Wednesday, August 29, 2007

Ten Year Cycle of Market Crashes?

The market crash in 2007

The recent heavy sell-down on the bond and stock markets caught a lot of retail and institutional investors by surprise. What appeared to be a haven in investment like the bond market was still subject to panic selling from institutional investors.

We believe the crash in the bond market was mainly due to the withdrawal of some foreign funds. As a result of tight liquidity, unwinding of yen carry trade and potential high losses in some hedge funds, some foreign funds might have been forced to withdraw their investments from the Asia-Pacific market.

The plummet in our stock market was mainly due to the fear of sharp drops in the US, Hong Kong, Singapore, South Korea and Japan markets.

Even though our banking institutions were not really affected by the US subprime issues, the international contagion and fear of more crashes, margin calls and panic selling from retailers caused heavy losses on Bursa Malaysia.

Nevertheless, the magnitude of our losses was far less than those in the regional markets.

The market crash in 1987/8

The market crash in October 1987 was partly attributed to strong market performance of most markets during the first nine months of the year. For example, the US market experienced more than 30% increase during the nine-month period.

However, from Oct 12 to 16, the Dow Index tumbled by 9.5%. On Black Monday of Oct 19, it plunged 22.6%, or 508 points, within a day. It was the largest single fall since 1929, in both absolute and percentage terms.

In Malaysia, the KL Composite Index (KLCI) tumbled by 12.4% on Black Monday. As a result of the overnight crash in US, the KLCI plunged another 15.7% the next trading day.

The market crash in 1997/8

The Asian stock market crash of 1997/98 began with a currency crisis in July in Thailand and quickly spread to neighbouring nations. One by one, overheated markets crashed in Thailand, Indonesia, Malaysia, the Philippines, Hong Kong, Singapore, Taiwan and South Korea. This was mostly due to the rapid industrialisation in these countries.

The US market was affected by the turmoil in Asia. Its share prices began to collapse at the beginning of October 1997. On Oct 27, the Dow Index tumbled by 554 points, or 7.2%, within a day. However, it recovered by recording a rise of 337 points the next day.

In Malaysia, the KLCI tumbled from 1,231 points in the beginning of 1997 to the low of 262 on Sept 1, 1998, representing a total percentage drop of 78.7%.

Comparing the three market crashes, the KLCI suffered its biggest daily drop of 21.5% on Sept 8, 1998. The crashes in 1997/8 and 1987/8 were also far more severe than our recent market crash.

We are not too sure whether we have seen the worst of the crash in 2007. However, the sell-down has caused a big disruption in our uptrend momentum. It appears to be quite difficult for the KLCI to touch the recent peak of 1,392 again.

Any market rebounds may prompt fund managers to continue offloading their equity exposure. Most of big losses in 1997/8 and 1987/8 happened in October.

As we can only know the actual exposure of the subprime issues for most of the US financial institutions when they report their third quarter results in early October, we are expecting some market volatility in that month.

Source: http://biz.thestar.com.my/

Saturday, August 25, 2007

Stock2Trade (ENCORP, EBWORX, GADANG)

ENCORP Buy only when price stay above 1.51-1.55.
Target 1.75-1.80. Support 1.30.


EBWORX

Buy only when price stay above 0.55.
Target 0.68 - 0.80. Support 0.43.


GADANG
Buy only when price stay above 1.08.
Target 1.32, 1.52. Support 0.98.


Do remember, we are now trade stock on rebound. There will be a sharp pullback once the traget is hit. Most of the market player still very cautions due to the subprime and credit crunch issues. All the best!

Read News And Do Your Home Work!

Recorded posting by showers and lowyat82. Good advice! I myself also using such methods. Reading news and study the counter in terms of FA and TA (but I mostly focus on TA). You can decide to buy or sell in two senario: 'sell on news/weakness' or 'buy on news/strength'.


Happy Trading!

Thursday, August 23, 2007

Inverted Head and Shoulder Pattern

Most of the counter today breakout from the inverted head and shoulder pattern formed between 06-Aug-07 till yesterday. Below is the sample stock for the IH&S pattern (JAKS and L&G)


Saturday, August 18, 2007

Stock2Trade : Strong Upside Detected!

I has been monitoring a few stocks during the sell-down periods. It came out a few list of stocks that has potential to move higher in coming weeks or months. Do monitor them.


L&G, RBLAND,
JAKS, HDISPLY
TIMECOM, KPS,
AMDB, KHSB,
KONSORT, MMM


All the best!

KLCI : 1141 Bottom?

Which correction pattern KLCI is heading? Can any one comments?
Well I would say KLCI yet to find the bottom!
ZigZag and Triangle is Prefered (downward bias).
Good Luck!

Another Day of Heartbreak for Investors!

PETALING JAYA: There was no solace for heartbroken investors yesterday.

Markets tumbled across the region on the last trading day of the week, with the Nikkei-225 index losing a massive 5.42% to 15,273.68, the Hang Seng Index closed 285.26 points, or 1.4%, lower at 20,387.13, the Kospi index fell 53.91 points, or 3.1%, to 1,638.07, while the Shanghai Composite Index closed down 108.87 points, or 2.28%, at 4,656.57.

In overnight trading Thursday, the Dow Jones industrial average, which was down as much as 343 points at one point, managed to rebound to close only 15.7 points lower at 12,846.

On the home front, the benchmark KL Composite Index (KLCI) plunged 16.06 points to 1,191.55 after falling 80.73 points over the previous two consecutive trading days.

Down 66.05 points shortly after the opening of the afternoon session, the KLCI bounced back from oversold territory.

Analysts and investors said the drop was again mainly due to external factors, with many Malaysian corporates continuing to be backed by strong earnings.

TA Securities chartist Stephen Soo attributed the drop in share prices on Bursa Malaysia, especially in the morning, to big “margin selling” as well as “programme selling” by US hedge funds.

“We feel that it is already overdone,” he said.

While the market would continue to be volatile, Soo said it would hold at the 1,138 and 1,078-point support levels.

It was too early to call a bear market, he said, adding: “The bull is injured but the long-term uptrend is still intact.”

An economist at a local bank-backed brokerage said the US lending woes would take some more time to unwind.

“It is not yet the end-game for a couple of weeks,” he said.

Capital market problems aside, he said the world economy remained strong.

In its April 2007 World Economic Outlook report, the International Monetary Fund had revised upwards its projections for global gross domestic product growth for 2007 and 2008 to 5.2% each from 4.9%, he said.

With global markets continuing to search for liquidity as risk-averse investors switch to cash and op out of the credit creation system, the US Federal Reserve (Fed) made an unscheduled rate cut yesterday.

Bloomberg reported that the Fed reduced the rate at which it made direct loans to banks, known as the discount rate, by 0.5 percentage point to 5.75%.

It, however, held the benchmark federal funds rate unchanged at 5.25%.

Meanwhile, the yen hit 111.6 to the greenback yesterday, its highest in nine years, largely attributed to unwinding of yen carry trades.

An economist at a local brokerage had said that the Bank of Japan (BoJ) might not intervene on the rising yen.

It is likely the BoJ is betting on domestic investors to trade down the yen by buying US dollars as happened in previous occasions of strong yen appreciation.

Friday, August 17, 2007

Fed Cuts Discount Rate

Text of Federal Reserve Policy Statements

Text of Federal Reserve statements Friday:

Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward. In these circumstances, although recent data suggest that the economy has continued to expand at a moderate pace, the Federal Open Market Committee judges that the downside risks to growth have increased appreciably. The Committee is monitoring the situation and is prepared to act as needed to mitigate the adverse effects on the economy arising from the disruptions in financial markets.

Voting in favor of the policy announcement were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Richard W. Fisher; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Michael H. Moskow; Eric Rosengren; and Kevin M. Warsh.

To promote the restoration of orderly conditions in financial markets, the Federal Reserve Board approved temporary changes to its primary credit discount window facility. The Board approved a 50 basis point reduction in the primary credit rate to 5-3/4 percent, to narrow the spread between the primary credit rate and the Federal Open Market Committee's target federal funds rate to 50 basis points. The Board is also announcing a change to the Reserve Banks' usual practices to allow the provision of term financing for as long as 30 days, renewable by the borrower. These changes will remain in place until the Federal Reserve determines that market liquidity has improved materially. These changes are designed to provide depositories with greater assurance about the cost and availability of funding. The Federal Reserve will continue to accept a broad range of collateral for discount window loans, including home mortgages and related assets. Existing collateral margins will be maintained. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York and San Francisco.

On the Net: http://federalreserve.gov/

Thursday, August 16, 2007

KLCI : Strong Rebound Is Due

In order to continue a downward momentum, a strong rebound is needed. Our KLCI has reach FR 61.8% today. A sharp sell down - impulse wave starting from 1390 till 1200 has taken place (red line) which should be the area of stop place* for EW Zigzag (5-3-5 : A,B,C) correction pattern in bearish market. Well, sooner or later the rebound wave will going to take place in order to form a B pattern (green line) and could reach to 1300 - 1320. Once this level is reach, beware of C pattern which can also be a sharp sell-down impulse wave and could reach to 1090 - 1100 (the wave will depend later on overall market sentiment). Good Luck!

Monday, August 13, 2007

KPS vs MRCB

KPS KPS is trending counter.
During sell down the price still stay above 14EMA.
This is good sign that the price will recover faster.
My target is 3.20, 3.50. Support 2.72.

MRCB

Today news about PORR project take over by MRCB is just a little spark. From the chart, the price still trending below 40EMA. This suggest further downtrend is possible for MRCB.
In near term, I would avoid this counter until the price can taken out RM3.00 convincely.

Asian Has Liquidity! Malaysia Still Strong!

Malaysia Maintains 6.0 Percent GDP Growth Forecast, Says Abdullah
http://www.biznewsdb.com/english/newspage/newspage.asp?ID=7081382&file1=7&bulan=08&kw=wwqq

Asian Central Banks Refrain From Extra Cash Injection
http://www.biznewsdb.com/english/newspage/newspage.asp?ID=70813115&file1=7&bulan=08&kw=wwqq

Malaysia Has Sufficient Liquidity To Withstand US Subprime Impact
http://www.biznewsdb.com/english/newspage/newspage.asp?ID=7081384&file1=7&bulan=08&kw=wwqq

Saturday, August 11, 2007

Scary Headline, Does It Really Matter?

FKLI Intraday EOD: 10-Aug-07

I go LONG at 1235.

Credit Issues Widespread ! Stock Plunge !

Asia central banks join bid to calm money markets

HONG KONG/SINGAPORE, Aug 10 (Reuters) - Central banks from Tokyo to Sydney injected extra cash into banking systems or pledged to do so on Friday, as Asia joined a global campaign by monetary authorities to calm panicky credit markets.

The Bank of Japan and the Reserve Bank of Australia added more money than usual to prevent short-term rates from spiking, albeit on a much smaller scale than the European Central Bank's (ECB) record 94.8 billion euro injection on Thursday.

"What the central banks are doing is a concerted effort to inject liquidity. And the worrying thing is that they do that when the system is not functioning the way it should," said Jimmy Koh, a currency strategist at United Overseas Bank.

At the same time, Malaysia, Indonesia and the Philippines intervened in markets to support their currencies by selling dollars, traders said, as escalating credit market worries hit risky assets around the region.

The moves came after the ECB pumped a record amount of cash into Europe's money markets to make sure that European banks had adequate short-term funds for lending. The U.S. Federal Reserve followed suit on a smaller scale.

The trigger was news that France's biggest-listed bank, BNP Paribas (BNPP.PA: Quote, Profile , Research), had frozen $2.2 billion worth of funds hit by U.S. subprime mortgage woes.

Investors fear the damage caused by the U.S. subprime meltdown runs deeper than originally estimated and will put an even tighter squeeze on credit markets worldwide.

"This month is going to turn out to be a horrific month for hedge funds in particular," said Jay Moghe, managing director at Opes Prime Asset Management in Singapore.

"Aside from the subprime exposure that a minority of funds have, the entire industry including the staple long/short managers will be affected adversely by the vicious volatility.

"A Bank of Japan official said the bank injected funds at its regular money market operation on Friday due to a slight rise in the benchmark overnight call rate.

The bank for the world's second-largest economy offered to supply 1.0 trillion yen ($8.45 billion) in funds. Traders said the amount was at the higher end of market expectations, but was not a major surprise.

The Reserve Bank of Australia (RBA) on Friday added more than twice the usual amount of money into the banking system, injecting A$4.95 billion ($4.19 billion) in its regular morning money market operation.

The injections were done to ensure there were enough funds for money markets to operate smoothly and to prevent short-term rates from spiking. Analysts saw the measures as part of central banks' mandate to ensure markets function properly and did not represent a shift in monetary policy.

While no reports had surfaced in Asia of a drying up of credit markets on par with the problems in Europe, financial markets took a battering.

Asian stocks slumped across the board and the yen extended its gains as investors dumped riskier assets following a rout in global markets sparked by a flare-up in credit jitters. The flight to safety shored up Japanese government bonds (JGBs) and U.S. Treasuries, sending yields down.

Elsewhere in the region, central banks pledged to open the tap on the first signs of a seizure in money markets.

The Bank of Korea's head of monetary policy, Jang Byung-wha, told Reuters on Friday the central bank was ready to take steps to maintain stability in the local financial system, such as supplying extra funds, if a credit crunch arises.

South Korean financial policy makers plan to hold a meeting later on Friday to assess the current financial market situation.

Singapore's central bank also said that it was ready to inject cash if needed, but noted it was sticking to its existing monetary policy.

"If there are liquidity bottlenecks, certainly we will come in to inject more liquidity. At this stage, the liquidity management is unchanged that we do not see any undue problems," Ong Chong Tee, deputy managing director of the Monetary Authority of Singapore, told a news conference.

Thursday, August 09, 2007

FKLI Intraday EOD : 09-Aug-07

Short or Long?
Well, I will look for opportunity to go long tomorrow.
Hope my assumption is right.

Monday, August 06, 2007

Stock2Trade (JAKS, KHSB)

JAKS
Make sure the support 0.80 is strong.
If this support is strong you can safely buy in here.
Short-term target 1.45.


KHSB
Support 0.85-0.90. Buy only if this level can hold.
Short-term target 1.50.
Happy Trading!

FKLI Intraday EOD : 06-Aug-07

Looks like MACD going to have golden cross soon.
Possible can go Long tomorrow.

Saturday, August 04, 2007

FKLI Intraday EOD : 03-Aug-07

Short all the way down! Happy trading!

KLCI - Very Weak!

KLCI struggle to stay above 28.6% FR for the 2nd time (above 1320).
The 1st time hit was in May 2007. If this support cannot hold well,
high possible the next dive will be at 38.2% FR (1278).
This is our last hope for bull to defence the bear attack.
The bull will die once 38.2% is breakdown! Hope this will not happen.
All the best to our market!