Wednesday, August 12, 2015

KLCI: 1500 Coming Next!

KLCI 1500 level in the making! 

YES, if fail to breakout from 168x in short term.

I expect a rebound from this level 161x as technically is oversold. 
Recommended to sell stocks upon rebounding/reaching 168x-1700. 
Watch for any breakout or failure is recommended before any buy entry.

Overall short term market is bearish as for now... :-(

Good Luck!

Thursday, August 06, 2015

Ringgit Fighting A Double Edged Sword

KUALA LUMPUR: Declining oil prices coupled with China's struggling economy have largely contributed to the depreciation of the ringgit, economists said. 

Malaysian Rating Corp Bhd chief economist Nor Zahidi Alias said the crude oil price, which dipped to US$50 per barrel recently, did not augur well for the Malaysian economy. 

"Declining oil prices sparks speculation of lower government revenue, hence larger-than-initially anticipated budget deficits," he told Bernama. 

Lower oil prices have also exerted pressure on Malaysia's external trade which has recorded a negative growth in the first five months of this year, he said. 

This would in turn, trims the country's current account surplus and triggers concerns over the possibility of "twin deficits", he said. 

"Malaysia's gross domestic product growth for 2015 may also be adversely affected if oil prices remain low throughout the year, inducing additional capital outflows, especially if portfolio investors become less sanguine about the prospects of corporate earnings," he added. 

As for China, Zahidi said the sluggish economic condition would have a negative impact as it might dampen demands, resulting in a decline in imports from the country with 1.4 billion people. 

China remains Malaysia's largest trading partner with total trade of RM85.83 billion for the period January-May 2015 and hence, Malaysia's economy could still feel the heat of the slowdown, he said. 

Echoing the sentiment, Kenanga Research economist Wan Suhaimie Saidie said the bias for the ringgit was still on the downside in the short- to medium-term.

"We expect the ringgit's volatility to subside and stabilise around RM3.65-RM3.75 by year-end," he said, adding that the adverse impact of the Goods and Services Tax (GST) is expected to stabilise by year-end. 

On the external front, he said the global economy, led by the US, is expected to improve by year-end, with the start of the US Federal Reserve's rate hike, while the European Union and China' economy stabilise. 

Another analyst said there should be more efforts directed at further enhancing the economic fundamentals and diversifying into non-oil based revenues. 

"Although the implementation of the GST is a good start, there should be more efforts (directed) towards this," said the analyst who requested anonymity.

He said it would take at least one year for a country to gain the full benefit of any new tax regime such as the GST. 

Malaysia implemented the GST at the rate of 6% on April 1, joining 159 other countries, in the quest to provide a more transparent and systematic tax system. 

Prime Minister Datuk Seri Najib Razak, had on June 6, said that the slumping oil prices could have sent Malaysia into an economic crisis had the GST not been imposed. 

He said the new tax regime helped broaden the country's revenue stream to avoid a high reliance on oil revenues. 

A chief economist from research firm, who also wishes to stay anonymous, said the government should also instill more confidence in the market following recent changes in the country's political climate. 

Asli Centre Public Policy Studies chairman Tan Sri Ramon Navaratnam said the present political problems should not detract the government from paying greater attention and showing greater political will by taking the "bull by the horns". 

The government should regain the people and investors' confidence, he said.


Tuesday, July 28, 2015

S&P Reaffirms Malaysia's "A-" Rating, Stable Outlook

PETALING JAYA: Standard & Poor's Ratings Services (S&P) has reaffirmed Malaysia's long-term foreign currency sovereign credit rating at "A-", with a stable outlook, reflecting the country's country's strong external position and considerable monetary flexibility.

This comes a month after Fitch Ratings upgraded Malaysia's outlook to stable and maintained its credit rating at "A-" and just days after BNP Paribas had criticised Fitch on its Malaysia centric assessments. BNP Paribas had said that Malaysia is at risk of a "multi-notch downgrade" in sovereign credit rating due to the country's credit position.

S&P however stressed that the rating is based on the assumption that the political implications of 1Malaysia Development Bhd (1MDB) investigations will not interfere with sound policymaking. It believes that corruption allegations involving 1MDB will not impede current policy flexibility and responsiveness.

"We view Malaysia as having a high degree of monetary flexibility. The central bank's track record in controlling inflation indicates strong monetary flexibility that helps absorb major economic shocks," it said, adding that Malaysia has a deep domestic bond market, compared with its peers', which reduces its reliance on external financing.

S&P said the ratings are also underpinned by Malaysia's strong external position, a result of years of current account surpluses.

"We believe this position can withstand a slowdown in the oil and gas sector over the next two years. Likewise, external indicators are likely to remain unchanged, given our assumption of continued healthy trade surpluses," it noted.

It estimates average annual increase in general government debt at 2.9% of GDP over 2015-2018 versus an average of 6% over 2009 to 2012, and the country's budget deficit to narrow toward a balance by 2020.

S&P said the government's measures to cut petroleum subsidies and introduce goods and services tax (GST) will ease its debt burden.

S&P said Malaysia's general government fiscal position also carries contingent risks from its public enterprises and financial sector, which include guarantees on debts and letters of support.

"Within our forecast horizon, we do not believe such contingent liabilities will materialise significantly," it opined.

S&P said Malaysia's public enterprises have diverse financial profiles--some with strong free cash flows and sizeable liquid assets that, in the past, have been used to support other parts of the public sector.

Although the high household debt levels pose some risks, it believes that is somewhat contained by a banking sector that is well capitalized and has a good regulatory record.

"Our bank industry country risk assessment for Malaysia is "4", with "1" being the strongest assessment and "10" the weakest," it added.

S&P said Malaysia's capital market exposure to sudden funds outflow due to a sharp rise in holdings of ringgit-denominated Malaysia government securities to 28% as at end-2014 by non-residents, is contained by its expectation of continued sound policymaking, floating exchange rate, high foreign exchange reserves, the presence of large domestic institutional investors, and the deep local capital market.

For 2015, it expects a weaker ringgit to boost exports of manufactured goods, and partly offset the impact of lower oil prices on Malaysia's energy exports.

"We project Malaysia's average annual growth in real GDP per capita will be just under 4% over 2015-2018. We expect exports of manufactured goods and growth in private consumption and investment to drive this expansion," it said.

Meanwhile, secretary general of Treasury Tan Sri Mohd Irwan Serigar Abdullah said in a statement yesterday that the reaffirmation of Malaysia's A- sovereign credit rating by Fitch and S&P is a testament to the government's continuous effort in ensuring sound macroeconomic fundamentals and its commitment to strengthening public finances.

He stated that S&P has expressed confidence in Malaysia's responsive and effective policy making.

"In this regard, S&P believes that issues surrounding 1MDB will not hinder the government's resolve to pursue economic and fiscal reforms," he added.