DJIA is in RED now:

12,246.52 -23.65 -0.19%

DJIA closed the day with:

12,378.61 +108.44 +0.88%

Congress Unveils Economic Stimulus Deal

Congress, Treasury Secretary Announce Deal on Tax Rebates, Business Breaks to Boost Economy

URL: http://biz.yahoo.com/ap/080124/economy_stimulus.html

Big cap stocks among the worst hit

PETALING JAYA: The big cap (large capitalisation) stocks, which are probably the bluest of the blue chips, are among the worst hit by the recent selling wave that swept across the globe.

The heavyweights' sharp fall well reflected the investment risk in equities. Even the well-managed companies can succumb to sell-down when sentiment turns sour.

"It is not a surprise the big cap stocks fell that much. Their movements are actually at the mercy of the foreign fund managers," said a dealer.

Foreign fund managers tend to invest in counters that have sizable market capitalisation as well as high free float; thus, their selections mostly focus on heavyweight counters like Sime Darby Bhd, Telekom Malaysia Bhd ™, IOI Corp Bhd and Malayan Banking Bhd (Maybank).

In other words, big cap stocks will be the main beneficiaries when foreign money is pouring into the local market, and vice versa when the foreign funds exit.

"When redemptions are heavy, the most liquid stocks get sold down and, in parts of Asia, large caps can get called on for 'national service' that compromises their profitability," said Citi Investment Research in a strategic report.

Among the big cap stocks, Sime Darby was the biggest loser in the recent market meltdown, followed by Bumiputra-Commerce Holdings Bhd and IOI Corp.

Sime Darby tumbled nearly 16% from its peak of RM13.30 recorded on Jan 11 to RM11.20 on Tuesday.

The share price of both Bumiputra-Commerce and IOI Corp sank 14% from their recent heights of RM12 and RM8.55 respectively compared with the 10.7% drop on the KL Composite Index to 1,354.5 points from the high of 1,546.2 points.

Maybank and TM were not spared the massive selling. Maybank slid 12.5% from the recent record of RM12.80 on Jan 7, while TM fell 12% from RM12.50, the highest since December 2000.

So, is it time to own these big cap blue chips after the sharp drop?

Analysts and fund managers polled by StarBiz warned that the selling might not have dried up although the regional markets recouped their losses yesterday after the US Federal Reserve slashed interest rate by 75 basis points.

"The valuation of the big cap stocks is starting to look reasonable (after the big fall) but I won't say they are good bargains now," said MIMB Investment Bank head of equity research Pong Teng Siew.

Pong noted the plantation stocks, particularly the big ones, had been up excessively.

"I expect the crude palm oil price to ease a bit. The plantation stocks would continue to lead the fall," he added. Plantation stocks account for nearly 20% of the KLCI weighting.

"The participation of the local institutional funds would lend support to Bursa Malaysia. But they may not be strong enough to push the market to new highs," said Pong.

The backdrop of the gloomy economic outlook on the US may prompt global fund mangers to hold cash in anticipation of more fund redemptions to come when men in the street worry that their investments have shrunk in value.

This probably means that inflow of foreign funds is unlikely to be intensive before the dust settles in the US.

"We are concerned that funds will be diverted to the bigger north Asian markets, which would lead to valuation contraction for Malaysia even if fundamentals stayed intact," said Citi Investment Research.

It said with Hong Kong and China markets attracting the big funds, Malaysia could get very little attention until valuations become more attractive.

URL: http://biz.thestar.com.my/news/story.asp?f...06&sec=business

Asian bourses rebound strongly

PETALING JAYA: After two or three consecutive days of losses, Asian markets rebounded dramatically yesterday following the US Federal Reserve's surprise move to cut interest rates by 0.75% to 3.5% to avert a US recession.

Hong Kong surged the most, with the Hang Seng Index up 10.72%.

Another regional market that staged a significant recovery was Australia's Sydney market that posted its biggest daily gain of 7% in a decade during intra-day trading. The benchmark ASX200 Index closed up 225.5 points or 4.35%.

Singapore's Straits Times Index (STI) was up 4.08% contrasting with Monday's 6.03% drop. The STI was down 1.73% on Tuesday.

China's Shanghai and Shenzhen markets were both back in positive territory yesterday, up 3.14% and 4.76% respectively.

Other major regional market indices, Japan's Nikkei 225 and South Korea's KOSPI rose 2.04% and 1.21% respectively. However, Taiwan's Taiex Index remained down, closing 2.29% lower yesterday.

KSC Capital director of research Choong Khuat Hock told StarBiz the rate cut was "a step in the right direction" but added that problems in the US credit market would persist at least for the first six months of the year.

"With major US banks still looking to re-capitalise (after major write-downs), the credit crunch is not over.

"At this time it is sensible to try to boost the economy with stimulus packages and rate cuts, but it will still take some time (for the US market) to recover," Choong said.

Although the benchmark Dow Jones Industrial Average (DJIA) ended Tuesday down 128.11 points, or 1.1%, to 11,971.19, the index had reacted positively to the rate cut, recovering from a more than 400-point loss at the start of the trading day.

Meanwhile, government officials in Japan, South Korea, Thailand and Australia hailed the rate cut as a stabilising move for the global economy.

According to Choong, with major Asian market indices plunging up to 7% to 8% as the US market closed on Monday for a public holiday, the less than 2% drop in the DJIA meant that losses in the Asian indices had been excessive.

Thus the rebound in Asian markets yesterday had been to retrace to levels more in line with the DJIA's.

Bloomberg quoted US fund managers who welcomed the rate cut as a sign that the Fed was willing to intervene to stabilise markets, but did not see it as enough in itself to ward off a US recession.

Alan Gayle, senior investment strategist at Trusco Capital Management in Richmond, Virginia, was quoted as saying that the Fed "is playing hard defense".

"The Fed is trying to assure the markets that they will do whatever they can."

Bloomberg quoted Elizabeth Dater, chief investment officer at AG Asset Management, which oversees US$3bil in New York as saying, "Concern is growing that monetary stimulus in its own right won't be enough.

"Monetary stimulus can add liquidity and confidence to lending institutions on the financial slide, but what we're worried about here is a consumer-led recession."

Aseambankers economist Saifuddin Morat told StarBiz while the Fed's rate cut would boost global markets, he did not see it as being enough to ward off a recession.

"The subprime problem is too big to be solved by a 75-basis points rate cut," he said. The losses from US subprime-related instruments are estimated at about US$300bil.

URL: http://biz.thestar.com.my/news/story.asp?f...00&sec=business

Most Asian bourses extend gains

PETALING JAYA: Malaysian stocks rose yesterday after a surprise interest rate cut in the United States helped calm nervous investors. Most Asian bourses extended gains for a second day, except those in Hong Kong, India, Thailand, Pakistan, Vietnam and Sri Lanka.

The KL Composite Index (KLCI) leapt more than 50 points or 4% on the opening bell after trade resumed following a one-day break. The benchmark index ended 28.87 points, or 2.13%, higher at 1,383.35 points.

Dealers said trading sentiment was cautious, as the market kept a wary eye on overseas developments.

"Although the KL Composite Index dropped 4.27% year-to-date, it has fared better than its Asian counterparts," said Bursa Malaysia CEO Datuk Yusli Mohamed Yusoff.

In comparison, Singapore's Straits Times Index dropped 11.99%, Japan's Nikkei 225 Index 14.47%, Hong Kong's Hang Seng Index 15.36%, China's Shanghai-A Index 10.33% and India's BSE Sensex 30 Index 15.11%.

In Hong Kong, the Hang Seng Index gave up its early gains to close 2.3% lower at 23,539 points in volatile trading. The index had risen to just shy of 25,000 points less than two hours before the closing bell.

In Singapore, the Straits Times Index jumped 2.3% on news that China signed an agreement to allow its banks to channel funds into the Singapore stock market.

Elsewhere, banking stocks continued to head north to lift share indices in Japan, South Korea and Australia.

In New York, Reuters reported that the Dow Jones industrial average was up 83.00 points, or 0.68%, at 12,353.17. The Standard & Poor's 500 Index was up 12.10 points, or 0.90% , at 1,350.70. The Nasdaq Composite Index was up 41.68 points, or 1.80%, at 2,358.09.

In Paris, Bloomberg reported that European stocks gained the most since 2003 as talks to bail out bond insurers, rising profits at Nokia Oyj and China's economic growth boosted expectations that equity markets would weather a slowdown in the United States.

URL: http://thestar.com.my/news/story.asp?file=...1469&sec=nation

Asia Markets Climb on Upbeat Wall Street

Asia Markets Rise, Heartened by Wall Street's Advance, US Jobs Data and Stimulus Package

URL: http://biz.yahoo.com/ap/080125/world_markets.html

The country's annual GDP eases to 11.2% in 4th quarter

BEIJING: China grew 11.4% in 2007, the fastest pace in 13 years, but it is headed for a modest slowdown this year as global demand weakens and credit curbs to cap inflation ripple through the economy.

The softening was evident in figures issued yesterday showing annual gross domestic product growth eased to 11.2% in the fourth quarter from 11.5% in the July-September period and 11.9% in the second quarter.

"If economic growth sees a mild slowdown, that would be within our expectations," Xie Fuzhan, head of the National Bureau of Statistics, told a news conference.

Still, 2007 marked the fifth consecutive year of double-digit growth for China, which is on course to overtake Germany as the world's third largest economy this year and is growing in importance as a locomotive for global growth.

"The average growth over the past five years has been 10.6% - that's really extraordinary. The ups and downs each year have also been limited - that's also extraordinary," Xie said.

As global credit woes stemming from the US subprime crisis drag down demand for China's exports, which contributed about a third of last year's increase in GDP, economists expect China's growth this year to dip to around 10%.

That would match the average growth rate that China has enjoyed since it embarked on market reforms in 1978 and would maintain its status as the world's fastest growing major economy.

If the economy slows more than expected, economists are in no doubt that Beijing will unwind some of the restrictive policies it has rolled out over the past year.

"China may relax its tightening after March if domestic consumption is not as strong as expected and if investment drops sharply," said Zhao Qingming, an economist with China Construction Bank in Beijing.

The ruling Communist party, economists say, wants above all to avert an economic hard landing that could sap its legitimacy as it prepares to show off China to the world in August's Olympic Games.

"I'm positive about China's economy this year,'' Xie said, adding: "The government could adopt a number of policies to offset the negative impact that could come from a slowing US economy.'' - Reuters

URL: http://biz.thestar.com.my/news/story.asp?f...45&sec=business

U.S. Stocks Head for Strong Open

Stocks Head for Higher Open After 2 Days of Rallies; Microsoft Earnings Add to Improved Tone

URL: http://biz.yahoo.com/ap/080125/wall_street.html

DJIA starts the day:

12,395.84 +17.23 +0.14%

DJIA closed the day with:

12,207.17 -171.44 -1.38%

Stocks Fall, Giving Up Early Gains

Stocks Cap Volatile Week With Sizable Decline; Microsoft Results Help Tech Index

URL: http://biz.yahoo.com/ap/080125/wall_street.html

This post has been edited by David83: Jan 26 2008, 10:41 AM

Thanks for the correction, cherroy.

I think the ctrl+c and ctrl+v doesn't work well.

There's also last minute sell-off in European stocks.

Prospect of pre-election rally gains momentum

PETALING JAYA: Speculation that the general elections will be held after the Chinese New Year celebrations from Feb 7 to 21 and the recovery in the local bourse have somewhat increased the prospect of a pre-election rally.

The KL Composite Index (KLCI) climbed for the second consecutive day yesterday, gaining nearly 50 points, or 3.8%, to 1,405.4 points from a low of 1,354.5 points on Tuesday.

At stockbroking firms' viewing galleries, seasoned stock traders and punters were betting on "politically-linked'' counters to ride on the anticipated pre-election rally when the market recoups its losses.

Nonetheless, after the recent market mayhem, the stale bulls are of the opinion that news flow from the United States plays a critical role in local sentiment.

Worries over the state of the US economy had set off the panic button, Phillip Capital Management Sdn Bhd chief investment officer Ang Kok Heng said.

"People will start thinking of an early election once things stabilise in the US," he added.

Some dealers said the pre-election rally had in fact started when the KLCI breached the 1,500-point level early this month, although the external shocks in recent weeks had stopped the rally.

Talk of an election has been overshadowed by the US subprime loan crisis which raised fears America would fall into recession and would hammer world economic growth, resulting in the rout in global financial markets recently.

"An imminent general election should provide a buffer, but cannot fully immunise against an external selldown," Aseambankers Malaysia Equity Research said in a report.

It said that in the past two general election, the KLCI recorded returns of over 9% in the two months before the polling date and generally "stayed firm in one or two months after the elections".

The commonly known politically-linked stocks are Malaysian Resources Corp Bhd, UEM group, Scomi Bhd, KUB Malaysia Bhd, MMC Corp Bhd and DRB-HICOM Bhd, Tradewinds Corp Bhd and Tradewinds Plantations Bhd.

The list also includes Putera Capital Bhd, Kumpulan Perangsang Selangor and Kumpulan Hartanah Selangor.

Singular Asset Management Sdn Bhd chief investment officer Teoh Kok Lin expects growing speculation of early polls to boost local sentiment.

"But historically there has not always been a rally prior to the elections," he said.

He added that investors should focus on companies' fundamentals instead of betting on event-driven counters.

OSK Investment Bank head of research Kenny Yee concurred that there was no strong correlation between a general election and a stock market rally in the past four elections.

He said it was a hard call to make whether there was a pre-election rally or not, given that the recent heavy selling had somewhat dampened sentiment.

Some analysts warn that punting on pre-election could be risky as in the past many investors had gotten their fingers burnt for not exiting on time.

URL: http://biz.thestar.com.my/news/story.asp?f...60&sec=business

Asian Markets Drop, Tracking Wall Street

Asian Markets Plunge on US Recession Fears; Shanghai Index Drops 7.2 Percent

URL: http://biz.yahoo.com/ap/080128/world_markets.html

European markets open in RED.

Mixed signals for KLCI

MAIN BOARD

The KL Composite Index (KLCI) sank on a broad sell-off in early trading last week as traders panicked and threw in the towel following huge losses in Asian markets and bearish sentiment linked to US recession.

A trend-change occurred after the unexpected mid-week holiday break and helped lift the index along with the strong recovery rallies in US and Asian markets. The KLCI regained 65.4 points from its intra-week low and closed with sharp losses.

The KLCI fell from a week's high of 1,436.29 points and set a four-month low at 1,340.29 in early trading and then rebounded strongly to finish sharply lower at 1,405.4, down 34.09 points or 2.37% from a week earlier.

Most of the Top 10 index-linked stocks recovered from the week's sell-off lows and ended with minor losses.

Maybank, IOI Corp, Telekom, Tenaga Nasional, Bumiputra-Commerce, Genting, Petronas Gas and KL Kepong settled in the negative column and contributed to a combined 16.36-point drop in the index.

Sime Darby and Public Bank closed in the plus-territory and added a total 7.18 points to the KLCI.

There was indeed a big rush to sell during the meltdown. Volume for the first two days of the week stood at 729 million shares. Volume for the holiday shortened four-day trading week soared to 1.39 billion from 1.37 billion shares in the full trading week previously. The daily average volume increased to 346.70 million from 274.89 million shares a week earlier.

The weekly candlestick chart closed on a positive note. A long lower shadow candle emerged in the weekly chart. This is typically a bullish signal when it is formed after a sell-off low.

After having seen the extreme volatile swings last week, I am sure this question is in most traders' mind: Who is in charge now?

We have another seven trading days before the Boar leaves the scene. During the Chinese Lunar Year of the Boar, there were three significant correctional moves.

The February 2007 two-week retracement erased 193.76 points or 15.11% and the late July 2007 four-week correctional move removed 250.6 points or 18% from the index. Both these technical pullbacks were followed by the emergence of fresh bullish momentum that helped lift the index to new highs.

The downward correction over the past two weeks took away 184.4 points or 12.1% when the KLCI slipped to a low of 1,340.29 points last Tuesday.

Our technical reading shows that we are not likely to see these types of bullish performance this time around. The index would find it very tough to rally and establish new historic highs.

Considering the fact that the index is now only about 120-odd points away from historic high, there are strong technical reasons to believe that the two-week-old downward trend is not over.

Based on chart, the KLCI has a vital support for the immediate term at the 1,380-1,370 levels. The overall trend would turn ugly upon the breaching of these levels. A minor chart support is now pegged at 1,330-1,310.

Resistance for the immediate term is now seen at the 1,425-1,430 levels. A minor chart resistance now stands at 1,455-1,465. Failure to push above these two levels in an upward rally attempt would likely set off fresh waves of bearish pressures.

The daily technical indicators closed the week mixed and indicated the index was not completely out of its bearish phase.

The daily stochastic triggered the buy signal on Jan 24 and remained positive at Friday's close. Both the oscillators per cent K and D ended higher and out of the bearish extended move zones at 32.15% and 19.22% respectively.

Analysis of the stochastic shows the index is in a recovery mode following last week's sell-off.

The daily Money Flow Index (MFI) rebounded from its negative zone and closed sharply higher at 40.60 points. Analysis of the MFI indicates that strong accumulation occurred during last week's selldown.

The main trend-tracker, the 3- and 7-week exponentially smoothed moving-average price lines (ESA-lines), finished the week in negative divergence and shows the main trend is still bearish.

The short-term trend-tracker, the 3- and 7-day ESA-lines, ended in positive convergence and signalled the short-term trend was still bullish.

The 5-day RSI rebounded from its oversold territory at 12.11 points and closed higher at 42.46. Analysis of the RSI indicates the index's immediate-term underlying strength is positive.

URL: http://biz.thestar.com.my/news/story.asp?f...72&sec=business

US Stocks Tilt Lower After Global Selloff

Wall Street Stocks Poised for Opening Losses Following Selling on Overseas Exchanges

URL: http://biz.yahoo.com/ap/080128/wall_street.html

DJIA starts the day with:

12,177.83 -29.34 -0.24%

Stocks Rise on Rate Cut Hopes

Wall Street Advances After Big Drop in New Home Sales, Disappointing Earnings

URL: http://biz.yahoo.com/ap/080128/wall_street.html