Malaysia Stock Rally to Wane as Value ‘Vanishes,

May 26 (Bloomberg) -- Malaysia’s stock rally that pushed
the benchmark index to an eight-month high may falter because
shares reflect “implausible” profit growth expectations, said
Maybank Investment Bank Bhd.
“History tells us the bear market isn’t over,” Andrew Lee,
an analyst at Maybank Investment said in a report today.
Valuations “have reached implausible levels. A profit recession
has just begun.”
He expects the key stock index to fall to 990 by year-end.
The measure slid 0.2 percent to 1,050.62 as of 4:05 p.m. in
Kuala Lumpur, the first drop in three days.
The benchmark Kuala Lumpur Composite Index has surged 20
percent this year, lifted by market gains in Asia amid optimism
the global recession is easing and Prime Minister Najib Razak’s
effort to bolster spending and open up the country’s services
and financial industries will bolster economic growth.
“Market growth expectations seem to be running ahead of
reality,” with shares moving “too far, too fast, Lee said.
“We are at best, halfway through this bear market,” he said.
The market currently trades at 15.2 times 2009 estimated
earnings, up from 12 times earlier this year, Lee said. This is
only 10 percent below the previous cycle’s mid-cycle value, even
as corporate profits are expected to shrink 7.7 percent this
year, he said.

‘Are We There Yet?’

“Four months ago, the question ‘are we there yet’ could
only refer to whether markets had reached the bottom,” Lee said.
“Today, it could equally refer to whether we have reached a top
-- that is the measure of how confused investors are.”
The lesson learnt from the previous bear markets is that
“we are not out of the woods,” he said.
Two previous bear markets, from 1981 to 1985 and 1993 to
1998 lasted 57 and 58 months respectively, he said. It has now
been 17 months from the January 2008 “collapse,” he said.
During those bear markets, the stock index has risen at
least 5 percent by as many as 38 times, he said.
“We have now seen 12 since January 2008,” he said,
suggesting the bear market isn’t over.
Each of the bear markets witnessed one major rally before
continuing its downtrend, said Lee. In the 1981-85 bear market,
a rally retraced 64 percent of its drop before continuing its
decline, he said.

“Be Realistic’

The present bear-market rally has retraced 32 percent of
its drop, he said. “Be realistic, be selective.”
Investors should buy construction companies such as IJM
Corp to ride on the government’s efforts to boost spending to
revive economic growth, Lee said. Najib has unveiled a total of
67 billion ringgit ($19 billion) in public spending, loan
guarantees and other stimulus measures to boost growth.
The central bank has also cut interest rates by 1.5
percentage points since late November.
Investors should also load up on consumer stocks including
KFC Holdings (Malaysia) Bhd., while shares that surge on hopes
of “near-term earnings recovery” should be sold, Lee said.

Stock markets are in for 'very long bull' run, JPMorgan says

Stock markets are in the middle of a "very long bull" run bolstered by a "powerful, synchronised" recovery in global economic growth, JPMorgan Chase & Co.'s chief Asia and emerging-market strategist Adrian Mowat said.

"In the 22 years I have been covering markets, there's been a few years where you make substantial returns," Mowat said in a Bloomberg television interview today. "I think that's going to be the story in 2009 going into 2010."

The MSCI Asia Pacific Index has rallied 11% this year, after plunging 43% in 2008, on optimism stimulus spending in countries from the US to China will revive growth in the global economy.

Economic data will slightly surprise on the upside, which should lift markets, JPMorgan's Mowat said. When "we feel the world is very uncertain, the chances of being positively surprised is quite high."

The Bank of Japan raised today its view of the economy for the first time in almost three years on signs that a record contraction in the first quarter represented the worst of the recession. US President Barack Obama said on May 20 that the world's biggest economy is showing "some return of normalcy".

Still, the UK had the outlook on its AAA debt rating cut by Standard & Poor's yesterday, and Treasury yields rose on speculation the US's rating may also be under threat.

The 11 Laws of Bear Market Success - Martin D. Weiss

I. Protect our capital.

II. Use common sense; avoid things that are most vulnerable in this crisis.

III. Do NOT count on the government to turn the economy around or save sinking investments.

IV. Invest exclusively in LIQUID, heavily traded investments.

V. Stay FLEXIBLE in our thinking and our choice of investments.

VI. Use investments that move INDEPENDENTLY of stocks and bonds.

VII. Seek out investments that rise DESPITE falling stocks.

VIII. Use investments that rise BECAUSE stocks are falling.

IX. Diversify and balance our portfolio for added risk reduction and profit potential.

X. Always be ready to cut a loss or take a profit.

XI. Above all, be fiercely contrarian; seeking to buy what others are selling at a deep discount ... and selling what others are buying at a premium.

Near term STI target raised to 2400, enroute to 2800 over 12 months

Still like early cyclical plays – CapitaLand, UOB, Wilmar,
SGX, SIA Engrg, Swissco, SAR, First Resources, Ho Bee and
FCT

DBS Research believes the worst is over for the Singapore
economy and the market could re-rate to mid cycle PER as the
economy progressively recovers. Our near term target could hit
2400 if we apply a target PER of 16x, which is the historical
average PER on FY09 earnings. Applying a potential earnings
growth of 11% growth for next year, the STI could reach 2,865
without stretching valuations to extreme levels.
We still like early cyclical plays but prefer laggards within these
sectors – our preference for Capitaland over City Development
based on potential upside in the property sector, UOB over
OCBC for Financials. Wilmar is our top pick, as we expect the
potential listing of its China subsidiaries to unlock value for
shareholders. We have picked SGX as a proxy to our positive
stance on the equities market and SIA Engineering, which will
lead the recovery in the aviation sector. Our small/mid cap picks
are resources stock benefiting from the firm oil/coal/commodity
prices,(Swissco, SAR, First Resources) or value buys (Ho Bee and
FCT) trading at a discount to book value.
1Q GDP fell 14.6% from 4Q 08, smaller than the 19.7% drop
reported in the earlier April data, and marked the fourth
straight quarter of economic contraction. On a Y-o-Y basis,
GDP fell 10.1%, also less than expected and a smaller fall than
11.5% reported earlier. The difference was mainly due to
manufacturing data for January and February being revised up.
Singapore maintained its forecast for the economy to shrink by
6 to 9% this year and kept its inflation outlook at between
minus 1% and zero.
Ezra is proposing a private placement of up to 78m new shares
priced at S$1.185 each, raising total gross proceeds of up to
S$92.4m. The issue price of each new share represents a
discount of c. 8.8% to yesterday’s closing price of S$1.30. This
issue represents around 13.3% of Ezra’s outstanding share
capital. Proceeds will be used to pay down debt (lower net
gearing to about 0.22x from 0.47x), funding capex and funding
possible M&As.
Mercator Lines said that it will lift its fleet size by a quarter to
15 by 2010 and sees increased coal demand from India giving a
boost to dry bulk shipping. According to the company, dry bulk
shipping is still likely to see lower freight rates, after the sector
has been hammered by the global slowdown, but it is unlikely
to deteriorate much further as it has sunk to a very low base

Asian Stocks May Decline 4.9%, Deutsche Bank Predicts

May 19 (Bloomberg) -- Asian stocks may halt their rally
this year as a recovery in earnings hasn't caught up with gains
in prices, Deutsche Bank AG said.
The MSCI AC Asia excluding Japan Index may end the year at
351.5, a 4.9 percent decline from yesterday's close, according
to a report by Niklas Olausson, an analyst at Deutsche Bank. The
forecast is still 46 percent higher than its earlier target.
The MSCI regional index rose 2.5 percent to 378.71 as of
8:09 p.m. in Singapore, taking its gains this year to 31 percent
and surpassing the 3 advance in the MSCI World Index. Asia
accounts for half the 10 best-performing markets in the world
this year, led by India and China.
"The rally has been largely fuelled by sentiment and
liquidity drivers, in addition to expectations of a lasting
recovery, rather than hard fundamental profit/return delivery,"
the analyst wrote. "We are not out of the woods yet as far as a
further downside risk to earnings is concerned."
Following the gains this year, the MSCI Asian index is now
valued at 18 times reported earnings, compared with its five-
year average of 14 times. The measure's price-to-book multiple
has also climbed to 1.7 times, up from a low of 1 time set in
October.
Deutsche Bank is predicting a 22 percent increase in
earnings-per-share next year, compared with a gain of 31 percent
estimated by other analysts, the report said.

'Improved Outlook'

"Equity markets have already factored in most of the
improved outlook," Olausson wrote. "Markets may overshoot in
the near term, but thereafter we anticipate a period of pullback
and consolidation, before markets climb up again."
Allianz SE, Europe's biggest insurer, said it has bought
Asian equities, bonds and real estate in the past two months and
would only add to its existing holdings at cheaper prices.
"Where we are today, we feel the market is toppish,"
Nikhil Srinivasan, who oversees $20 billion as chief investment
officer for Asia and Middle East at Allianz, said in an
interview in Singapore on May 18. "Valuations are about fair,
it's not cheap. The risk-reward ratio is not that attractive and
investors are getting a bit tired chasing the rally."
The Singapore-based fund manager expects Taiwan and India
to outperform other Asian markets, adding it doesn't plan to be
"too aggressive" on stocks.

India

India was upgraded to "overweight" from "neutral" at
Deutsche Bank, which said the election results was a "positive
surprise" for the market. The brokerage yesterday raised its
target for the benchmark Bombay Stock Exchange Sensitive Index
to 14,500 from an earlier estimate of 11,500.
The measure surged a record 17 percent to 14,284.21,
triggering a suspension in trading after breaching its upper
limit set by regulators. The Sensex added 0.1 percent to
14,302.03 today.
Indonesia and the Philippines were also raised to
"overweight" from "neutral" while South Korea was upgraded
to "neutral" from "underweight," the analyst said. He added
that Thailand was cut to "underweight" from "overweight"
while Hong Kong was lowered to "underweight" from "neutral."
Deutsche Bank is also "turning progressively more
cautious" on China as the gains this year lift valuations,
Olausson wrote in the report. The brokerage retained its
"overweight" rating on the market and said it expects China to
outperform the rest of the region by the end of the year.

Bull run ‘breakout’ at year end

SINGAPORE, May 11 — Templeton Asset Management’s veteran fund manager Mark Mobius is so bullish on emerging markets that he thinks the recent dramatic stock market surge is barely the beginning.

He believes the “breakout” for emerging market stocks has not yet happened.

The money manager said the bull run could start in earnest at the end of this year and could even breach the highs that were seen about two years ago. “It could go higher than (in) 2007, as we’re now in a different era. A lot of companies are much stronger, with stronger balance sheets,” he said in a recent interview.

Mobius’ confidence comes as many market analysts are urging investors to be careful as the current rally may be a false dawn. For example, economist Andy Xie has cautioned that this is a bear market bounce that will end in tears.

But why the bearish outlook?

Mobius, who in 2006 was named one of the Top 100 Most Powerful and Influential People by Asiamoney magazine, explained: ‘Because they lost so much money in the downfall, they are very bearish. They said “never again”.

“You’ll find all kinds of doom scenarios out there. Some will say it’ll get worst and that the markets will go down further, while others say that there’ll be a depression greater than (in) the 1930s.”

Mobius, who is bullish on commodities as well as companies that cater to emerging market consumers, thinks this economic downturn is “not as bad” as the Great Depression of the 1930s in the US.

“During the Great Depression, there were no guarantees on bank deposits...People had bank deposits and they didn’t get one cent back. And there was no social security system,” he said.

Mobius said China’s rapid growth would spur demand for consumer goods, and Chinese consumers, in spite of their high propensity to save, would continue to spend.

“Their savings rate is high, but per capita income is going up, so they are able to devote a high proportion to not only saving but also spending,’ he added.

“The Chinese government is also subsidising purchases, giving rebates, and that should drive more consumption.”

Reiterating what he told investors earlier this year, he said: “We’re building a base for the next bull market.”

But Mobius cautions investors not to put all their money into the markets right away, but to dollar cost average (invest regularly with small amounts) over, say, a year.

“You’ll have the jagged movement up and down...and lots of volatility. Until all the bears are out and confidence has returned, then you’ll see a breakout. When that happens, it’s anyone’s guess, but we’re looking at the end of this year, possibly,” he said. — The Straits Times

Stock Strategists Says S&P 500 Could Break Above 1000 This Year

WASHINGTON (MarketWatch) - The annual meeting of the mutual-fund industry's trade group kicked off on a bright note Wednesday, with a pair of notable investment strategists contending that the Standard & Poor's 500 Index will top 1000 by year-end.


Abby Joseph Cohen, senior investment strategist and president of the Global Markets Institute at Goldman, Sachs & Co. and Legg Mason Inc.'s Bill Miller both said
they see the benchmark stock-index gaining at least 20% for 2009.


Cohen said "compelling" valuations, greater investor comfort with the market and improved consumer sentiment will bring cash sitting on the sidelines back into stocks. She said stock moves are starting to reflect company fundamentals rather than momentum -- a telling sign.


"Money has started to come back, but gingerly," Cohen said.


"It's a behavioral fact that money chases returns," added Miller, manager of Legg Mason Value Trust . "As the market goes up, the money comes back."


Better odds


Cohen and Miller spoke at the opening panel session of the Investment Company Institute's General Membership Meeting.


Asked by panel moderator Martin Flanagan, president and chief executive of Invesco Ltd. where they expected the 500-stock index to be at the end of the year, Cohen said Goldman Sachs puts fair value between 1000 and 1050. The market bottomed in early March, she said. Miller predicted the index would hit between 1100 and 1200. The S&P 500 closed Wednesday at 920.


As for their most bullish ideas over the next two years, Miller said he favored the U.S. financials sector, while Cohen said simply U.S. stocks.


"Everything is on sale," in the financial markets, Miller said. [why didn't he say that in early March?]


While seeing stabilization in the housing crises in most cities, Cohen said a recovery in home prices would take some time.


"I think investors will be more comfortable in stocks than in real estate [for investment purposes]," she said.


Miller was more optimistic on the chance of a rebound in house prices, saying that prices will be "modestly higher" in 2010.

Four reasons why the aggressive run-up in the STI during the past several days is not sustainable

1) STI is heavily overbought. Current RSI (relative strength index) reading is even higher during Oct 07 when STI hit an all-time high of 3,906. This suggests a state of divergence, where a new high in the RSI has not coincided with a new high in the underlying security. Elliot Wave Count coupled with fibonacci retracements suggests a minimal price target of 2,050. This level also represents the double daily lows seen on 05 & 06 May 09.

2) Banks are also overbought. Run-up in the index of late has been mainly contributed by the three banks where they are also presently technically overbought. Additionally, gainers within the top active counters among the past few days have included offshore marine and oil & gas plays (Ezra / Swiber / Cosco / AusGroup, etc). Potential fall of the index should also drag down the share prices of these sectors.

3) Impending result of stress tests. While results of the stress test of the US are not officially out, the market is already expecting additional capital to be required by 10 of these 19 banks. Notable ones include GMAC (US$11.5 billion), Bank of America (US$34 billion), Wells Fargo (US$15 billion), and Citigroup (US$5 billion). Should actual results indicate that more capital is needed, equity markets may take a tumble.

4) US non-farm payrolls on 08 May 09. While official market forecasts are gunning for 603k jobs to be lost for the month of April, note that the bar has been raised as the ADP Employment Report within the private sector released on 06 May 09 is forecasting for only 491k jobs to be lost. Therefore, even if the actual number released by the US government manages to meet official market forecasts, global indices may still fall as whisper numbers are now gunning for a better figure than -603k. STI may suffer a relatively bigger fall compared to the other indices as it has outperformed most of these indices for the week so far.



By James Lim

Might is right in Perak

Market just ignore the Perak fiasco and decouple from politics for the time being.

Looks like decouple at least on this occasion because despite the political crisis in Perak Bursamalaysia still manages to go north.

Watch the video for a brief review of what happened in Perak.

Mad Cow Disease ?

There are symptoms of Mad Cow Disease affecting Bursamalaysia at the moment.

1. When Dow was down 102.43 points (or -1.2%)on 7.5.09 Bursamalaysia open cautiously on 8.5.2009 into the negative territory.

2. A little latter punters throw caution to the wind and chase stocks up without regards to the fundamental of the counters.

3. Very high volume especially confining to third liners indicates the disease is spreading to the retailers.

All these are Symptoms of Mad Cow Disease. hahaha

Anyway Mad Cow Disease does not disappear over night as we learned in the past Mad Cow can run for a while and later can lead to Stale Bull Run.

Stock stampede coming and it's no bull

A major bull run is under way in global stock markets, says the Capital Dynamics group, a fund manager with one of the most optimistic views of the market yet.

Managing director Tan Teng Boo believes that stock markets have bottomed "a few months ago" and that the global economy is on course to a V-shaped recovery.

"The global stock markets are on a major bullish reversal," he told reporters yesterday at the launch of a global unit trust fund.

Economic data in almost every part of the world, including the US, is beginning to look much more positive, he said. Yet, investor sentiment has continued to remain negative.

"I've never seen so much pessimism in my life. I want to go on the record as being bullish, amid pessimism," he remarked.

Economy in Malaysia Likely Bottomed

Bank Negara (BNM) Maintained the Overnight Policy Rate (OPR) at 2.0%; In Line with Our Forecast – BNM left the OPR unchanged today at 2.0%, citing that the worst maybe over for the domestic economy and a recovery is expected moving into the second half of 2009. This is in line with our view first stated on 25 March. Market consensus was expecting a 25bps cut to 1.75%.

 Economy Likely Bottomed; Current Monetary Conditions and Fiscal Policy Stimuli Assessed to be Sufficient For Now – Consistent with Gov Zeti's earlier reiterations that overly low interest rates are not constructive and that current monetary conditions are sufficiently accommodative, BNM's decision to pause also factored in expectations that the economy has bottomed as we had earlier pointed out. Fiscal stimulus measures adopted in Nov last year and Mar this year, the frontloaded 150bps cuts in policy rates, coupled with stabilizing global economic conditions were deemed to be sufficient to help the economy recover in 2H09.