Retail investors chase penny stocks

The buying interest in penny stocks is driven by growing retail confidence and investors who shift their focus away from blue chips, says a head of research


Retail investors are flocking back to the market, boosting interest in penny stocks, said brokers and analysts.

Penny stocks are quoted securities, trading below the RM1.00 mark. They are seen as studs in a bull market, as retailers clamour for action, at the lowest possible cost.

"I think the buying interest in penny stocks are driven by various factors, but the two main ones would be growing retail confidence and investors who shift their focus away from blue chips," said Jupiter Securities' head of research Pong Teng Siew.

Interest in penny stocks are mainly driven by retail investors' confidence, added participation of day traders, speculators and willingness by brokerages to provide margins.

Pong added that frequent sharp upward swings in prices of many penny stocks are providing the main thrust for retailers at the moment,

OSK Investment Bank head of research Chris Eng said some of the gains made by penny stocks could be explained.

"We have a few companies that were out of the PN17 list, so that have sparked some buying interest," said Eng.

Eng also noticed a trend among traders zeroing on small consumer stocks, mostly companies in the food and retail business.

"You can see buying interest in companies like Farms Best Bhd, Spritzer Bhd, Hwa Tai Bhd and Hup Seng Bhd," he added.

Indeed, for the past six trading days, penny stocks have dominated the most actively traded securities list, with 14 of them being on the top 20.

On the converse, there was only an average of 11.8 stocks on the list in the first two weeks of this month.

"Business has been improving lately," said a remisier from a local stock broking firm, attributing it to the rise in orders made by retail investors.

Retail participation, as a percentage of the total trades done, has been declining, falling to 27 per cent in the first half of the year compared with 37 per cen in the same period a year ago.

Pong sees the rise of retail participation as a positive sign for a sustained market uptrend.

"I believe we can see the market touching a new high soon, probably as soon as next week," he said.

CIMB Investment Bank Bhd said early this week that the benchmark stock index may surpass levels before the start of the global financial meltdown in 2008, to climb to 1,450 by the year-end.

However, some analysts are not biting the bait just yet, pointing to a Bloomberg data this week, which showed that "buy" calls on Malaysian stocks slumped to a decade-low of 39.38 per cent this month.

Read more: Retail investors chase penny stocks http://www.btimes.com.my/Current_News/BTIMES/articles/pennt22a/Article/index_html#ixzz0ucLBAbxl


My comment:
Best time to sell your speculative socks is when retailers are bullish

How to Front-run the Chinese, Legally By Brian Hicks | Wednesday, July 21st, 2010

"The 19th century was the century of the UK, the 20th century was the century of the US, the 21st century is going to be the century of China." — Jim Rogers

"China is going to be an enormous force that will make the Japanese threats of the seventies and eighties look like a water pistol." — former CE CEO, Jack Welch, 2001


Dear reader:

According to British author and soldier Sir John Bagot Glubb’s book The Fate of Empires, the seven stages of an empire’s life cycle are as follows:

1. The age of outburst (or pioneers)

2. The age of conquests

3. The age of commerce

4. The age of affluence

5. The age of intellect

6. The age of decadence

7. The age of decline and collapse


It’s not hard to figure out where the United States stands in this life cycle.

We just experienced the greatest housing and credit bubble in history… when homeless people were given mortgages.

We’re also experiencing epidemics in obesity, heart disease, and debt.

The U.S. finds itself in stage #6: decadence.

That’s right, we’re in decadence. At what phase of decadence, I’m not sure...

But decadence will soon turn to decline… if we haven’t already fallen off the cliff.

Nothing proves this point more than the following chart from the International Energy Agency (IEA) that shows that China now consumes more energy than America:

You can draw a circle around where the two lines intersect and write “Historic!”

This chart represents an epic shift in global power, both economically and politically.

Wall Street Journal broke the story on July 18th:

China's ascent marks "a new age in the history of energy," IEA chief economist Fatih Birol said in an interview. The country's surging appetite has transformed global energy markets and propped up prices of oil and coal in recent years, and its continued growth stands to have long-term implications for U.S. energy security.

The Paris-based IEA, energy adviser to most of the world's biggest economies, said China consumed 2.252 billion tons of oil equivalent last year, about 4% more than the U.S., which burned through 2.170 billion tons of oil equivalent. The oil-equivalent metric represents all forms of energy consumed, including crude oil, nuclear power, coal, natural gas and renewable sources such as hydropower.

For many energy and China observers, this wasn’t a surprise — although it occurred much sooner than expected.

But, dear reader, this is a mega-trend that will continue for decades.

And the investment potential is mind-blowing.

You see, later in the WSJ piece…

Mr. Birol, previously an economist at the Organization of Petroleum Exporting Countries, said China is expected to build over the next 15 years some 1,000 gigawatts of new power-generation capacity. That is about the total amount of electricity-generation capacity in the U.S. currently, and the construction of all those gigawatts occurred over several decades. "This demonstrates the major growth we are talking about" in energy demand and capacity growth in China.

Now, China has been all over the world inking deals with oil sand firms in Canada, resource rights in Africa, Australia… and Mongolia.

They’ve been doing this for years. This is not new.

They’ve also been hoarding resources to supply their infrastructure build-out for years to come.

This brings me to the point of this article.

If you know what resources the Chinese will need to maintain their rising energy consumption, you can buy now, sit on the investment… and let the Chinese buy you out.

Chris DeHaemer has already shown you how to front-run the Chinese. He’s done this with a Mongolian gold stock and Mongolian oil.

In fact his latest home run — a Mongolian oil stock — has rallied over 700% this year alone. His readers are making money hand-over-fist.

And that’s just the beginning...

Imagine buying Suncor Energy (one of Canada’s largest oil sands companies) when it went public in 1993 for just a $1.08 per share!

Today Suncor trades for $33… a gain of 2,900%.

That’s what you’re looking at with Chris’s Mongolian oil play.

Mongolia is in an ideal situation. It borders a nation with a voracious appetite for resources… coal, oil, natural gas, etc.

Think about it like this...

Canada is a resource-based economy. Its GDP for 2009 was $1.287 trillion. Canada is in an ideal position because its neighbor to the south still has the #1 economy in the world. So, Canada essentially ships all of its resource production to the U.S.

Now look at Mongolia. It’s also a resource-rich nation. It too has a huge neighbor that needs its resources — China.

And the thing about China is that it appears to be in stages 2 to 4 in the empire life cycle.

China has more millionaires now than the UK and France.

And like energy, it’s only a matter of time before China’s overtakes America in that economic category as well.

Profitably yours,

Brian Hicks

Bernanke slams U.S. economy!

Bernanke on jobs:

"This is the worst labor market since the Great Depression."

Bernanke on housing:

"The market remains weak, with the overhang of vacant or foreclosed houses weighing on home prices and construction."

Bernanke on fears about the future:

"Most ... viewed uncertainty about the outlook for growth and unemployment as greater than normal, and the majority saw the risks to growth as weighted to the downside."

Bernanke on tight credit for small businesses:

"Bank loans outstanding have continued to contract. Small businesses, which depend importantly on bank credit, have been particularly hard hit."

And never forget: All this is coming from a man whose job invariably makes him extremely reluctant to admit to negative trends in any sector at any time — if Bernanke is saying things are bad, you can bet your bottom dollar they're actually far worse.

Tanjong: Bidding for new power projects

Tanjong plc (RM17.50) is hoping that some of its bids for new power projects will come to fruition over the next few quarters. In the meantime, earnings from its existing power assets are expected to remain relatively resilient, although overseas earnings, donominated mostly in US dollars, are hurt by the stronger ringgit.

Gaming sector / betting duty increase

§ NFOs Pool Betting Duty (PBD) increased from 6% to 8%.

§ Genting Malaysia acquires UK casino operations from Genting Singapore for £340m cash.



§ Depending on whether the NFOs are allowed to transfer the higher cost via lower prize payout, impact could be directly on margin (additional PBD costs) or turnover (transfer additional cost to lower prize money resulting in loss of market share to illegals as the latter has no precedence in reducing prize money).

§ In either case, consensus net profit of NFOs will be adversely impacted, ranging from 3-13%. Among the NFOs, Tanjong will be least affected (3-4.5%) while the impact on B-Toto and MPHB could be at least doubled Tanjong’s impact.

§ The hike in PBD may raise concerns about potential hike in casino gaming tax. For every 1%-point hike, Genting Malaysia and Genting’s consensus net profit would be eroded by 2.7-2.9% and 1% respectively.

§ Previous hike (2003) in casino gaming tax was 5%-point. Assuming the same magnitude, Genting Malaysia and Genting’s consensus net profit would be eroded by 14% and 5% respectively.

§ Will reduce competitiveness to attract high rollers or foreign fund inflows.

§ As for Genting Malaysia’s acquisition, it would erode consensus earnings by circa 3% due to the low level of profitability of the UK casino operations. Marginal impact on Genting as it holds circa similar stake in both the purchaser and vendor.



§ To mitigate the impact of the PBD hike and assuming NFOs are allowed to transfer the higher cost via lower prize money. The best way to mitigate competition from illegals is to reduce prize monies except for the top prize.



§ NFOs will suffer from lower earnings and uncertainties above potentially more hikes.

§ Genting Malaysia – Investors likely to prefer better cash utilization or higher dividend. Untimely deal given expectations of adverse impact on earnings arising from increased competition by the two newly operational integrated resorts in Singapore.

Six reasons why I’m convinced that the U.S. economy is even now falling into a rare double-dip recession ...

1.# The economy is quickly running out of gas: The recovery that followed the bear market was bought and paid for with $2 trillion in government stimulus and bailout money. Now, that money is running out. The economy and stock market are running on fumes. And with no new stimulus on the horizon, there’s nothing left to keep stocks from plunging.

2.# Jobs, jobs, JOBS: Despite everything Washington has tried to do, nearly one in four American workers is still struggling to get by with a reduced paycheck — or without any income at all! Worse: The job growth of recent months has now dwindled to nearly nothing. The economy created a lousy 41,000 private sector jobs in May, nowhere near what we need to bring unemployment down. Next up: Massive, fresh job LOSSES!

3.# 70% of the economy is shutting down: Consumers are responsible for 70% of all economic activity — and consumer confidence is cratering. Worse: Retail sales are already plunging.

4.# The housing slump has returned with a vengeance: New home sales just cratered by 33%, the biggest decline on record. Foreclosures are increasing again, creating new nightmares for our largest banks.

5.# Most U.S. states are drowning in debt; New York, California and others are going down for the third time: The 50 U.S. states now have a cumulative deficit of $127.5 billion. Plus, states have more than $1 trillion in pension obligations they can’t pay. They have to make massive spending cuts to survive — cuts that are sure to lead to even more job losses, and impact corporate earnings and stock prices from coast to coast.

6.# Sovereign debt crisis is leaving investors gun-shy: More and more investors are viewing Europe’s sovereign debt crisis as a sneak preview of our own future here in the United States. After all — our debts are far greater than Portugal’s, Greece’s or any of the other “PIIGS” countries! If they’re right, we could see interest rates soar — pure poison for an economy as strapped as ours is.

Understanding the current market down trend

By GRAHAM BOWLEY and CHRISTINE HAUSER
    (New York Times) -- Fears that the fragile economic recovery
in the United States might be threatened by the financial and
political crisis in Europe gripped Wall Street on Thursday,
sending the stock market into a sharp decline and leaving anxious
traders wondering where the pain might stop.
    The 376-point drop for the Dow Jones industrial average
punctuated what amounts to a slow-motion crash that began in late
April. The Dow has now plunged more than 1,000 points in a matter
of weeks, marking what is known as a market correction — a sort
of mini-bear market characterized by a 10 percent decline in a
short period of time.
    With Thursday’s sell-off, this broad decline gained momentum
and quickly spread beyond stocks to commodities like copper and
oil, which are considered bellwethers of the industrial economy.
    As traders downgraded their forecasts for economic growth,
the price per barrel of crude oil fell roughly 8 percent in
intraday trading, before recovering to end nearly 2 percent
lower, at $68.01.
     Nagging worries that Europe’s debt crisis could spread,
compounded by uncertainties over financial regulation on both
sides of the Atlantic, have set investors on edge the world over.
     “People are learning to think the unthinkable,” said Willem
Buiter, chief economist of Citigroup. Many worry that Greece and
even other economically vulnerable nations like Spain or Portugal
will be unable to pay their debts despite a sweeping rescue
effort by the European Union.
    By the close, the Dow was down 376.36 points, or 3.6
percent, at 10,068.01. In a see-saw period of months this year,
the index closed at a recent low of 9,908.39 on Feb. 8, climbed
to a close of 11,205.03 on April 26, and then fell back by more
than 10 percent since then.
    The broader Standard & Poor’s 500-stock index closed down
43.46 points, or 3.9 percent, at 1,071.59, the biggest one-day
drop since April last year. The Nasdaq composite dropped 4.1
percent.
    The unilateral decision by Germany this week to ban certain
speculative trading, a move rebuffed by some other European
nations, has unsettled investors.
    The German government did not consult its partners before
issuing the change, adding to the sense that new financial
regulations will start arriving piecemeal and that Europe’s
leaders are not united in addressing the Continent’s broadening
crisis.
    “Investors are struggling to adjust to a new regime where
politics is more important than before,” said Gianluca Salford, a
strategist at JPMorgan Chase in London.
    On Thursday evening, the Treasury Department announced that
Secretary Timothy F. Geithner would travel to Europe next week to
discuss the economic crisis there with Britain’s new chancellor
of the exchequer and with the president of the European Central
Bank.
    The uncertain progress of financial reform in the United
States has also weighed on the markets.
    Across Wall Street, banking analysts are busy tallying up
the financial impact of legislation as it comes up for a Senate
vote. Tough new credit card rules have already chipped away at
the bottom line of the biggest banks. Now, their derivatives,
debit card and proprietary trading businesses could face
similarly heavy restrictions under new rules.
    A Goldman Sachs research report, released Monday, said the
proposed legislation could reduce earnings at 28 of the biggest
banks by more than 20 percent.
    For the first time there was talk of capital flight from
countries like Germany and Britain to perceived safe-havens like
Switzerland. And across the globe investors fled from risky
currencies, bonds and stocks to safer assets like the dollar, the
Japanese yen and United States bonds.
    The yield on the 10-year Treasury bond — the benchmark
global interest rate — fell to 3.21 percent, its lowest level
this year and a clear sign of investors seeking a safe haven.
    “There has been a flight to quality — a flight to the
dollar, investment grade bonds and even within the stock market
toward higher-quality companies,” said Matthew S. Rothman, global
head of quantitative equities strategy at Barclays Capital.
    There were other reasons for the jitters on Thursday —
violence in Thailand, political tensions between North and South
Korea, and yet another labor strike in Greece over the proposed
austerity measures, all of it adding to the nervousness of
investors.
    But traders and analysts said the biggest factor unnerving
markets was the continuing prospect that European governments
might not have done enough to stem the panic over Greece and
other heavily indebted nations, and that their problems might
spill to the United States, affecting the pace of economic
recovery.
    Some economists warn, for example, that weakness in Europe’s
economies combined with the ongoing appreciation of the dollar
against the euro could hurt American exports.
    “You are seeing the combined impact of three distinct yet
reinforcing factors: greater understanding and concern about the
structural headwinds facing markets, a downward reassessment of
global growth prospects, and large technical unwinds,” said
Mohamed A. El-Erian, chief executive of the bond giant Pimco.
    Major American industrial companies whose prospects are
intertwined with that of the global economy took a hit to their
share prices on Thursday. General Electric, for example, traded
almost 6 percent lower, Caterpillar shares were down 4.5 percent
and Boeing was off almost 5 percent.
    The S.&P. 500 index broke below its 200-day moving average.
To technical analysts of the stock market, that was seen as a
sure signal of a bearish mood among investors.
    “There is no sector that is being spared,” said Anthony
Conroy, head equity trader at BNY ConvergEx Group. “You have
heard the phrase ‘flight to quality’? We are having a flight to
liquidity. Everybody is trying to get liquid. Gold, oil, silver,
financials — every sector is getting hit.”
    Mr. Buiter of Citigroup said many big investors were
questioning whether they could continue to rely on the euro as a
safe long-term investment, given Europe’s troubles.
    “Many pension funds and other long-term holders have to, for
regulatory reasons, hold a fraction of their investments in safe
assets. Euro debt used to fit the bill,” he said. “It no longer
does. People are wondering about it.”
    But some other investors said that despite the market
correction there had not yet been a fundamental shift in
long-term investment strategies.
    Justin Urquhart Stewart, investment director at Seven
Investment Management in London, said: “The market is nervous and
there has been some selling out, but it’s not capital flight. The
euro zone economy is doing better than it was, German exports are
strong and corporate earnings are on the up. We have had a
one-year bull market in equities, so it’s not surprising to see a
pullback.”

Reminder!!!

"Buy what's hot. Shun what's not. That's the approach of all too many investors. Running with the crowd feels good, after all. But the results tend to be unfortunate.
To achieve strong, consistent investment results, we all need to follow the classic advice of being greedy when others are fearful and fearful when others are greedy. All too many do just the opposite"

If you are investing for long-term, you need the market to go down so that you have the opportunity to buy shares at a bargain. The above reminder is a timely one now because the market is going down every day.

If you are trading you need to watch the trend. Trend is your friend.and since in Malaysia short selling is not allowed you need to stay out of the market at least for now.

Europe's web of debt

ZHULIAN (TP RM3.77– BUY); current price RM2.5

ZHULIAN (TP RM3.77– BUY) Initiating Coverage: Strong but Undervalued Jewel

Riding on its reputation as a costume and fine jewelry producer, the group has grown into a regional MLM company with a broad product range. Targeting the Bumiputra market in multiracial and multilingual Malaysia, the group is poised to tap the potential in Malaysia, Singapore, Thailand and Indonesia. We are forecasting a 2-year revenue and earnings CAGR of 19.8% and 27.8% for the next 2 years and initiate coverage on the stock with a BUY call at a TP of RM3.77 (based on 12x FY10 EPS). Despite its strong fundamentals, the stock is trading at some 30% discount to the industry’s forward PE. Zhulian is the highest dividend yield stock in the industry.   

By OSK Research

GLOMAC (TP RM1.83– TRADING BUY) as at 29th April 2010

GLOMAC (TP RM1.83– TRADING BUY) Initiating Coverage by OSK Research : A Rerating in the Horizon

We initiate coverage on Glomac with a Trading Buy call and a CY10 Target Price of RM1.83 based on 0.94x CY10 P/NTA, which is the average valuation for its closest comparable peers. Its cheap valuation, estimated at 0.7x CY10 P/NTA coupled with potentially strong earnings recovery in the immediate term, could well spur a re-rating on the stock. As our expected broad sector rebound starting from late 2010/early 2011 pans out, the investment community will gradually be drawn to fundamentally sound and still-undervalued property stocks like Glomac

How Greece Can Impact YOU! by Bryan Rich

The economic problems in Greece have made front page news for the better part of the past three months. And I've written several columns here in Money and Markets on the ongoing drama and its influence on the global currency markets.
But with all of this incessant talk about Greece, what does it have to do with you?
That's a common question. And the answer: Potentially, a lot.
You see, Greece represents the growing mound of looming landmines in a global economy that has been damaged by the worst economic crisis in more than 80 years. And if there's anything that should have been clear from the collapse in global financial markets in 2008, it's that the world is a highly interconnected place, and so are its financial markets. So problems in Greece will likely mean problems for you and me.
Here's why ...
In a fragile economic recovery, investor and consumer confidence plays an important role in repairing economies ... and likewise, restoring investment values and opportunities.
So a hiccup in investor optimism can be a huge blow to a fragile economy. It can make businesses more defensive and consumers stingier, thus sending stock prices lower and risk premiums higher.
In short, a lack of participant confidence can mean round two of a bear market in global stocks, and potentially a double dip recession for the global economy. And that's highly possible because ...
A Sovereign Debt Crisis Is Underway
ECB Executive Board member Juergen Stark said this week that the global economy may be entering a new "sovereign debt crisis."
Last November, Dubai sent tremors through financial markets by announcing it would be "restructuring" its debt. The government later offered its bondholders just 60 cents on the dollar for their investment.
Now, Greece's shaky finances represent a threat to the lifespan of the euro, the second most widely held currency in the world. And it stands on wobbly footing as the second domino in an unraveling global sovereign debt crisis. The other potential candidates include Portugal, Italy, Ireland, Spain ... even the UK, Japan and the U.S.
That's a lineup of suspects that, if under the gun of global investor scrutiny for their respective burgeoning debt problems, could mean a lot to you and me — and to the outlook of the global economy.
But the euro zone and the IMF stepped up last weekend and provided details of aggressive financial aid as a lifeline to Greece. And given the initial bounce in the euro and decline in market interest rates for Greek government debt, the hope was that Greece's default threat had finally been put to bed.
Not so. In fact ...
The Greece Problem
Is Far from Over
Those initial favorable responses to the aid plan are already being reversed as Greece's bond yields and the euro are back to pre-rescue announcement levels.

For the near term, the rescue plan could plug the gap for Greece. It has 11.6 billion euros of government debt to refinance over the next month — and another 20 billion euros by the end of the year. 
For the near term, the rescue plan could plug the gap for Greece. It has 11.6 billion euros of government debt to refinance over the next month — and another 20 billion euros by the end of the year. 
Greece ... a Big Deal
With the U.S. stock market climbing, almost daily, to new post-crisis highs and the U.S. economic data showing solid recovery, Greece sounds like a distant problem.
But as you can see, the drama in Greece is a big deal! Not just for Europe, but for the world economy — and for institutional and individual investors alike.
Unfortunately, the euro zone is in a no-win situation. The European monetary union countries, with damaged balance sheets and a bleak outlook for growth, are stuck. And with a one-size fits all monetary policy and currency, they lack critical tools, such as devaluation, to work their way out.

So expect the sovereign debt crisis to continue to build. And be cautious of a quick downturn in global risk appetite, which can send stock markets and global demand heading south, and global capital heading for safety.

Tanjong still good for long term investment.

 TANJONG plc (RM18.82) is looking to new power projects to drive growth for the company for the foreseeable future.
The company has had a good start in terms of overseas expansion, successfully acquiring power plants with effective installed capacity totalling some 2,461MW over the past few years.

Its biggest investments are currently in generating plants in Egypt and Bangladesh with smaller interests in Pakistan, Sri Lanka and the United Arab Emirates. Having already established a track record in these countries, Tanjong is upbeat on its ability to secure new power projects, especially in the Middle East and North Africa (MENA) region.

Focus on MENA power projects
The MENA region has vast reserves of petroleum and natural gas with a population equivalent to that of the European Union. Electricity demand growth expectations and investment requirements in the power and power/water sector in the region is one of the highest in the world, particularly for members of the Gulf Cooperation Council.

Against this background, Tanjong has aspirations to add some 4,000MW to its power-generating portfolio over the next five years. The company has a relatively strong balance sheet to leverage upon. Its existing power plants generates a cumulative RM1 billion in cashflow annually while the company has over RM1.5 billion in gross cash, some RM1.3 billion of which lies with the power business.

The power arm accounted for over three-quarters of Tanjong's pre-tax profit of RM953.3 million in its latest financial year ended January 2010. Not taking into account any new acquisitions, we expect the business to record steady earnings in FY11 — save for some RM50 million budgeted for major overhaul expenses for two of its power plants.

In short, power will continue to be the largest earnings contributor and key driver for future growth.

Sustained performances from property and leisure
Elsewhere, the property and leisure businesses are expected to sustain earnings in FY11.

The property arm, mainly rental income from Menara Maxis, contributed some RM48 million in FY10, excluding RM22 million in revaluation gains. The building is fully occupied and few surprises are expected on the earnings front.

Similarly, TGV Cinemas is expected to maintain its performance this year. The unit reported operating profit of RM14.8 million in FY10.

Tropical Islands will probably stay in the red but with slightly narrower losses. The resort theme park recorded RM22.7 million in operating losses in FY10, down from losses totalling RM33.9 million in the previous financial year.

Nonetheless, any significant turnaround is likely only possible once more on-site accommodations are available. Tanjong's venture partner has completed 21 villas so far and aims to have another 25 units available by mid-2010. The company targets some 400 units by the end of 2012. On-site accommodation is key to attracting a greater number of visitors from a wider geographical range. Currently, most visitors are day-trippers. Longer stay would also boost the average visitor spending in the resort.

Working to resolve RTO losses
Less positively, operating losses at the racing totalisator (RTO) business widened in FY10, to RM65.8 million from a loss of RM26.9 million in the previous year. Losses may increase further in the current financial year as the company works to resolve issues plaguing the business.

Sales per draw at the numbers forecast business (NFO) too have contracted in FY10. We believe this was due, in part, to the higher number and timing of special draws as well as competition from new games recently introduced by its peers.

Given that another 20 special draws are slated for the current year, the same as that in FY10, sales would probably stay flattish. Operating profit will be dependent on the luck factor and prize payout, which tends to average out at around 65%-66%.

In all, we forecast earnings from the gaming business to decline in FY11, weighed down by bigger losses — estimated at about RM80 million — for the RTO unit.

Still good investment for the longer term
Thus, in the absence for any extraordinary gains/losses, we expect lower profits in the current financial year for Tanjong. Net profit is estimated at roughly RM636.4 million or 157.8 sen per share, down from RM676.8 million in FY10.

Despite the expected earnings contraction this year, we believe the stock is still a good longer-term investment — priced at just about 11.9 times price-to-earnings (P/E) — with better than fair prospects for growth. A new power project would result in a step increase in its earnings base, which would then be sustainable over the period of the power purchase agreement.

Furthermore, Tanjong should be able to sustain its dividend payments, at least, supported by steady cashflow from the NFO business. Assuming gross dividends remain at RM1 per share, shareholders will earn a fairly decent yield of 5.3% at the current share price.

Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.

Tabung Haji investment

I believe that investments made by Tabung Haji have gone through some filtering. It will be good to monitor these counters closely.

Market leaders to provide the condition of stock market

One method for gauging the strength of any given market is to track the action of its leaders. Market leaders are typically widely held by institutions and their behavior can provide a clue to market sentiment. Weakness in market leaders is often a clear warning that all is not well in the markets. After all, the general markets will rarely make a sustained move without the cooperation of market leaders.

Hartalega

Results within expectations

The glove-maker posted 9M10 net profit of RM97m, up 82% yoy and within market estimates. Key takeaways from the results: (1) Revenue increased 28% yoy on higher demand resulting from the recurrent flu outbreak. (2) Operating margins improved to 29.6% in 9M10 compared to 18.0% in 9M09 on improved production efficiency and lower raw material prices. Natural latex prices declined 18% yoy to RM4.62/kg during the period. (3) Net cash balance has turned positive to RM43.4m in 9M10 from -RM19.5m in 9M09. (4) A second interim dividend of 5sen/share has been declared, bringing the total dividend declared for FY10 to 10sen/share.

Hartalega trades at FY11E P/E of 11.8x and P/B of 3.6x, versus Top Glove’s P/E 12.5x and P/B 2.9x, and Supermax’s P/E 8.6x and P/B 1.8x.

AEON

AEON chart as at 27/1/2001. There was a very good opportunity for buying when a bullish divergence occured Febuary 2009. Currently it is trading within a channel. If you have the stock, it will be an opportunity to sell off when it reaches the upper channel or when RSI >70.
Just my suggestion.

Counters to pay attention

Current price (closing price on 22.1.10)
Atrium REIT - 0.915
TSM Global - 2.29
Paramount - 3.08
Zhulian - 1.87
Kurnia Asia - 0.755
Faber - 1.67
Wellcall - 1.39
Sapura Crest - 2.43

Genting Plantations

Genting Plantations

Plans to develop Johor landbank

Genting Group revealed yesterday it plans to develop a premium shopping mall via Genting Plantations in Johor’s Iskandar Malaysia region. The development will be in a form of JV with U.S.’s Simon Property Group and Genting Plantation’s contribution is expected to be around RM200m. The mall will be part of the Group’s plan to develop a recreation hub, which will consists of not only the mall, but also hotels and a theme park, to draw visitors to its casino resorts in Malaysia and Singapore.

We are positive on the plan as: (1) The development of the hub will enable the company to unlock the value of its 10,000 acres landbank in Kulai, Johor. (2) The expected development cost of RM200m is within its financing ability as it is sitting on a net cash pile of RM183m as of 30 Sep 2009.

Genting Plantations is currently trading at 16x FY11E PE, a 15% premium to peers.

Genting as at 18th Jan 2010

Better odds than competition

Genting Berhad (GENT) has risen 3.4% YTD this year in anticipation of Genting Singapore’s opening on Jan 20th and the opening of its Universal Studio Theme Park and casino shortly afterward. Despite the rise, GENT is still the cheapest gaming stock compared to regional peers, trading at 2010E EV/EBITDA of 7.7x and P/BV of 1.9x, versus Wynn Macau (16.2x and 7.3x), and SJM (7.6x and 2.6x). Due to the expensive valuation of Genting Singapore (GENS (currently trading at 2010E EV/EBITDA of 22.7x and P/BV of 3.5x), investors might switch to GENT as a cheaper to the Singapore gaming market. GENT's stakes in GENS and GENM at current prices are worth RM27bn, almost equivalent to its market cap of RM28bn. At this price, investors are getting the plantations, power generation, and other businesses for close to zero. Pegging it at lower range of peers’ FY10E P/BV of 2.6x, we see GENT trading at RM10.40.

Leader Universal (current price = 0.93 sen Target =RM1.16

In a Bursa announcement yesterday, Sarawak Energy Bhd said it has awarded a LoA to Naim Holdings for the construction of Package B Part I and II of the 275KV Overhead Transmission Line Projects for Bakun-Similajau Transmission System.
Since Leader is likely to be the lead supplier of wires and cables to this project, the company is poised to gain both directly and indirectly. Hence, given improving earnings visibility, we ascribe a higher PER of 8x against 6x previously to the company’s cable and wire division in our Sum-of-Parts valuation. This results in an upgrade on Leader’s target price to RM1.16 from RM0.93 previously. BUY call maintained.
Project in hand? Our checks with sources indicate that this transmission line is part of the second phase of the Bakun-Similajau Transmission System (BSTS). In fact, Leader had previously supplied cables and wires for the first phase of the BSTS, which was awarded by the same party. As such, we believe the cable and wires supply contract for the second phase could well land on Leader’s lap.
Direct and indirect exposure. Besides directly supplying to the BSTS, Leader’s associate company, Universal Cable Sarawak (UCS), would also be Leader’s indirect exposure to the BSTS. UCS is also principally involved in the manufacture of electrical wires and cables as well as sub-contract power and transmission related works. (see page 2 for more details) Optimistic earnings forecast reinforced. We see Leader’s FY10 revenue growing 9.2% y-o-y. Coupled with recovering copper and aluminium prices, the resulting higher margin should well lift its net profit by 21.4% y-o-y over the same period. We see increasing orders from the SCORE region as more transmission lines are installed in the future. Nonetheless, we deem our estimates for Leader reasonably “bullish”, and hence our unchanged earnings forecast. A potential upside catalyst would be higher than expected orders from the SCORE region.
Compelling valuations. Leader’s share price has surged by 17.7% in the past two days following news of a JV between State Grid Corp of China and 1Malaysia Development Berhad to invest in projects in SCORE. As the prospects are improving for Leader’s operations in Sarawak going forward, we are now ascribing a higher PE of 8x against a conservative 6x previously to the company’s cable and wire division in our sum-of-parts valuation. This prompts us to revise upwards our TP for the stock to RM1.16 from RM0.93 previously. Leader remains a BUY.

3 jan 2010 Market Strategy "Year of the Tiger".... CLSA

2010 strategy
To outperform in 2010, investors have to buy on dips. Buying opportunities will arise from concerns on inflation, monetary tightening and double dip recession. We expect fundamental and liquidity factors to drive the FBM KLCI up to 1460 pts by year-end. For the Year of the Tiger, we will focus on domestic consumption plays, and top picks in the big cap space are CIMB, Maybank and Genting.

The three bears

* 2010 will be a year of tug-a-war between liquidity versus fundamental factors for equity investors which will result in choppier markets.
* To ensure outperformance, investors have to buy on dips.
* Buying opportunities will arise from concerns on inflation, monetary tightening and double dip recession.


Three re-rating catalysts

* Despite our expectations of choppier markets, the uptrend remains intact.
* The persistent weakness in the USD will continue to fuel the dollar carry trade and the liquidity party.
* Fundamental re-rating catalysts include a new investment cycle, revitalisation of the equity market and sustainable economic recovery.


FBM KLCI year-end target 1460pts

* Fundamental factors are not the most appealing with forward PE trading at 14.4x, which is close to 10-year mean.
* However recall the most recent liquidity party driven by the yen carry trade, ended with PE multiples peaking at 22x in January 2008.
* Taking into account fundamental and liquidity factors, we derive a year-end index target of 1460 pts or 15% upside.


Top picks

* In 2009 we told investors to hedge against inflation with positions in the property and commodity sectors.
* For 2010, we will focus on domestic consumption plays, given the economic recovery, stronger inter-regional trade, high savings rate and low unemployment.
* Top picks in the big cap space are CIMB, Maybank and Genting, whilst mid-caps are AMMB, Tanjong, Astro and UEM Land.

KFC - Crossing the regional roads

KFC Holdings UPGRADE TO BUY
Price/Target: RM7.86/ RM9.40 Mkt Cap:
US$0.5b Daily: Vol 0.2m 1-Yr Hi/Lo: RM8.00/6.51

Poised to expand regional presence beyond involvement in India, backed by impressive resume with Yum! and strong balance sheet. 2009 earnings could throw up a pleasant surprise. Upgrade to BUY and raise target to RM9.40.


Corporate Event

QSR/KFC Bhd Group is likely to have more opportunities to expand its KFC franchise operations in the greater Asian region, having clinched in recent years franchises in Singapore, Cambodia and India.

Meanwhile, we expect KFC Holdings (KFC) to deliver a strong set of results for 2009, perhaps above consensus, led by margin expansion on the back of easing raw material costs, rising average selling prices (ASP) and ongoing store expansion.

Stock Impact

Yum! returns with larger regional bites. In the intermediate term, KFC is in a strong position to secure more lucrative KFC franchises in the greater Asia region from Yum! Brands (Yum!), in recognition of its impressive
Malaysian operations (consistently a top-performing KFC franchisee in the region) and steady store expansion (thus feeding Yum!'s growth in royalty payments). To recap, the Group clinched the Singapore franchise, followed by QSR clinching the sole KFC Cambodian franchise (which started its first
store in 1Q08), and most recently, KFC was appointed a key KFC restaurant franchise operator in Pune and Mumbai, India, where it intends to open 10-12 outlets in 2010.

As such, KFC could be in a good position to secure a concessionary foothold in more developed countries in the intermediate term. This implies a much larger outlay but also swifter translation to the bottom line. From time to time, KFC could be invited to bid for such opportunities which could lift its earnings by at least 10%.

Meanwhile, the existing overseas franchises should deliver attractive returns over the long term, beyond the expected start-up losses in the first 1-2 years of operations. For example, KFC Singapore, which was
bought for S$55m in 2002, turned around in 2005 and today delivers about RM10m in pre-tax profit. KFC Cambodia, which has seven outlets, made a modest loss in 2009.

Earnings Revision

Upgrade outlook for 2010-11. We maintain 2009's net profit estimate, but raise 2010-11 forecasts by 4.9% each to RM146m and RM154.2m respectively after lowering raw material cost assumptions. Our 2010-11 forecasts
conservatively assume rising raw material costs in 2H10 and start-up losses in the region.

Valuation/Recommendation

Upgrade KFC to BUY (from HOLD) with a revised target price of RM9.40. KFC is expected to enjoy the strongest earnings momentum among the consumer stocks under our coverage on the back of improving consumer sentiment. It is still trading at cheap valuations of 10.0-10.7x PE for 2010-11. Our
target price is based on a lower discount rate of 35% to our RNAV of RM14.50/share in recognition of a rising likelihood of further expansion in Asia, indicating an effective use of its surplus cash. The revised target
price implies 12.8x 2010F PE and 12x 2011F PE. There could still be upside to our target price should the company realign its use of surplus cash and provide a more generous dividend policy, noting that established
multi-national F&B companies like Nestle and F&N trade at over 20x PE.

Analyst: Vincent Khoo, CFA/ Malaysia Research Team

DAIBOCHI PLASTIC & PACKAGING... GROWTH STOCK

Current Price RM2.33 (as at 8th January 2010)
New Target Price RM2.96

Acquisition of new key account to spur growth
Daibochi’s investment proposition is at first glance,
driven by a surge in margins at the plastic packaging
materials segment, which buoyed group results up
218%YoY in 3Q-09. The steady share price gain is
also on promising prospects for a sustained 8%
medium term dividend 5.2% yield that puts the stock in
the running to be added as a medium-term holding.
But more encouraging is the recent acquisition of the
BAT (British American Tobacco) account that may pan
out to be a key regional supply contract in the longer
term. BAT is looking to source domestically to
substitute for more expensive imported metallized
polyester and aluminum foil and the initial orders are
aimed at qualifying Daibochi as a long term regional
supplier for the bulk of its needs. As the share price
continues to notch up 52-week highs, investors may
finally recognize its potential as a growth stock. We
have placed our initial price target at RM2.96, with a
BUY recommendation.
A Quick Take on 3Q09 Results
3Q-08 quarter is a seasonally weak quarter. Revenues
fell just 0.6%YoY but were down 7.0% QoQ on
seasonally lower sales volume after the ramp-up ahead
the Eidul-Fitr season. 3Q’s low 16.3% effective tax rate
also helped. Sales were flat as this is a function of the
lower cost of plastics being passed on to customers.
But the lag and incomplete passing on of cost savings
benefits margins. Consequently, 3Q-09 gross margins
at 13.2% is at a record high. Our forecast is for FY09
as a whole, revenue growth will continue at 5.9%,
driven by a marginal 4% volume gain and gains on
better mix of packaging materials. The price of
PE/PP/polyester resin and film fell sharply in 2008.
Film and resin of these 3 raw materials make up 65%
of material cost by value.
Recommendation
Our forecast is for FY2010 earnings to rise to
RM23.5m, representing +16.5% growth. This does not
include any assumption of a significant margin gain in
the event BAT ramps up orders. Even so, valuation
remains undemanding at 7.5X forward PER. The
company’s financial strength has strenthene4d sharply
in the past year and may swing into a net cash position
by this year. The rapid paring down of debts despite
payment of a bumper 15 sen dividend in 2009 is a
testimony of this trend. The strong growth prospect is
backed by a trend towards flexible packaging materials
rapidly replacing metal and rigid plastic containers for
an array of consumer goods. The share price has risen
372% in the YTD period, but the promised yield is still
at least 5.2%, or above our recommended threshold
yield for income stocks, giving the stock an anticipated
12-month total return of 33%. BUY

(By JUPITER SECURITIES RESEARCH)

OSK Macro Analysis Report: Investment outlook 2010

Think cautiously: hot money, asset bubble, inflation, policy exit, strong US$ ….

Global healing, not global boom

Global GDP had contracted by about 1% in 2009, the worst since 1982. Undoubtedly the world has started to heal in about June, and continues to bounce as China, Brazil, India and Southeast Asia are pulling relentlessly. While we believe the world will eventually heal all its deep-cut wounds caused by the financial turmoil of 2008, a full recovery is unlikely to be seen until the end of 2012. For 2010, we will have a global recovery, not a global boom. While the stock markets of Hong Kong and China are still in their party moods, we caution investors to think about the possible setbacks that will cause some really volatile swings for the markets.

Hot monies will depart

According to the Financial Secretary of Hong Kong, about HK$640bn of hot monies had flowed into Hong Kong the last six months. There were no sign of their departure so far, but if they do depart, the bull market will end without hesitation. Many said hot monies will stay in Hong Kong, as China is booming and assets/stock prices are still cheap. Our view is that their inflow had caused the HSI to double in about nine months. There are plentiful profits with the hot monies already, so the lure to depart is irresistible. Besides, their flows are hypersensitive to the policy changes and shifting relative attractiveness of the different markets. As such, by nature they won’t stay.

Asset bubbles will burst

While hot monies stay, asset bubbles are unavoidable in Hong Kong, mainly because the Chief Executive only listens to the major developers. Many young doctor and lawyer lovers had told him they can’t afford to buy a shelter to get married, but he said they should rent instead, or buy a tiny flat to start. We will not see public land sales resuming. As such, property prices will continue to rise. The asset bubble will burst when all young couples are marching on the streets on 1st July 2010, or when the hot monies suddenly leave and cause the market to collapse.

Inflation risk in China is back

The CPI in China became positive at 0.6% in November, after had remained at –ve 0.5% to –ve 1.8% in the previous nine consecutive months. We believe the CPI in China will likely be hovering at around 5% in Q3 2010, and the risk of reaching that earlier is high. Property prices are at historical peak in many cities. Fast rising rents will speed up the increases in consumer prices in every sector. The State Council’s work conference of 12th December urged local governments to stop property price rising by all means, and on 18th December, a new rule requires all developers to pay 50% of land cost when acquiring new land. Despite these, runaway property prices and rising inflation will hit both China and Hong Kong in mid-2010, in our view. With near-zero interest rates, all anti-inflation tools will not be very effective. As such, we alert that inflation will become a nasty issue in China/HK from Q2/Q3 2010.

“Policy exit” here and there

Given the globe will reach the flexing point of its recovery path during 2010, the central banks must withdraw the excessive liquidity from the system. Their “policy exit” may take different forms, and start at different times. Yet the end result will be the same: interest rates will go up, so as the mortgages and borrowing costs. Only by doing so, the G7 (and to lesser extent, China) can curb inflation expectation before inflation runs. As the “policy exit” is equal to high interest rate, equity markets will head south when the politicians are heated up with the debates of when and how to exit, a signal telling the stock market to contract, in our view.

US$ strengthening

The US$ had declined by 10-20% against most Asian currencies in 2009, causing gold price to reach over US$1200. The US dollar index of the Reuters was 89 in Feb and is now 77. In 2010, the US$ will likely strength instead of continue to fall, the US economy will finally start to recover and the number of new jobs will rise. A stronger US$ will lift the appreciation pressure from the RMB, and will also induce a majority of the hot monies to flow back to the US, causing severe swings in the HSI.

18.5% upside for the HSI

The HSI at 21,175 is now trading at about 17x 2009(est.) earnings. The consensus eps growth for HSI in 2010 is about 22% as of today. If the market sublimes to maximum bullishness again, the HSI could go for its historical forward peak p/e of 18 times, and hit as high as 27,800 in 2010. However, given the 5 afore-mentioned major cautions, we believe investors will exercise maximum care instead, pushing HSI to peak at 25,000 only. In fact, we could still see the HSI nudging up 5-10% higher from this level, but only momentarily. Within the HSI constituent counters, we believe the PRC banks have the best upside. We also like the developer stocks before the asset bubble burst.

Hot themes for the mid-caps

We believe coking coal, steel, cement, heath care, sportswear, green energy (car batteries and wind) are the hot themes from which we can identify many super outperformers in 2010. China’s infrastructure will boom in 2010, due mainly to the Rmb4 trillion rescue package of Q4 2008. Steel, coking coal and cement should be investors’ main focus in the next 6 to 9 months. As living standard improves, the sportswear and health care stocks will perform fantastically. We also believe the green energy companies will remain hot in 2010, including those involving in wind and solar energy, and those supplying the next generation batteries for cars.

Tanjong may pay high dividend, says ECM Libra

Tanjong plc (2267), a power producer and gaming company, may pay a high dividend in its final quarter as earnings from its utility business continue to be strong. ECM Libra, an investment bank, expects the group to pay a full year dividend of RM1.16 for the year to January 31 2010, which is the same amount it paid for 2009.

So far, it has declared total dividends of 52.5 sen for the first nine months of the current financial year.

"We continue to like Tanjong as a defensive stock as well as for a dividend play," ECM Libra said in a research report released yesterday.

A stock is described as defensive if its price does not suffer volatile swings over time and holders enjoy a continuous stream of dividend payouts.
Tanjong's stock has gained about 24 per cent so far this year, underperforming the broader market's 43 per cent gain in the same time.

The group, which also operates a leisure business called Tropical Islands in Germany and the TGV cinema chain, posted a third quarter net profit of RM177.8 million, an 83 per cent surge from the same period last year.

Revenue for the period to October 31 was almost flat at RM985 million.

Its net profit for the full nine months was RM550.7 million, 27 per cent higher than the same period last year.

Tanjong made more money mainly from its power business, driven by its Egypt power plants, as it spent less on plant maintenance.

However, luck was not on Tanjong's side in the numbers forecasting operation as it paid out more prizes in the third quarter against the second quarter.

KLCI target of 1,400.

New listings coming on stream. With the improving economic outlook, we see PM Najib Razak’s new reform policy measures gaining some momentum in terms of execution. JCY International, a Malaysian hard disk drive components maker, has submitted an application to list the company in what is probably the country’s second-largest IPO over the last six years with an estimated offering of M$1B (according to the Edge newspaper). This follows the announcement made by the new administration on a modification of Bumiputera equity ownership requirements upon listing from 30% previously to 12.5% on a best efforts basis.

· Financial sector liberalization is happening. On 20 November 2009, the Malaysian government issued a commercial bank license to Industrial and Commercial Bank of China Limited (ICBC). Note that this license is separate from the five new commercial banking licenses (two in 2009 and 3 in 2011) that will be issued under the liberalization initiative that was announced on 27 April 2009 which is currently in progress. On the capital markets front, Goldman Sachs has been granted a license by the Securities Commission to establish a fund management and corporate advisory business following the recent policy change in allowing 100% foreign ownership of fund management and corporate finance firms in Malaysia.

· We hope to see more execution of policy reforms in 2010. Possible events to watch out for include:- 1) high profile infrastructure projects and government procurement contracts awarded on open tender basis; 2) revitalization of GLC transformation programme including selling down holdings to facilitate liquidity; 3) increased corporate activity that could boost the earnings profile of the domestic equity market; 4) new foreign investment into the recently “liberalized" services sector and Iskandar region.

· Dec-10 KLCI target of 1,400. To recap, our positive stance on the Malaysian equity market in 2010 is based on policy implementation surprising on the upside aided by tailwinds from an improving external sector and globally low interest rates. Top picks are Public, AMMB, Tenaga, Sime Darby, Genting and IJM. Avoid Maybank, YTL Power and MISC.

PPB Group: Share prices-in zero value on core operations

PPB Group’s market capitalization only reflects its stake in Wilmar (18%) and Maybulk (14%) and implies zero value on its core operations in sugar refining, grain trading and film distribution. We are positive on the stock: (1) Recent corporate exercise to dispose MFM, kilang Gula Felda Perlis and 5,797ha land in Chuping Perlis will net the company RM1.3bn (RM1.10/share). (2) Wilmar is a cheaper proxy to rising CPO prices (+51% YTD) vs. Bursa-listed big-cap planters like Sime Darby, IOI and KLK. Wilmar trades at 17x FY10E PE compare to 19-20x for Bursa-listed planters. Assuming Wilmar re-rates to 20x FY10 PE, PPB’s stake in Wilmar will be worth RM18.18/share.

PPB’s share price (+71% YTD) is trading at 13x FY10 PE, a 32% discount to big-cap planters. We value PPB at RM19.50/share based on sum-of-the-parts: (1) stake in Wilmar at RM15.51/share; (2) stake in Maybulk at RM0.37/share, (3) core operations and balance sheet item at RM3.62/share.

HLG Research

Our 11 Startling Forecasts for 2010 (Edited Transcript) by Martin D. Weiss, Ph.D.

Forecast #1
The Federal Reserve will not relent
in its money printing madness until
it's absolutely forced to do so.

Martin: Because ...

Mike: Because it's in black and white — right in the Fed's own statements, month after month. It's what they told us they'd do. It's what they're doing. And it's what they're telling us they're going to continue doing. We also know Bernanke will pursue this policy because of the persistence of those forces. We've had 120 bank failures from the beginning of 2009 through mid November, the most since the S&L crisis of the 1980s.

Martin: An obvious excuse for the Fed to continue printing money! So the pivotal question for 2010 is this: When and how will Mr. Bernanke shift gears? But first, let's focus on the immediate consequences of the Fed's money printing.

Larry Edelson: Just connect the dots! They take you straight to

Forecast #2
A continuing, virtually unstoppable
long-term decline in the dollar.

Yes, we will have dollar rallies. And yes, the dollar rallies will be sharp. But they will be traps. After each rally, the dollar will consistently resume its long-term decline. Mr. Bernanke is creating massive new supplies of U.S. dollars, ad infinitum. So he's naturally diluting their value.

Martin: But so far, the U.S. dollar's decline has been orderly.

Larry: I wouldn't use the word orderly. Instead, I'd use the words "messy" and "volatile," and that's only going to get worse in 2010. 2010 will also bring louder voices demanding that the dollar be replaced as the world's dominant reserve currency. Most important, at some point, the pressures on the dollar could reach critical mass, and the pace of decline will accelerate. Instead of a zigzag decline, you'll see a freefall, and ultimately, outright panic.

Claus: A tipping point could come when the dollar makes new, all-time lows ...

Martin: ... and those lows are already very close.

Larry: Yes. Against the euro, the dollar is just 4 euro cents from its lowest level in the euro's history. When that low is broken decisively, it could set off a dramatic wave of panicky dollar selling here and in the Euro zone. Against the Japanese yen, the dollar is now just 2.5 yen from its lowest level of all time. When that low is broken decisively, it could set off an even more dramatic wave of panicky dollar selling in Japan. And globally!

Claus: Of course. Investors hold dollars all over the world — not only in the Euro zone and Japan, but also in Southeast Asia, South Asia, the Middle East, and the Americas. Those investors are not only central banks that may still have some political motives to refrain from selling ... but also private corporations and individuals who don't give a darn about politics, who won't hesitate for a moment to dump their dollars if they feel that's what it takes to avoid a beating.

Martin: Right. But won't that kill European export industries?

Claus: Yes, and periodically here in Europe, we will gripe and make noise about how unfair that is. But we cannot complain too loudly. Remember, we also benefit from all this free money. We also have very shaky financial systems. We also have been rescuing our banks and letting our budgets go to hell in a handbasket. Meanwhile, I don't think the Japanese can complain very much, either.

Martin: Because they have been doing pretty much the same thing as the Fed is doing now ... and they've been at it for over TWENTY years.

Claus: Yes!

Monty Agarwal: Gentlemen, I know I'm new here and you wanted to save me for later, but there's another factor — a factor so pertinent to this discussion ... do you mind if I interject it here?

Martin: I don't mind at all.

Monty: It's the sovereign wealth funds, the giant national pension funds, which I track avidly. Not only have they grown dramatically in size — to as much as 3 trillion dollars — but with the dollar decline, they are now becoming far more aggressive in shifting out of the dollar and moving into alternatives — other currencies, other sectors, other continents, such as Asia. Most economists are greatly underestimating their impact. And most investors will probably miss the opportunity to follow their lead to some very profitable asset reallocations in 2010.

Martin: What happens next, gentlemen?

Larry: Let me answer that. Let me tell you what I already see happening among many investors here in Asia ... and what could soon become a sweeping, worldwide phenomenon all over the world in 2010.

Forecast #3
The entire concept of "RISK" will be REDEFINED
by global investors. The new definition will be:
HOLDING U.S. dollars and dollar-denominated assets.

First of all, more and more investors perceive U.S. dollars — and anything denominated in dollars — as high-risk investments. They don't really care how conservative the instrument is or how strong the company may be. All they see is that it's wrapped in greenbacks, and they paint everything associated with those greenbacks with a single broad brush and a single color — red for risk.

Martin: Which makes them anxious to dump dollars.

Larry: Yes, but it runs deeper than just currency trading. It means they are compelled to find other assets that can replace the U.S. dollar as stores of value. They must rush to buy alternative forms of money for their wealth ...

Martin: Like gold ...

Larry: Not just gold, but also silver, copper and other commodities. Not just commodities but also other tangible assets like real estate. Not just tangible assets, but also paper assets that provide a stake in those tangibles ... including common stocks!

I call this "the monetization of assets" — the phenomenon whereby other assets of many shades and colors become substitutes for the traditional role money plays as a store of value. That's the inevitable result of the Fed's efforts to flood the economy with devalued money.

Claus: And that's why they're buying gold.

Martin: Which leads me to this question we often get from our readers: Won't central banks prevent — or at least moderate — the rise in gold by simply unloading some of their gold hoards on the marketplace?

Larry: No. they're going to do precisely the opposite, which takes us to our next forecast:

Forecast #4
Gold will reach $1,500 if not higher as
central banks help drive up its price
with massive new buying of their own.

Martin: When do you see this beginning in a big way?

Larry: It already is! China is actively buying gold, boosting its gold reserves from 600 metric tons to 1,054 metric tons — a 76 percent increase since 2002. India has just spent a whopping $6.7 billion to scoop up 200 tons of gold from the International Monetary Fund.

Martin: But how big is this in the context of the broader global market for gold?

Larry: Are you kidding? It's equal to roughly 8 percent of all the gold mined in the entire world each year. Meanwhile, in addition to central banks, you've got a rush of private investors buying gold. Demand for gold investment products like ETFs soared to a record 1,732 metric tons of gold in the third quarter, $55 billion of gold. All this buying is converging right now. And this is the most obvious factor that will drive up gold in 2010.

Martin: Now, 27 percent of our readers said gold could rocket to somewhere between $1,500 and $2,000. And nearly 8 percent said $2,000 or higher.

Larry: Well, they're right on, in my opinion! But it won't be a one-way street. Before going that high, an ounce of gold could dip below $1,000. If it does, it will be a huge buying opportunity, a true gift for gold investors. I've said this many times before and I'll say it again: Every ounce of gold bullion you can buy for less than $1,000 an ounce should be seen as a great bargain.

Martin: Claus, what about oil?

Claus:

Forecast #5
The overwhelming majority of oil producing nations
will demand that the U.S. dollar be replaced as the
pricing standard for crude oil.

Martin: In past OPEC meetings, the debate was always about how to lower or raise the price of oil.

Claus: That will not be the big issue in 2010. More than ever before, oil will be driven by free market forces, and more than ever, the rise in oil prices will be tied to the fall in the U.S. dollar. As the dollar falls, the demands to replace the dollar will get louder and more unanimous. And as those demands grow in strength, you'll see more and more upward pressure on oil prices.

Martin: Gentlemen, please be more specific about what that will do to the price.

Larry: Here's my forecast, based on my work with the Foundation for the Study of Cycles: In 2010, the price of oil will move into a new, higher, and broader trading range — $110 on the high end, $70 on the low end.

Martin: So you don't see oil making new highs in 2010. Why not?

Claus: Because of the weak demand for energy from the largest economy in the world, the United States. Yes, the U.S. economy is recovering. And yes, the recovery could last well into 2010. But here's our forecast:

Forecast #6
The U.S. economic recovery of 2010
will go down in history as one of the
weakest and shortest in 100 years.

Mike: Never forget: There are currently 27.4 million unemployed or underemployed workers in the United States.

Never forget: Banks are clamping down on credit cards, tightening standards for the last nine quarters in a row, according to the Fed's own surveys. Also never forget that more than one in five U.S. homeowners has lost all their equity in their home and is upside down on their mortgage.

Plus, now you throw rising gasoline prices and surging heating oil prices into the mix and you're left with a perfect storm for a very large proportion of American consumers: No job security. No credit. No home equity to tap. And to add insult to injury, rising energy bills.

Claus: In contrast, when you look overseas, you see an entirely different picture:

Forecast #7
The economies of Brazil, China and India
will grow up to four times faster than the U.S.

For the most part, their consumers are not threatened by record unemployment, are not overly reliant on credit cards or home equity as a source of spending power ... and are not directly impacted by rising energy.

In the U.S., even if the recovery holds until the latter part of 2010, I don't think you'll see growth of more than a couple of percentage points. Meanwhile, Brazil will grow by nearly 5 percent, India by 7 percent and China by almost 9 percent.

Martin: Based ...

Claus: Based on official government sources, which, in at least two of those countries, have often understated the actual growth.

Martin: Tony, can you help us there? By the way, I understand you've now moved back to Asia permanently?

Tony Sagami: I was born in Japan, and moved to the U.S. as a child, and now I'm back living in Asia as an American citizen ... and loving every minute of it ... although I sure miss the U.S. But to answer your question about the global stock markets, I have all the information here at my fingertips, which brings me to ...

Forecast #8
Stocks in countries like China, India and
Brazil will rise up to three, four,
even FIVE times faster than the S&P 500.

The immediate reason is quite simple — China's $586 stimulus plan is working like a charm. China didn't have to borrow a dime to finance that stimulus. And unlike the U.S., which used trillions to buy out worthless sub-prime debt, China spent its stimulus money on highways, airports, dams, utilities, bridges, shipping ports and more. Not only has this created millions of jobs, it has created a foundation of productive infrastructure that will keep the Chinese economy humming for years to come.

Larry: Look. This is not just about one year or even one decade. We are in the first years of one of the most powerful mega-cycles in the history of civilization.

Martin: I know exactly what you're talking about — the work you've done over the years with the Foundation for the Study of Cycles, which you presented to us in an earlier event this year.

Larry: For those who may have missed it or who need to refresh their memory, could you run some key highlights of our session with the Foundation's Director of Research, Richard Mogey?

Highlights of Our Event with Richard Mogey,
Director of Research for the
Foundation for the Study of Cycles.

The time is the 1930s, and we're back in the Great Depression. President Herbert Hoover could not have dreamed of a more adverse environment to begin planning his re-election campaign — not even in his worst nightmares.

The public and the press demand to know who or what was to blame for this catastrophe. To survive, the Hoover Administration would have to give them answers.

But the president knows that just any answer will not suffice. Only a credible, exhaustively documented, scientific answer could have a chance of restoring the public's faith in his administration and in the U.S. economy.

And so, Hoover turns to a scientist he trusts — a Chief Economic Analyst in the Hoover Administration ... named Edward R. Dewey.

Later Dewey will create a nonprofit foundation. And with this foundation he and his successors will continue a 78-year quest for the mysterious forces that drive the economy and investment markets, joined by many of the best minds from Harvard, Yale, Princeton, Oxford, Temple University, Western Reserve and other globally respected institutions.

The mission of the foundation is championed by men at the very pinnacle of the scientific establishment — Charles Greeley Abbott, the Head of the Smithsonian ...William Cameron Forbes, the Chairman of the Carnegie Institution ... Wesley Claire Mitchell, Founder and Director of the National Bureau of Economic Research...

A former Vice President of the United States — General Charles G. Dawes — joins Dewey's Foundation. So does Senator Everett M. Dirksen.

Richard Mogey: Dewey discovered a very simple reality — that in modern, industrialized nations, economic expansions and contractions occurred in regular, PREDICTABLE patterns.

Larry: In regular waves — CYCLES!

Richard: Exactly!

Larry: I've put together a short list of some of the most outstanding calls in major markets.

Richard: Forecasts of key turning points.

Larry: Yes, the foundation alerted investors to

• the June 1973 high in soybeans ...
  
  
• the January 1980 high in silver ...
  
  
• the March 1981 high in crude oil ...
  
  
• the September 1981 high in interest rates ...
  
  
• the August 1982 low in the stock market, and ...
  
  
• the great Crash of 1987 in the stock market.

Richard: These were all very major turns in the history of
markets.

Larry: The Foundation forecast ...

• the massive bull market in stocks, 1995-2000 ...
  
  
• the bottom in oil, February 1999 ...
  
  
• the historic low in commodities, June 2001 ...
  
  
• the all-time high in stocks, September 2007, and ...
  
  
• the March 2009 low in the stocks

Congratulations, Richard. This is why Weiss Research has entered into an exclusive, strategic alliance with the Foundation to help give our readers direct access to this valuable timing information.

Richard: Thank you! We also have a much longer, 500-year geopolitical cycle — a major power shift from East to West or from West to East, which is the case now.

Now, we return to our "11 Startling Forecasts for 2010" ...

Martin: That was fascinating, Larry. Congratulations again on introducing us to the Foundation. What I find most remarkable about all of this is not just how accurate the Foundation has been in timing the market, but also how broad their vision is of the future — particularly the 500-year cycle of the massive power shift from West to East.

Larry: We are just in the very early stages of that shift. And clearly, it's not just about a shift of power. It's also a shift of capital, wealth and investment opportunities. It's a wealth shift from economies that are bogged down in debts, deficits — and denial of the dire disasters all around them — to economies that are rich in cash, rich in commodities ... and full of confidence in their future. This is probably the most important, the longest term and the sustainable megatrend of our time.

Martin: What does that mean for global stock markets in 2010?

Claus: Here's our forecast:

Forecast #8
Stocks in countries like China, India and
Brazil will rise up to three, four,
even FIVE times faster than the S&P 500.

The S&P 500 could rise 20 percent further in the first half of 2010. But as investors begin to realize how weak the U.S. recovery truly is, it's likely to give up AT LEAST half of those gains in the second half.

So by December, if the S&P is still up 10 percent for the year, it will be a minor miracle. In contrast, don't be surprised if major foreign markets are up by 30 percent, 40 percent or even 50 percent for the year ... three, four or even five times more than the S&P 500.

Martin: Mike, you told me before this conference that you had some strong numbers that illustrate how this has happened in the recent past.

Mike: It's actually quite consistent. When stock markets are rising, most foreign markets outperform by HUGE margins. So far this year, for example, the S&P 500 has risen by 21 percent. China's Shanghai Stock Exchange Composite Index is up 75 percent, beating the S&P by factor of 3.6 to one. India's BSE Sensex index is up 79 percent, beating the S&P by a factor of 3.8 to one. And Brazil's Bovespa Index is up 139 percent, over SIX times better than the S&P.

In 2007 overall, the foreign markets did equally well — India up 65 percent, Brazil up 72 percent, and China up 110 percent. But since the S&P rose only 3.5 percent, the relative outperformance is far greater: India, almost 19 times better. Brazil almost 21 times better. China thirty-one times better!

So clearly, a forecast of three, four or five times outperformance in 2010 is not at all unreasonable, given the historic precedents.

Martin: Just remember that this is a double-edged sword. Volatility to the upside comes with volatility to the downside. Would anyone venture a guess as to which will do the best of all?

Tony:

Forecast #9
The best performing stock markets in 2010
will include Indonesia, Thailand and Vietnam.

I just completed a five-day fieldtrip to Indonesia, and I was blown away by what I found. Indonesia has the fourth largest population in the world and is growing like a weed. It just reported that its economy grew by 4.2 percent in the third quarter and that's on top of 4 percent in Q2. That makes it the THIRD fastest growing economy in all of Asia, just behind India and China.

Indonesia is extremely rich in natural resources, especially oil and coal. How rich? Many people don't realize that Indonesia was the only Asian member of OPEC until it voluntarily withdrew last year. You know why they withdrew? Because their economy was growing so fast and they were making such good use of their own oil, they didn't need to export it any more. OPEC stands for Organization of Petroleum exporting countries. So if they're not exporting, why be a member?

Martin: You've recently been to Taiwan, Hong Kong, Macao, mainland China, Japan, India ... now Indonesia. Where are you going next?

Tony: My next trip is to Xian, China. There are over 100 Universities there and they produce the most engineers of any city in China. That gives them a wealth of talent in technology and engineering, and I am going to visit two companies in particular that tap this talent.

From there, I'm going to Hanoi and Ho Chi Min City. Vietnam is taking aggressive steps to open up its economy. It has recently been privatizing companies and property rights. It's taking some very broad measures to boost the liquidity of its stock market. Its market is another prime candidate for #1 outperformer next year.

Larry: And Thailand, despite its political problems, is one of the most undervalued markets in Asia, with many stocks trading at less than their book values! Plus, there's a vast amount of new Chinese money going into Thailand, buying property, buying banks, buying every major asset they can lay their hands on. Which leads us to sovereign wealth funds.

Monty: As you know, major sovereign wealth funds are essentially the national pension funds of some of the world's richest nations, and my forecast is quite simple:

Forecast #10
Sovereign wealth funds of Asia will become far more aggressive buyers of contra-dollar assets in 2010, helping to drive up their values at a much faster clip than generally expected, especially in Asia.

Just the top ten Sovereign Wealth Funds in the world have nearly $3 trillion in capital. More than 80 percent of that capital originates from the Middle East and Asia — and more than 70 percent of that capital is going into natural resources, which are contra-dollar assets.

Larry: What most people don't realize is that the sovereign wealth funds are also global trendsetters. When they start gobbling up natural resources, other companies will follow their lead and do the same.

Sean Brodrick: Which leads us to our next forecast:

Forecast #11
Expect a MASSIVE new global boom in mergers
and acquisitions, focusing on small- and
mid-cap natural resource stocks.

We just saw Goldcorp gobble up a company with gold mining operations in Mexico by the name of Canplats for $238 million. And this acquisition was driven by a wave that will lift a lot more small boats, targeting not only gold, but other natural resource like oil, silver, copper and more. The wave I'm talking about is that the large producers can't replace their production fast enough.

And it's accelerating. Bear Creek Mining bought three gold and silver exploration companies in South Peru. El Dorado Gold bought Sino Gold in China. Jin Shan, based in Canada, recently merged into a larger Chinese miner.

Tony: I have another one:

Bonus Forecast
2010 will bring a NEW phase in Asia's
real estate boom — a boom which is
both broader and far more sustainable
than America's real estate boom of the 2000s.

Martin: Where in particular?

Larry: I travel throughout Asia. I bought a property here in Bangkok just SIX months ago, and it's already up 35 percent. So I can answer that question based on first hand information. Real estate prices will naturally be highest in major urban centers where population density is the greatest and real estate is in the tightest supply: Hong Kong, Singapore, Shanghai.

Martin: Gentlemen, this is fascinating. But most investors can't travel all over Asia like you do. And even if they could, how are they going to buy Asian real estate?

Tony: Are we ready to start naming specific investments?

Martin: Yes!

Tony: In the past, it would have been almost impossible for the average American investor to profit from a real estate boom in Asia. Today, it's just a matter of buying the right exchange-traded funds — simple ETFs. ETFs are traded on U.S. exchanges. You can buy ETFs with deep discount commissions, or even zero commissions. And you can do it in any standard brokerage account or IRA.

Martin: What about ETFs for Asian real estate?

Tony: You can use IFAS. This ETF owns shares in some of the biggest commercial property developers throughout Asia, including China, Singapore, and Japan.

I have personally visited real estate developments in Shanghai, Beijing and all over China, and that's where I think you're going to get the biggest bang for your buck. I'd love to take readers on a tour with me to see some of them — and the HUGE demand for them — first hand. But I don't have to.

You can buy a stake in China's real estate with the Claymore/AlphaShares China Real Estate ETF (symbol TAO). This ETF owns companies like Wharf Holdings Ltd. and New World Development, which develop malls, office buildings, and other commercial projects in China.

The main point I'd like to make is that there are ETFs for each and every one of your forecasts, and for nearly all of them, the market liquidity is excellent.

Martin: Forecast #2 was a continuing, virtually unstoppable long-term decline in the dollar. What's the simplest vehicle for profiting from that trend?

Bryan Rich: Currency ETFs. ETFs that never buy a share of stock, never buy a single bond. ETFs that invest strictly in foreign currencies themselves. These ETFs allow you to profit from the appreciation in the currencies against the dollar. Plus, in several cases, you get the benefit of a higher yield.

For example, the Australian dollar ETF now gives you a full three percentage points more than U.S. Treasury bills or U.S. money markets. The Brazilian real ETF pays you over EIGHT percentage points more!

Martin: The next actionable forecast was gold heading for $1,500. What instruments to do you recommend?

Larry: If you don't own any gold, decide how much you want to allocate to gold and buy half now, half on a pullback. But don't put most of that allocation in bullion coins or bars. You'll have to pay a hefty premium. You'll have the costs and hassles of storage. It's simply not for most of your money.

Instead, I use the SPDR Gold Trust ETF (GLD). It's far more flexible and practical.

In addition, every investor should hold shares in gold miners like Newmont, symbol NEM, and Barrick, symbol ABX; plus some juniors, like Agnico Eagle, symbol AEM; IAMGOLD, symbol IAG; and another up-and-coming company, Jaguar Mining, symbol JAG.

Martin: Forecast #5 was a higher trading range for oil, up to $110 per barrel but NOT new all-time highs. To me, that implies a strategy that also has a strong income or dividend component.

Nilus Mattive: I like Master Limited Partnerships like Kinder Morgan Energy Partners (symbol KMP) and Energy Transfer Partners (symbol ETP), which have dividend yields of 7.6 percent and 8.1 percent respectively. Or, if you want to get broad diversification in MLPs with one shot, you can use the MLP & Strategic Equity Fund (MTP), which pays an annual yield of 5.7 percent.

Martin: The next actionable forecast was on the strong potential outperformance of stocks in countries like China, India and Brazil. What are the best vehicles?

Tony: There's a solid ETF for each one. Plus, beyond ETFs, I think the best way to invest in China is to concentrate on the two C's ... Construction and Chuppies — Chinese yuppies. And my favorite stocks for these two sectors those trends are Duoyaun Global Water (DGW) and New Oriental Education (EDU).

Martin: Last actionable forecast: Big mergers in small- and mid-cap resource companies.

Sean: One of the hottest regions right now is Argentina and Chile, where I've been hopping around for the last eight days virtually nonstop on twin-engine puddle-hoppers, micro buses, pick-up trucks, hiking —in the Andes, in Patagonia. That's where my favorite Latin American gold miner has two of its most promising exploration projects. The one in Patagonia is called Cerro Moro where they're finding bonanza-grade veins — 13 grams of gold per ton of rock mined ... 56 grams of gold per ton, 550 grams per ton.

Martin: How does that compare to other mines?

Sean: They have to do a lot more drilling to prove it up, but look, there are mines all over the world going into production with less than a single gram per ton.

Martin: You never gave us the name of the company.

Sean: It's Exeter Resources, traded in Toronto and on the Amex. Plus, they have another huge project in Northern Chile, which I just visited, which could one of the largest undeveloped gold resources in all of Latin America. The kicker is that this company's valuation is based almost exclusively on this second project. So the first project is like a free, extra bonus.

Monty: Gentlemen, I've been listening carefully throughout this hour and I'd like to give you my evaluation of what I've heard, if I may. I have managed Asia-focused hedge funds for quite a few years — in Tokyo, in Singapore, in Hong Kong ... and most recently in the U.S. Hedge funds are avid but also very skeptical buyers of research. So I think I can recognize good work when I see it, and I want to compliment your team for bringing together the essential elements of investment success: On-the-ground research — not just in some ivory tower on Wall Street, but also in the trenches overseas. Timing, with the Foundation for the Study of Cycles. And diversification, with a team of specialists, each in their individual sector. The only thing I would add to that, as I've stressed from the outset, is to track closely what the giant sovereign wealth funds are doing. Follow them closely, and you should do very well in 2010.

Martin: Gentlemen thank you very much, you have brought to the table a wealth of investment ideas ...which leads me to something I have been wanting to say directly to our most loyal readers for quite some time.

I have your emails and blog comments. I have been thoroughly briefed about your phone calls. I love your compliments, and I also very much appreciate your concerns and even your complaints

Please correct me if I'm wrong, but the message I take away is that you'd like the research and investment ideas of all the experts on this team.

You want open access to the entire group without paying for this or that news letter like most investors typically do.

I hear you. I want to give you what you're asking of me ... and more. I want to do everything I can to help you ensure your future investment success — not only to take advantage of our startling forecasts for 2010, but also to continue doing so in 2011, 2012 ... and the entire new decade that is about to begin.

So earlier this year, I gave my Weiss Research staff the challenge to create a very special membership program with the following parameters:

First, it must be for your core funds — no investment recommendations for options or fast-paced trading, but strictly recommendations that make sense to the mainstream investor, and that can go into any standard brokerage account or IRA.

Second, it must cost LESS than the total cost of all the newsletters for just one year (not based on their list prices, but based on their discounted prices).

Third, and here's the big breakthrough: It must be forever! I hate asking you for your renewal every year just as much as you probably hate paying for renewals every year. How can we do away with that? Well, when you join a country club, you never have to renew. You buy the membership once and that's it. The same concept here is the same.

Fourth, each year brings change, and to adapt to that change, we are continually adding new, exciting newsletters. So any new, future newsletters that are dedicated to your core funds will also be included.

Last, as an incentive for you to join us and get ready before we march into the amazing year ahead, I asked my team to offer a hefty Charter discount for those who join before year-end.

That, I trust, addresses all of your hopes and requests, and if you'd like to learn more, click here.

I also trust you have gotten great value out of this program today. I personally find this live video streaming to be a great way to stay in close touch with you and talk to you directly in a way that I can't always achieve with the written word alone. So much so, that I want to do this more regularly and in a way that is easier for you as well.

So as part of your VIP membership in our inner circle, you will also get access to our regular TV show we're launching next year.

I look forward to seeing you there.

And in the meantime, we'll send you more specific details on the VIP membership program.

Thank you again for joining today. Have a good day and a great 2010!

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