction of public policy and economic measures had become a big unknown after the ruling Barisan Nasional lost its two-third majority in parliament and the opposition parties took control of Kedah, Penang, Perak and Selangor.......
  
  AmResearch has cut its fair value to 1,300 from 1,590, while Aseambankers Malaysia Equity Research reduced its year-end target for the KLCI to 1,350 points.
  
  HwangDBS Vickers Research also trimmed the KLCI's year-end target to 1,360 yesterday.
  
  Despite the expected sell-down, Citi Equity Investment urged investors to pick up “fundamentally good” plantation and telecommunication stocks. It warned clients to avoid the cyclical property and construction stocks.
  
  Credit Suisse said Malaysia would not be attractive until political clarity emerged over the next six or 12 months.
  
  One main concern is whether the roll out of infrastructure projects under the Ninth Malaysia Plan would be affected since these involved both federal and state governments.
  
  Also, there are worries over the possible delay in contracts that have already been awarded should the newly formed state governments review them.
  
  Analysts said scrapping certain public projects would certainly hurt companies' earnings.
  
  However, they said it would be good for the economy in the long term if those projects were not justifiable in terms of social benefits, and the money could be channelled for better use.
  
  “The new political equilibrium will, hopefully, bring with it the checks and balances, which should in the future, curb the excesses of the past,” Credit Suisse's report said.
  
  Stocks perceived to be politically linked and heavyweights were among the worst hit.
  
  Kumpulan Perangsang Selangor Bhd, Equine Capital Bhd and Malaysian Resources Corp Bhd hit limit-down amid fears that these companies might not win certain public projects as expected.

Other worth reading links.

• Market bogged down by concerns
• Foreign funds jolted by uncertainties
• Integrity intact despite trading halt
• Selling by funds cited for rising bond yields
• Players seek business-friendly policies

Worries over water-related stocks

• Investors are uncertain over the prospects of companies with water-related projects, especially in Selangor, where a new government would be formed following Saturday's election results.
  
  The opposition parties garnered a majority of state seats to enable them to form the new government.
  
  This has raised concerns over the Pahang-Selangor interstate water transfer project that has already been awarded. There are also worries that the expected consolidation of water supply and distribution in Selangor might be reviewed.
  
  Water stocks suffered the biggest losses when the market opened for trading yesterday.
  
  Kumpulan Perangsang Selangor Bhd (KPS), a subsidiary of Selangor investment arm Kumpulan Darul Ehsan Bhd, was severely sold down, falling almost 51% to RM1.68.
  
  Also affected was KPS' associate JAKS Resources Bhd, which fell to an intra-day low of 56 sen before recovering to close 38% lower at 62 sen.
  
  Shares in Selangor water concessionaire Puncak Niaga Holdings Bhd lost almost 30% in value, ending at RM3.18, off its intra-day low of RM3.
  
  An industry source said the fundamentals of JAKS were intact as most of the contracts were currently being negotiated with the Federal Government, hence the change in the Selangor government would have little impact.
  
  “Besides, the Langat 2 project is driven by demand and supply. With Selangor expected to face water shortage next year, the contract would have to proceed,” he said.
  
  He also pointed out that JAKS was one of few players with the capability and capacity to undertake such a huge contract.
  
  An analyst with a local brokerage noted that the sell-down in water stocks was driven by fears that the award and implementation of contracts would be reviewed by the new government.
  
  “The bargaining level has changed. The water sector consolidation process might take on new perspective given the new government,” he said.
  
  While the new administration was likely to honour the sanctity of Langat 2, the concern now was how they would implement the project, he added.
  
  In the long term, the state government will still need to address the water shortage issue as it affects the masses.
  
  The analyst noted that Puncak Niaga was scheduled to granted a tariff hike next year, estimated at about 37%, for the supply and distribution of water in Selangor and the Federal Territory.
  
  “Through the proposed consolidation, the Federal Government would take over the assets and, as a result, there would be no tariff hike,” he said.
  
  The Japanese government, which is funding the Pahang portion, is also expected to add pressure for the implementation of Langat 2.
  
  The analyst said the selling of water stocks was a knee-jerk reaction, noting that Puncak Niaga and KPS were backed by assets.
  
  Besides JAKS, KPS also has stakes in Konsortium Abbas Sdn Bhd and Syarikat Pengeluar Air Sungai Selangor Sdn Bhd.
  
  “It is short-term pain for long-term gain as there could be more cost-control efforts, and the benefits passed on to users,” the analyst added.
  
  Another analyst with a local research house said the Selangor government would play a vital role in the consolidation process as well as the implementation of Langat 2.
  
  “Previously, KPS was given the green light to helm the restructuring but it is now uncertain as to who will be driving the consolidation and who will benefit,” he said.
  
  If these were resolved by the year-end, Puncak Niaga would demand for its scheduled hike next year and the state government would have to compensate if the concession agreement was not honoured, he added.

Firms with overseas jobs more resilient

• Construction firms that rely mostly on government jobs would be the most vulnerable to political changes but some companies will be better positioned to weather the uncertainties.
  
  OSK Research analyst Jeremy Goh said earnings of companies such as Hock Seng Lee Bhd, whose projects are mainly in Sarawak, should remain resilient.
  
  “We also remain positive on companies like IJM Corp Bhd and Zelan Bhd, whose operations are focused mainly in the oil-rich Middle East.” he said.
  
  When contacted by StarBiz, Zelan chief executive officer Albert Chang said: “Almost all of our projects are foreign-based. In fact, we have not had any direct government projects for the past 20 years.
  
  “The current uncertainty in the local scene does not have any bearing on us as we’re mainly focused on the Middle East.” he said.
  
  IJM Corp is another construction player that has the bulk of its order book from overseas.
  
  Chief executive officer and managing director Datuk Krishnan Tan told Reuters yesterday that the company had an order book of RM6bil, of which 40% was from overseas.
  
  Tan said notwithstanding some erosion in margin, he saw a steady flow of work from India and the Middle East.
  
  TSR Capital Bhd, whose core business is in construction, remains quite unfazed by the looming uncertainties as most of its projects are in the Federal Territory.
  
  Managing director Tengku Datuk Mustapha Tengku Mohamed said: “We are still confident of prospects as most of our projects are Federal projects.”
  
  The construction sector is poised to be a key driver of the country’s economic growth as projects worth billions of ringgit are being planned for implementation under the Ninth Malaysia Plan.
  
  However, the impending change in administration in Penang, Perak, Kedah and Selangor, which have come under opposition control, has given rise to uncertainties in the award of public contracts.
  
  There are also concerns whether the implementation of projects that have already been awarded would be delayed as the newly-elected state governments have said projects would be reviewed.

Oh, and the BDI closed at 8624. Up another 88 points. However, given all the negative issues in the market, it looks like a non-issue for now.

How now my dearest Brown Cow?