Daily Commentaries 29th Sep 06

Yesterday, the market again made another attempt at the 970 pts before succumbing to some profit taking activities as volume remained moderate. For today, MRCB announced RM391m worth of construction and development contracts in the Middle East. Supermax explained that its merger plans with Seal Polymer were called off because both companies could not agree on the price. The Lion Group is restructuring its holdings of the Parkson retail business under Amalgamated Containers although this will still be almost completely owned by Lion Diversified. And finally ECM Libra Avenue is planning a VSS to cut 23% of its workforce. Another announcement that should affect the market is that UMNO elections have been postponed till after the general elections. This news will likely remove uncertainties on the country’s leadership going into the general elections. With US markets posting moderate gains yesterday, we expect the KLCI to make another attempt at the 970 resistance level. Initial support is at the 966 pts level.

Let It Go

Have you ever owned an older car and sunk a lot of money into it? First the transmission goes out, and you figure that rather than buying a new car, you would save money if you repaired it, but then it needs a valve job. It doesn't end there. You replace some of the wiring and then it hits you: You would have been better off buying a new car, but at this point, you've sunk so much money into your car, you can't seem to part with it. This same phenomenon happens while trading, We may put a great deal of time and effort into a trading strategy or method and we just cannot seem to give it up no matter how much we have lost. Behavioral economists call this malady the sunk cost effect.

The sunk cost effect is most insidious while holding on to a losing trade. Suppose you were holding a position that had lost 20% of its value for the last four months. Your trading plan may dictate that you close the trade, but you do not close it. Instead, you can't believe how wrong things are going. You think of how much time and effort you put in studying the fundamentals of the company, and watching the markets to find the right time to enter. You hold on and things get worse. At some point, your thinking is fatalistic and you figure, "Why stop now? What else do I have to lose?"

It's easy to fall for the sunk cost effect. Humans hate to experience a loss or setback of any kind, and when they do, they increase their commitment to a losing course of action because a great deal of time, effort, and/or money has been spent. But when this happens, it is better to just accept the setback, cut your losses and move on.

It's hard to admit we were wrong, though. It's like the old car you dump money into. You feel like you have to justify the time and effort you put into a losing course of action, and rather than admit you are wrong, you just put in even more time, effort and money. In the end, however, it is vital to admit you've made a mistake and move on before the situation compounds into an even bigger problem.

One of the best ways to beat the sunk cost effect is to allow yourself to make mistakes. The sunk cost effect is especially powerful when we believe that we must be perfect. But we don't need to be perfect. We can be human. This is where a strong independence streak is useful. Independent people don't care what anyone else thinks. When we feel we must justify our actions, we usually are not trying to justify our decisions for ourselves. Usually, we are trying to justify our actions to someone else. It may be friends, family, or even some undefined social standards we feel we absolutely must obey. But in the end, the only standards that you must meet are your own. So if you want to be a fallible human being, you have the right. Once we realize that we do not have to justify our mistakes, it's easier to accept a setback and move on.

Don't waste time justifying your mistakes. Trying to justify your behavior will gnaw at you, and if you are not aware of it, and are not trying to control it, you will have a tendency to get stuck and stagnate. As you trade, be aware of the powerful influence of the sunk cost effect. Try to consider whether or not sunk costs are influencing your decisions. Don't try to justify a losing course of action. Let it go and move on to the many trading opportunities that are waiting for you out there.

Quote Of The Day

Never follow the crowd.

Bernard M. Baruch

Daily Commentaries 28th Sep 06

The market saw another day of lackluster trading, inching up 0.66 points. Selected blue chips like CAHB saw some interest while retail investors continued to be on the sidelines. On the corporate forefront, sources say that Sime Darby has been given the green light to acquire Ramunia while Ranhill is looking to raise US$250m to finance and refinance existing debt obligations. Proton may be assembling Chery vehicles next year should discussions with the Chinese party conclude and Bursa has deferred the re-introduction of short selling by a month. Tanjong announced its results last night that came in below our and market expectations while Sapuracrest and Glomac also disappointed. We again expect the listless trading stance to prevail today considering the lack of fresh leads and despite modest gains on the Dow and regional markets. To note, oil prices remained relatively firm last night while CPO futures extended their gains. Today’s support remains at 957 while resistance is at the 966-970 level.

Daily Commentaries 27th Sep 06

The KLCI closed positive +0.22 points, off its low of 960.85 yesterday. As anticipated, BNM has kept the OPR unchanged at 3.5% and inflation is expected to decelerate. MAS announced some management changes to enhance the company’s performance while the Minister of Energy, Water & Communications has called for a stop to the speculation on the Power Purchase Agreement, at least until the Energy Policy is concluded. Meanwhile, Maxis is heating up competition with plans to spend RM2.85bn until end-2009 to become the nation’s second telecoms provider. The M&A move by Kumpulan Hartanah Selangor and Kumpulan Perangsang Selangor may spur trading interest. On the capital market front, Khazanah is likely to issue a US$750m Islamic exchangeable bond, which could be converted into Telekom shares. The local market is likely to remain range bound despite the stronger performance of the Dow Jones overnight buoyed by growing confidence in the economy and declining oil prices. Support remains at 957 level.

Quote Of The Day

Energy and persistence alter all things.

Benjamin Franklin

That's My Trading Plan and I'm Sticking To It

When your money is on the line, it can be difficult to stay calm and rational. Many traders make trading errors and regret it later. There are many reasons for abandoning a trading plan. Some traders don't outline a detailed trading plan. They trade by the seat of their pants and when panic sets in, they act on impulse. Other traders cannot seem to follow their trading plans no matter what they do. And they can't understand why. Everything just seems to happen so fast; maintaining discipline seems beyond their control. One minute they are in a rational state of mind, and their objectives seem clear, but the next minute it seems as if they are in a state of panic. They don't know what to do. Have you ever felt this way?

As much as it seems like you may not have control over your impulses, you do. It's all a matter of gaining awareness, and taking precautions to stick with your trading plan. If you have trouble sticking with a trading plan, the first step to gaining control is admitting that you have a problem. When you anticipate that you have a problem sticking with your plan, you will see the need to make a concerted effort to develop strategies to stick with your plan. When you are aware of the problem, you can more easily take precautions that will help you maintain discipline.

If you want to seriously stick with your trading plan, outline the reasons why you want to stick with it. Usually, the best reason is to limit losses. If you have trouble sticking with a trading plan, you might write these reasons down on an index card and be ready to pull it out and read over the reasons when you feel the urge to abandon your trading plan. For example, suppose that you buy a stock at $50 and have a plan to sell at $52. When the price reaches $51, however, you have a strong urge to sell prematurely and lock in profits. When you feel the urge to sell, you may try to pull out your index card, and look at how much money you have lost or want to make. It is useful to repeat to yourself, "I must hold on and see what happens. Only if I stick with my trading plans will I make sufficient profits in the long run." By repeating these statements over and over again, you can slow down your thinking and stick with your plan.

When you think you may lose control and abandon your plan, try to slow down. Stop taking action, and remind yourself of the consequences of abandoning your plan. And try to calm down. If you can relax, slow down, and remember the reasons you want to maintain discipline, you will. And you will make more profits in the long run.

Daily Commentaries 26th Sep 06

As expected, Puncak was among the pack of losers among blue-chips yesterday that included Genting and Tenaga, weighing on the KLCI. Overall market breadth was negative with external concerns reflected on the number of losers outpacing gainers at the close. VADS, one of our top small cap picks for ICT exposure extended its brilliant run reaching a new high. Worries of lower oil prices affecting the viability of bio-diesel projects decorate headlines today. Other key news includes the setting-up of an internet exchange for the country, Genting’s oil and gas subsidiary discovering gas reserves in the West Natunia field and Brem receiving up to four offers for its Kelana Brem Towers from individuals as well as REIT-based funds. Results from property developers, I&P and Merge Housing showed a respectable performance this quarter following higher progress billings from on-going projects. We expect the market to continue drifting in the absence of fresh leads albeit a slight positive bias is not unexpected given the stronger overnight close on the Dow and continuing soft oil prices. The market is also pricing in no change in interest rate when BNM meets this evening.

Daily Commentaries 25th Sep 06

OSK Research

Technical View

Given that the previous week was a momentous week, the KLCI did prove to be somewhat resilient bucking the Dow's 0.5% decline to close flat w-o-w. Friday's close was typical of the cautious upside ahead of the weekend as investors locked-in quick gains with market breadth looking mixed. The government's denial of a tariff hike for Puncak could see some of its near-term gains pared today. Elsewhere, key news includes Sime Engineering's interest in Ramunia, Roadbuilder’s RM348m railway construction contract from the Transport Ministry and PECD/Nam Fatt’s claims for cost overruns in Sudan. Recent AIMS debutante, GMO is also reported to be close to completing the purchase of a content provider in China that could boost sentiment on Green Packet, its key shareholder. The range bound trade on the market is expected to continue today with investors taking cue from the US market, which faces a second week of heavy economic data announcements including consumer inflation and confidence numbers. Support remains at the 957 level. Here's wishing our readers and clients a Happy Start to the month of Ramadan.

Is Being Wrong Really So Bad?

When trading the markets, it's more common to be wrong than right. There are many ways to be wrong. You can misread a chart pattern, since interpreting a chart is largely a matter of subjective interpretation. You can falsely anticipate what the market will do next, or you can simply commit too much capital to a trading strategy that just may not pan out in the long run. Novice traders, in particular, are infamous for needing to be right. This natural, human tendency is so powerful that novice traders engage in unproductive trading behaviors to avoid admitting that they are wrong. They might hold on to a losing trade, for example, to keep losses on paper. They may procrastinate or put off making a trade in an effort to avoid facing the consequences of a bad trading idea. In many ways, a need to be right can be stifling. Rather than feel free and creative, a trader who consciously or unconsciously needs to be right may hold back at critical moments of trading. When you are inhibited and afraid, you avoid making trades. And unless you make trades in a variety of market conditions, you'll never hone your trading skills and master the markets. To trade like a master, it is vital to stay calm, open, and ready to trade with a winning edge.

Is being wrong really so bad? Many people have trouble admitting they are wrong. It can be difficult to admit we are wrong. It hurts. We tend to place great psychological significance on negative feedback. For example, when we are wrong, it is as if parents or teachers are criticizing us for doing something morally wrong. But this is a false assumption. When we are wrong, or make a mistake, we are not doing anything morally wrong. We are just being human. We all make mistakes, and it is vital to take setbacks in stride. If you can learn to downplay the emotional significance of being wrong, you will feel calmer and can trade more freely and creatively.

Another reason we hate being wrong is that we have an irrational need to be perfect. We often assume that unless we are always right, we will not be successful. This is especially true when trading. Every dollar we lose may often require the effort of making two dollars to make up the difference. It's natural to want to be perfect and never lose. But we don't always need to be right. We learn to assume that we always need to be right in school. In school, we were usually allowed only one chance to turn in a term paper or take a test. In most school settings, you can't retake a test or rewrite a term paper, and thus, you can't learn to hone your skills. Many people carry over this mindset into trading. But it doesn't need to apply. If you make small practice trades, for example, you can make a trade, learn from your mistakes, and make a new trade. Over time, you'll hone your trading skills. Since risk is managed, you can make mistakes and learn from them. There's nothing to fear.

There's no reason to kick yourself for making a mistake. You're human. You are allowed to be wrong. Don't be afraid to accept your limitations. If you allow yourself to be wrong, you will allow yourself to trade more freely, and over time, you'll hone your trading skills to the point that you will trade the markets skillfully and profitably.

Daily Commentaries 22nd Sep 06

OSK Research

Technical View

The market did indeed rebound as we expected, to hit the 966 resistance level just at the close. Tenaga led the rally on comments from the Energy, Water and Communications Minister that Malaysia may consider an electricity exchange in the future and that the negotiations with IPPs may hopefully be completed by year end. Despite the uncertainty in Thailand, the Ministry of International Trade and Industry announced that it may retaliate against Thailand's decision not to lower tariffs for car imports from Malaysia, which may impact local car maker plans for export to Thailand. Celcom announced its latest strategic tie up with Google to allow its 3G and GPRS customers to surf the net while eBworx will be implementing its Digital Credit Management System for AmBank. US markets retraced yesterday as concerns about the economy linger while oil prices crept up after the recent slide. Despite the overseas retracement, for today, we expect another attempt at the strong 970 resistance level while support remains at the 957 pts level.

The Ideal Environment For Trading

When trying to trade at your best, the proper trading environment can make all the difference. For some people, the proper environment may be on the floor of the exchange, getting charged up from the traders yelling in the pit. For other people, the ideal environment may be sitting in a bathrobe with your dog at your feet. Whatever your ideal environment is, however, it's necessary to trade in this environment when you are trying to trade at your best.

Behavioral psychologists argue that the environment in which you trade can dictate how you think, feel, and react. The environment can even elicit memories and motives that influence your decisions and actions. Have you ever tried to sleep in a strange bed, but couldn't fall asleep? Perhaps it was the sheets, the lumpy mattress, or the noise outside your window. Whatever it was, it just didn't feel right. When you are at home in your own bed, however, it all feels right. You feel calm, comfortable, and relaxed. You fall right to sleep. It can be the same way with trading: The ideal trading environment can immediately put you in the proper, winning state of mind.

Working in an environment that suits you can greatly improve your performance. If you prefer a neat environment, it may be hard for you to concentrate when your workspace is cluttered with charts. It may be necessary to straighten things up before you can trade in a calm and relaxed manner. Some traders prefer a small cubbyhole with a desk and a few monitors.

From a psychological point of view, a workspace can have "stimulus qualities." What that means is that our thoughts and emotions can be linked to a particular workspace environment. For example, your family room with a big screen television and theatre quality sound can be associated with relaxation and fun. It may be difficult to work in that environment, even with the television set turned off, because the space is "conditioned" to thoughts, feelings and motives of entertainment. Similarly, when you are sitting at your dining room table, you may naturally think of eating rather than working. And when you are in your bedroom, you may naturally think of sleeping. Each environmental space has a specific set of thoughts, feelings, and motives associated with it.

There are times, however, when we "condition" multiple thoughts, feelings, and motives to a particular environmental space. For example, you may eat, sleep, and watch television in your family room. When you do multiple activities in the same space, the space loses some of its "stimulus value." In other words, when you find yourself in a space that has multiple uses, it can elicit a variety of thoughts, feelings, and motives. You don't want this to happen to your trading workspace, however. When you enter your trading workspace, you want to immediately feel energized and ready to trade.

It may be necessary to take specific steps to ensure that your trading workspace elicits a winning mindset. It is necessary for your trading workspace to be distinct. It should not be in a space where you engage in other activities such as eating or sleeping. Your workspace doesn't necessarily have to be an entire, separate room, although a dedicated room for trading would be ideal. You can merely use your desk as a workspace if that is all you have. The key is to keep the space distinct, though. Don't eat or sleep at your workspace. If you feel like eating, sleeping, or even daydreaming, it is better to get up and do these activities somewhere else so as to preserve the positive stimulus qualities of your workspace. By keeping your workspace distinct, it will elicit only thoughts, feelings, and motives related to a winning mindset. Also keep in mind that a workspace can be "conditioned" to elicit thoughts, feelings, and motives that are associated with a pessimistic mindset. If you are stuck in a rut, your workspace may become associated with a bleak outlook. Don't under-estimate the power of the space. If you get a negative vibe from your workspace, it's vital to trade somewhere else for a while until you regain your mental edge. Once you return to profitability, you may be able to return to your old workspace and "re-condition" it so that once again it elicits a winning mindset. Where you trade can make as much of a difference as how and what you trade. When you trade in an environment that elicits a winning mental edge, you will trade at your peak.

Daily Commentaries 21st Sep 06

OSK Research

Technical View

The coup in Thailand appeared to have little impact on our market which recovered some of the losses towards the end of the day. For today, news includes our CPI numbers which was below expectations, MISC expanding its container services in the Middle East to capture the growing halal trade market, AirAsia reiterating that its business in Thailand is not impacted by the coup, JAKS Resources buying a steel pipe exporter in Penang and Kosmo Technology’s MOU with Korea’s Hanju Chemical Co. called off. Over in the US, markets rallied overnight as crude oil prices continued to slide and the US Fed maintained interest rate as expected. With news generally bland, the market could be ripe for a modest rebound towards the 966 pts resistance level. Support is now at the 957 and 948 pts levels.

Ponder Of The Day

Life is what happens when you’re planning other things.

What Seperate The Winners From The Losers?

It doesn’t matter whether you have three billion or three hundred dollars in the bank: Life is a series of challenges. Some of the challenges you face turn out well. Some don’t. What separates the winners from the losers, I’ve learned– in business and any other aspect of life– is how a person reacts to each twist of fate.

Donald Trump

Daily Commentaries 20th Sep 06

OSK Research

Technical View

Tenaga continued its strong performance following news that it has scrapped plans to issue new shares, reducing the risk of a share overhang. However, profit taking on institutional stocks saw the KLCI shedding 2.73pts yesterday. Several retail stocks tumbled following the news that the US’ SEC will investigate Aeneas Capital Management. Tan Sri Azman Mokhtar’s second attempt to take AmCorp Group private at RM1.40/shr may spur trading interest in the stock today. Other local news are Hiap Teck’s excellent 4Q06 results, the lower vehicle sales in August (-6.4%), representing a consecutive seven-month of decline as higher interest rates and the lower value of used cars deterred purchases. Also, the award of RM13m contract by Petronas Carigali to Tanjong Offshore, Lion Forest capital distribution raised to RM2/shr from RM1.20/shr and Oilcorp’s RM15m acquisition of a deepsea fishing company. Meanwhile, CIMB has issued 20m and 30m of Sime Darby and Gamuda call warrants, respectively. Despite the oil price dipping below US$62pb, market may be cautious ahead of the FOMC meeting tonight. Nevertheless, consensus has anticipated the Fed to keep interest rate on hold at 5.25%. In addition, the military coup in Thailand and weaker close on the Dow may dampen today’s sentiment. On the local front, Aug CPI number will be released today, expected at 3.6% (Jul: 4.1%).

Advice

Advice is what we ask for when we already know the answer but wish we didn't.

Erica Jong

Panicked and Stunned

Tom is in a panic. He has been pushing himself all month to reach a specific financial objective, but he can't seem to make it. In a last ditch effort, he has made a big trade and he is ready to execute it, but he can't get it done. He is so anxious, agitated, and frustrated that he cannot do the most simple task. Tom is having a trader's panic attack. He is so fearful that he just cannot function.

Have you ever felt like Tom? When fear sets in, your body reacts with such agitation that nothing seems to go right. You start doing dumb things. Even the most commonplace task can't get done, or you make stupid mistakes, like closing the wrong trade or reading a chart incorrectly. You can be so agitated that you accidentally kick the power cord for your computer out of the wall socket. The human body is wired to panic at times. There are vast individual differences. Some people are calm no matter what, but others are easily unnerved. Nevertheless, when panic sets in, our attention is truncated and our options are limited: We either stand up and fight or run away to save ourselves. These are the two basic instinctual responses when panic sets in. Some traders react to panic and frustration by throwing their mouse out the window. That's how basic the human animal can be at times. But again, there are vast differences. There's no one right way to trade and many different viable trader personalities. The limitation isn't in having the "wrong" personality for trading. The limitation is in trying to be someone that you are not. If you are easily panicked, it is vital that you identify this potential drawback and work around it.

Look at your personality closely. Are you the kind of person who may have a trading panic attack? Do you get so agitated at times that you can't think straight? If you are prone to such a malady, you can work around it. First, limit your risk. The more you have at stake, the more agitated you are likely to become. If you risk little, though, you will know in the back of your mind that you can handle the worst case scenario. It will calm you down. Second, always remember that you can scale back your financial goals if necessary. If you can't reach your goals, don't worry about it. Do what you can do. You will find that your feelings of agitation are greatly reduced when you set more modest goals. Third, use a broker if you need to. Although we are in the midst of a technology boom, many professional traders still call their broker to place a trade. It may seem old fashioned, but some traders realize that actually placing trades puts them on edge. They know that they feel calmer when someone else actually puts their money on the line.

You don't have to be the ideal trader to profit in the markets. Indeed, the myth of the ideal trader is just a myth. There are many different kinds of people trading the markets profitably. The key to success is to be true to yourself. Gauge what your personality is, and work around it if necessary. Don't be afraid to be yourself and to take steps to change your trading methods to suit your personality. If you are prone to anxiety attacks while trading, scale back and calm down. You'll find that you can think more clearly and trade more profitably.

Daily Commentaries 19th Sep 06

OSK Research

Technical View

Tenaga shined yesterday on news that it will benefit from impending changes in the framework of IPPs, contributing to the positive close on the KLCI. News today came in the form of the 17.7% y-o-y rise in July manufacturing sales while Protasco and TSR Capital have bagged RM246.2m and RM50m contracts for road upgrade and rehabilitation and the building of a police headquarters respectively. Meanwhile, General Motors (GM) is expanding its presence in Asia with the purchase of a controlling 51% stake in Hicomobil, a unit of DRB-Hicom. Petronas has also indicated it will pay taxes in Chad, ending the dispute between the government and oil majors in the African country. On a dismal note, the investigations into a foreign hedge fund, Aeneas Capital Management LP’s involvement in the sell-off of Iris, Mobif and Farm Best could be the Achilles heel for the market. Coupled with the weaker close on the Dow and crude oil prices inching back up again, there is downside risk today. Immediate support is at 955 with the next target at 948.

Daily Commentaries 18th Sep 06

OSK Research

Technical View

The market recovered to close just a shade firmer last Friday with benign sentiment reflected on the 555m shares. YTL spearheads corporate news over the weekend with a maiden property development project secured in Singapore's Sentosa island valued at US$100m. The company's IPP arm, YTL Power may however feel the heat from a likely revision in PPA against its favour according to a business weekly. EPF also said it is still keen on RHB and has asked UBG to disclose the price it wanted for the stake. Meanwhile, Bank of Nova Scotia has denied talks that discussions are on-going with UBG on the same. Makro is in the news again with its exit igniting bids from retail giants, Walmart and Costco while Proton surprised the market with a letter of intent secured with PSA Peugeot Citroen for possible cooperation. That the 955 level is still holding explained a certain degree of institutional support on heavyweights but poor retail sentiment would cap any meaningful upside for the broader market. The US Fed's meeting on Wednesday to decide on interest rate plus a string of economic data to be released should keep the KLCI rangebound.

Daily Commentaries 15th Sep 06

OSK Research

Technical View

The KLCI spiked-up breaking through the 957 barrier yesterday in the last half hour of trade. Notable gainers yesterday include palm oil proxies, IOI, KLK and Ghope as CPO prices saw a slight advancement. News for today include Muhibbah Engineering securing a RM581m project for works at a liquefied natural gas (LNG) loading jetty in Yemen. Also MRCB may see interest today after finalising a multi million contract in the Middle East. KPJ is also looking overseas and is actively bidding for hospital management contracts in the ASEAN region. Besides that, more banking M&A action appears as Canada’s Bank of Nova Scotia plans to bid for financial group RHB after an offer by EPF was rejected by Utama Banking Group. With a considerable amount of positive news flows for today and oil futures retracing below the US$64 level, there is a positive bias on the market today.

Totally Objective and Rational

Winning traders maintain an objective state of mind. Rather than react to every setback with frustration, they just brush it off, as if it really didn't matter. But to the novice trader, it is difficult to take losses and other setbacks so nonchalantly. It's hard to avoid thinking, "I have lost a lot of cash. I could have paid a lot of my living expenses or bought some great stuff with the money I've lost this month. I need to win it back right now." This sort of thinking, however, can be very unproductive. The minute you equate losses with actual money, you will start reacting emotionally. Your emotions will start to play a significant role in your decision-making. In the end, emotions should have no place in trading. It is useful to cultivate a more objective, unemotional approach when trading the markets.

Cash is a strong motivator in our society. It's the ultimate reward. It has meaning. The more money we have, the more freedom we have. Money can change people's lives. People's attachment to money is understandable. Every dime we lose hurts. Every dollar we win makes us feel great. But when it comes to trading, you must divorce your emotions from the money you are trading. It's like when you spend money on credit cards. When using credit cards, it's easy to forget you are spending real money. The money is abstract. It's not as real. When trying to trade objectively, it's essential to learn to look at the money you're trading as objectively and abstractly as possible, as if they are merely percentage points or ticks.

Psychological studies have clearly demonstrated that by cultivating an objective state of mind, you will react less emotionally. Creating psychological distance can help you cope with upsetting events. If you were to view a distressing film, such as a film showing a surgical procedure for example, it is easier to watch it and feel at ease if you objectify the ongoing action. Rather than fully emotionally engage, you must keep your distance.

When it comes to trading, there are a few simple things you can do to maintain an objective state of mind. Many say that when money is committed to a trade and the risk and potential loss is experienced, "objectivity goes out the window." Thus, anything you can do to minimize the feeling of risk and potential loss will help you cultivate an objective mindset. First, it's helpful to trade with money you can afford to lose. Trading is a profession where you should go in expecting to lose. If you can't afford to lose the money you trade, it will be difficult to maintain objectivity. Deep down, you will know that you are risking money you just can't afford to lose in a worst-case scenario. Second, it is also crucial to manage your risk. By carefully managing risk on any single trade, you call tell yourself, "I've got little to worry about. I can afford to take the loss." At first you may have to consciously remind yourself of this fact (again, make sure it is a fact), but over time it will automatically be in the back of your mind. You will be calmer, and can more easily cultivate an objective mindset. Finally, view profits and loses in an abstract framework. Rather than focusing on concrete dollar amounts, try to focus on percentages, or just abstract, theoretical numbers. Don't think of the dollar amounts in terms of what can be purchased. Equating dollar amounts in terms of tangible terms, such as car payments or sought-after luxury items, will weaken your objective mindset. You'll be more prone to experience elation from big wins and disappointment from losses. Rather than trade emotionally, you will make more profits if you trade objectively.

KFC Holdings

KFC Holdings is valued at RM5.65.

QL Resources

QL Resources is valued at Rm3.20.

Daily Commentaries 14th Sep 06

OSK Research

Technical View

After the recent retracement, the market appeared to lack direction yesterday, closing slightly in the positive territory with losers and gainers fairly equal. While the KLCI held onto the 953 pts support level, the anticipated broader market rally did not take place. News for today includes MTD Capital securing a section of the East Coast Expressway project for RM1.4bn, Jobstreet’s JV to diversify into an online lifestyle portal in Singapore, Glomac’s joint development with PKNS of 20 acres of land in Bangi and Salcon continuing on Phase 2 of its NRW project in Sandakan. FDI may get a boost with the setting up of a special cabinet panel for high impact foreign investor projects. Crude oil rebounded above the US$64 per barrel bringing some cheer to energy companies in the US which helped lift the market there. Substantial support remains at the 948 pts level although given the lack of fresh domestic leads, the KLCI may drift rangebound.

Daily Commentaries 13th Sep 06

OSK Research

Technical View

With oil prices falling yesterday morning and CPO prices following suit, profit taking activities on plantation and oil & gas counters was evident with the former pushing the KLCI below the 950 pts before a last minute rally helped it to close at the 953 pts support level. However, the market again appeared to be two-tiered with heavy volume on lower liners such as Iris, Mobif and Tebrau resulting in large gains for these counters and more gainers than losers overall on a volume surge of 710m shares traded. For today, major news is in the form of QSR making a GO for KFC shares, the proposed privatization of Intan Utilities at RM2.10 a share and negotiations between the Government and financial institutions on ways to implement the 10:90 Build-then-Sell concept for housing. Contracts announced include Hexagon’s provision of specialty illumination products worth potentially RM65m to petrol stations across Asia Pacific and other areas from a global oil major and HeiTech Padu’s 2 year RM18.5m contract to maintain the travel documents and immigration control system for the Immigration department. Oil prices continued to slide with the IEA predicting lower demand going forward. Although this will bode well for airlines, it may put continued pressure on plantation and oil & gas counters although we believe bargain hunting activities may emerge to cushion the fall. As such, for the KLCI, the 953 support level looks tenuous with the 948 level being the stronger support. However, things still look positive for the broader market with retailer interest likely to be sparked on more speculative counters after the overnight rally on Wall Street.

Daily Commentaries 12th Sep 06

OSK Research

Technical View

The 955 level appears to be holding with the market crafting a base and oil prices retreating further. For today, Genting will likely get a lift upon re-quotation with the takeover offer for Stanley Leisure by GIL at 860 pence/share or RM4.36bn. Other key news items include Sime Engineering bidding for RM3bn worth of EPCC jobs in the Middle East and India while Boustead is planning for a RM500m Islamic plantation REIT. Also, renewed talks of the privatization of Lion Forest should continue to see active trading on the counter. Despite the US market closing slightly higher last night and the softer oil prices, we would expect the market to continue languishing within a tight range today in the absence of fresh leads.

All Is Not Lost

Have you ever had those months where nothing went right? You lost time and time again and could not help but feel like a loser. In the back of your mind, you may have thought, "What good could have come of this? I just wasted my time." It's psychologically difficult to look on the bright side when you have lost so much, but you have a choice. You can feel defeated, pout, or get angry, or you can consider what past setbacks have taught you, make midcourse corrections and feel excited about future prospects. All is not lost. Why not turn a loss into a gain?

Professional athletes and seasoned traders know how to turn losses into gains. Rather than mull over past defeats, or trading losses, they use the setback as a motivator, an opportunity to hone their skills, grow, and improve. They examine what they did wrong, learn from their mistakes, and view the temporary setback as a fresh starting point from which to achieve higher future performance. Many successful athletes note that Babe Ruth struck out over 1000 times on his way to setting the homerun record. Seasoned traders similarly note that winning traders, with proper risk management, can win as few as four trades out of a dozen and still come out ahead. In both cases, these winners could have been bogged down with self-doubt, regret, and defeat. But instead of feeling stuck and beaten, they decided to use the "loss" as a motivator for change and improvement.

How can you make the best of a setback? First, identify what you did right and what you did wrong. Sometimes a trade goes wrong because you were in a bad mood. Perhaps you were stressed out or tried to risk too much money. Perhaps you didn't prepare far enough in advance for a trade. Maybe your trading approach was inappropriate for market conditions. Things may have not gone your way because you did not trade under optimal conditions. It's necessary, however, to identify those conditions where you trade at your best and to trade under those conditions. Second, don't be afraid to identify what you did wrong and admit it. The biggest obstacle to improving your trading approach is to deny you have limitations and to try to cover them up. We usually engage in such deceptions because we believe that we cannot overcome our limitations. If we have the courage to admit what we did wrong, however, we can be more open to change. Third, it's vital to be committed to making a change. You must be willing to do whatever it takes to change. Making a change is difficult, and if your heart isn't it in, you will find a variety of reasons to not change. In the end, you must make the decision to change in order to actually change. You cannot just think, "I would like to change or it would be advantages to change," but you must think, "I am determined to make a change." Finally, you must maintain optimism. You must believe that change is possible and that if you work hard enough, you will achieve the change you desire.

When searching for success as a trader, it's vital to continue to improve. You must pick yourself up after a setback. When your ego is hurt, you cannot wallow in self-pity. You must get up and fight. Losses are only setbacks if you think of them that way. Rather than see a loss as a tragedy, look at it as a stepping stone on the path to more profitable trading.

Quotable Quotes Of The Day

Whatever you can do, or dream you can, .....begin it. Boldness has genius, power and magic in it.

Goethe

Daily Commentaries 11th Sep 06

OSK Research

Technical View

The market snapped its 3 day losing streak to close higher last Friday spurred by oil prices falling below the US$67 per barrel level. Proton was in the news over the weekend with the possible cut in its FY07 KPIs due to the challenging market conditions, the first by a GLC that could re-ignite fears over the health of the GLC transformation program. An IJM-led consortium also secured a RM1.32bn contract in the United Arab Emirates for a building project while oil and gas services providers, KNM and Tanjong Offshore are in the news again with strong demand prospects for their services. Aside from that, Hovid has proposed a 1-into-5 stock split while Kian Joo proposed a 1-into-2 stock split subsequent to a 1-for-5 bonus issue to boost their liquidity. EON is also reported to have renewed talks with VW for the distributorship of up to 9 of the latter’s models. Meanwhile, ASTRO reported good 1HFY07 results underpinned by strong demand for the World Cup whilst announcing the setting-up of a JV to offer advertising services in China. Given the slew of corporate news flows and the US markets having shrugged off concerns of the soft economic outlook to finish higher ahead of the weekend coupled with easing crude oil prices, there is enough meat for the market to trend firmer today. Immediate support and resistance levels are pegged at 955 and 960 levels respectively.

Personality and Trading Style: Finding the Right Match

It's natural to search for a sure thing. Although some people love taking risks, most of us would rather take $100 right now, instead of taking a risk and ending up with nothing. The extent to which you prefer risk depends on your personality, however. Some people seek out risk, and enjoy the rush. Other people seek out absolute certainty, safety, and security. They are uncomfortable with uncertainty and risk. There's no one right way to trade, though. You must make sure that your trading style matches your personality.

If you prefer certainty, you may also prefer long-term investing. When trading in the long term, making sure the trend is in your favor is more likely. You can make sure that the trend will be sustained before making a firm commitment. Short-term traders, in contrast, don't have the luxury of gathering a wealth of confirming evidence for a trade. In the short term, you have to take a little more risk. You have to live with a little bit of uncertainty. Again, there's no one right way to trade, but if you can't stand uncertainty and risk, you may have trouble making short term trades.

Why do short-term traders have to take more risk? It's a simple matter of supply and demand. When you buy a stock, you cannot make a profit unless there is someone ready to buy your position from you later. A long-term trader can wait it out. In a worst-case scenario, inflation will often take care of early paper losses. As long as the company stays in business, you can always sell a stock for more than you bought it for if you wait long enough. (It may take years, but it is likely to happen if the company produces a worthwhile product that people will always need, such as General Mills.) Since a price move is shorter for a short-term trade, it is often necessary to buy a stock before all indicators line up. You have to buy early and sell into strength when there are buyers left to buy your position. That may happen or it may not, but that's the chance you must take if you are a short-term trader. If you can handle uncertainty, then you may enjoy short term trading.

Some people thrive on risk. They prefer uncertainty. It's within their nature to take risks. What are you like? If you don't mind risk, and are comfortable with it, then short-term trading is for you. But again, there is no one right way to trade. Don't be afraid to look deeply at your personality. If you don't like risk, that's all right. Trade in the long term. Whatever you do, however, don't force yourself to trade in a style that doesn't suit your personality. Trading can be rewarding and profitable, but only if you respect your personality and find a good match between your trading style and tolerance for risk and uncertainty.

Daily Commentaries 8th September 06

OSK Research

Technical View

As expected, profit taking did continue across the board with volume continuing to remain thin. Today’s announcements of interest are CIMB’s RM70m rebranding of its BCB and SBB bank branches, APB’s proposed JV with PSCI for the construction and repair of ships in Penang, MP Technology’s discovery of possible fraudulent financial irregularities, Petronas Gas’ completion of the 20% stake acquisition in Gas Malaysia, Kinsteel’s completion of the Perwaja acquisition and Cahaya Mata Sarawak’s sale of its steel mill. Timber players may receive some attention with the Malaysian Timber Council expecting export growth of between 3 to 5% this year. Despite oil prices taking a dip below the US$68/barrel level, US markets still fell yesterday on concerns of slowing economic growth. As such, we see the market continue to drift down towards the 953 and 948 pts support levels.

Daily Commentaries 7th September 06

OSK Research

Technical View

Profit taking activities continued yesterday particularly for plantation counters and blue chips such as Genting after the recent run up. For today, oil and gas players are in the news with Petra Perdana ordering a new marine vessel, Tanjung Offshore transferring to the Main Board tomorrow, APB Resources being suspended and SAAG completing the acquisition of a workover rig. Nonetheless, on a global scale, the price of oil dropped on less war risk in Iran and no signs of an oil disrupting hurricane. This may in turn impact the plantation players who have seen share price hikes on anticipation that CPO prices will rise in line with oil prices. Further news that may dampen the plantation counters is the statement from the Plantation Industries and Commodities Minister that the Government may revoke some biodiesel licenses for those license holders which are not committed to the business. In other news, Maxis will have to spend some US$300m to expand its Indian operations while GMO shares doubled its IPO price on its listing yesterday in London which may boost its 3 key shareholders in Malaysia. With the overnight drop in US markets on renewed fears of rate hikes, we feel that the local bourse may drift lower towards the 953 pts support level for today.

Malaysia : A Laggard Poised To Underperform Further

Recommendation to underweight Malaysia given by BCA Research.

Daily Commentaries 6th September 06

OSK Research

As expected, the market’s fine run ended its course yesterday with the emergence of profit taking activities. Headlines today include Genting making a RM4bn bid for Stanley leisure following Harrah’s bid for London Clubs International (LCI). Also, Proton plans to speed up its revival plan by year end and decide if it wants a foreign or local partner. Besides that, AirAsia has made a bid for the lucrative KL-SIN route and expects to launch flights next year. July exports unveiled last night came in above our expectations with 16% growth marking a 16 month high. The Dow last night closed firmer on further softening in oil prices as well as the Fed saying that inflation remained under control. The market may consolidate further today in search of new leads. Further support is seen at the 960 level.

Survive Now, Prosper Later

If you are like most novice traders, you want to win big right now. You can't wait. Many people are motivated by greed. They dream about great wealth and how wealth can solve all their problems. Many novice traders are drawn to the action. Movies like "Wall Street" and "Trading Places" make trading look exciting and sexy. Unfortunately, most seasoned traders will tell you that winning in the markets is a matter of tediously looking for high probability, low risk setups and trading them. All that a quest for greed and excitement will do is distract you from learning how to master the markets.

It takes time to master the markets. Many seasoned professional traders have blown out their accounts more than once. In "Market Wizards," for example, Michael Marcus described how he wiped out his account balance several times before learning how to make millions trading the markets. Although he faced an unbroken string of losses, he didn't give up. As he said to Jack Schwager (p. 18), "I would sometimes think that maybe I ought to stop trading because it was very painful to keep losing. In 'Fiddler on the Roof,' there is a scene where the lead looks up and talks to God. I would look up and say, 'Am I really that stupid?' And I seemed to hear a clear answer saying, 'No, you are not stupid. You just have to keep at it.' So I did."

Trading takes years to learn. You have to take the time to learn to develop an intuitive feel for the markets. You can't just read books and take classes and think you can learn it all. These activities may be essential prerequisites, but real world experience counts too. As Brandon, a seasoned professional we interviewed put it, "Books mainly teach basic techniques and give you basic advice: the trend is your friend, buy double backs, buy breakouts, draw trendlines. But books don't talk about emotional experiences." You are a unique person with your own history with the markets and your own resources. You need to learn what it feels like to lose, or what it feels like to hold a position overnight. You have to learn to gauge your tolerance for risk. There's no one right way to trade. You have to learn what you prefer and develop an approach to trading that suits your talents. All this takes time and patience.

Many novice traders make the mistake, however, of trying to rush things. They make big trades rather than manage risk. Big trades are exciting and satisfy the need to make a lot of money as soon as possible. This approach usually fails, though. Novice traders who make big trades just end up wiping out their account balance before honing their skills.

If you are a novice trader learning to master the markets, it's vital to manage risk so that you can survive. Just like many seasoned traders, you will have many years of prosperous trading. What you must do right now, however, is to survive the learning curve. In addition to managing risks, it's useful to specialize on learning the movements of a few specific stocks. Learn to get a feel for support and resistance levels for that stock. You should know good buy points and sell points. With practice, you'll be an expert on a few stocks, and soon your intuitive skills can be applied to a variety of stocks and commodities. By starting out slow and building your skills over time, you can survive the learning curve and end up a seasoned, prosperous trader.

Budget 2007 : Another Perspective

Budget 2007 by Alliance Research

Daily Commentaries 5th September 06

OSK Research

Technical View

The market closed shy of the previous high recorded in mid-May on the back of the strong Budget infused blue-chip buying. The broader market, however, witnessed sporadic selling of lower liners indicating the more wary sentiment among retailers. Major headlines include MMC’s RM8bn Islamic bond issue to finance the acquisition of Malakoff, increase in cigarette prices and TM’s associate, Spice Communications US$330m IPO in India to raise funds for expansion. Aside from that both Mitrajaya and Perisai were awarded major contracts that should see some action on the counters today. While near-term feel good factors will continue to lend positive support to the market, it nevertheless faces a virulent resistance at the 970 level. Recent gains could also translate into some profit-taking on blue-chips while retailers may prefer to adopt a wait-and-see attitude in search of new leads. News flow from the US was pretty dry with the Labour Day holiday but oil prices have dipped below US$69 per barrel.

Budget 2007

Key Proposals of Budget 2007.

Daily Commentaries 4th September 06

OSK Research

Technical View

Contrary to expectations of very little to be unveiled, Budget 2007 proved to be a pleasant surprise for businesses and the average man on the street with broad-ranging incentives accorded (see our Budget report today). The most discerning boost for the stock market (arguably the least the market had expected) was the reduction in corporate tax rates, the first in 9 years. This is a big step forward for Corporate Malaysia and should boost earnings growth whilst serving as a re-rating catalyst. We also laud the broad-ranging initiatives for the laymen, which is a clear articulation of the government’s commitment in making the current economic woes less painful. Other boosters, namely for the construction and property REIT sectors were not unexpected. Aside from the Budget, other major headlines today include MAS raising its fuel surcharge for the forth time this year, New Toyo making a GO for Tien Wah Press at RM2/share and Proton denying that its Cikarang plant in Indonesia is up for sale. With the positive undertone on the market sweetened by the Budget news flows, the market is expected to extend its upward momentum today with new resistance pegged at 965. The Dow closed higher on the first trading day of September last Friday on better-than-expected jobs data for July.