January 30, 2007

Daily Commentaries 31st Jan 07

Profit taking on the KLCI was well absorbed towards the later period of the second session, swinging the local bourse to a positive 3.89 points from yesterday’s close. Top corporate news today are RHB’s announcement that it is “currently considering” the offer for sale of RHB Capital shares, Lafarge’s proposal of a 20sen capital repayment, as well as Proton’s plans to acquire the remaining 49% stake in its Indonesian subsidiary. Meanwhile, Proton has denied a report that it has agreed to sell a stake in its manufacturing arm to Volkswagen while Petra Perdana has secured a RM55m contract from Shell. BNM will introduce a risk-based regulatory regime which includes a new risk based capital framework for insurance companies in Malaysia. The Dow finished higher overnight driven by optimism about the economy. Resistance and support for the KLCI remains at 1,180 and 1,170 respectively.

Quote Of The Day

The difference between stupidity and genius is that genius has its limits.

Albert Einstein

January 29, 2007

Daily Commentaries 30th Jan 07

As expected, the KLCI recouped earlier losses to close firmer driven by continued blue-chip support. Key headlines today are MTD Infra’s capital repayment of 35sen/share, Gamuda’s RM1bn commercial development project in Vietnam and DiGi extension of its popular friends & family calls to include non-DiGi and postpaid customers. Meanwhile, Sin Chew announced the creation of a Chinese newspaper giant through the merger with Nanyang and Hong Kong- listed Ming Pao while Alam Maritim acquired 2 vessels. The market is likely to be further buoyed by the favorable sentiment although attention will be on corporate earnings delivery and the U.S. FOMC meeting tomorrow. Resistance and support are pegged at 1180 and 1170 respectively.

January 28, 2007

Daily Commentaries 29th Jan 07

The correction late last week is viewed positively for the the market to build a temporary base in anticipation of further upside in the interim. BNM's move to keep interest rate steady at the first policy meeting of 2007 last Friday was expected and should have little impact on the market when trading opens. Major corporate headlines over the weekend include Goldman Sachs emerging as a major shareholder of Pelikan, Media Prima eyeing a stake in TM Net, Samling Group making a revised bid for shares of Lingui, Ramunia securing an EPCC contract at the Malaysia-Thailand Joint Development Authority Block and YTL Corp acquiring an Indonesia hotel operator. Also, Bonia has proposed a 1-for-2 bonus issue and share split pursuant to its proposed transfer to the Main Board and Proton may be looking to overhaul its dealership network. Meanwhile, news of fresh incentives for the REIT sector could spur some interest in REIT issues today. With the immediate support of 1170 broken last Friday, the new support for the KLCI now rests at 1160. However, we think the market is likely to recoup earlier losses given the continuing positive corporate news flows with resistance pegged at 1175.

January 25, 2007

Daily Commentaries 26th Jan 07

Yesterday, there was some profit taking in line with regional weakness which was well absorbed as the market underwent a healthy correction. Tenaga’s good results should help support the market today although news that the Government has not set any deadline for PPA renegotiations may limit the counter’s upside. Khazanah too is reviewing the foreign ownership limit to GLCs which will help to bolster the blue chips. Although not a surprise, Perodua confirmed its leading position in the Malaysian auto market with the announcement of the total vehicle sales in 2006 yesterday. Other market news includes ISS Consulting buying a rival in Singapore for RM17m while the IJM-Road Builder deal received shareholder’s approvals. With overseas markets undergoing a correction overnight, the KLCI could possibly see further consolidation today. Nonetheless, any consolidation should be minor given the good news flow with support at the 1170 pts level.

January 24, 2007

Daily Commentaries 25th Jan 07

In line with other markets in the region, the KLCI powered ahead to close 14 pts up even as losers outnumbered gainers in the broader market. For today, the Synergy Drive deal also moves into the next gear with the Sale of Business Agreements being signed yesterday while the Board of PPB Group has approved of the offer by Wilmar to acquire PPB Oil. Sime Darby is also in the news after Tenaga held a briefing on the Bakun submarine cable where Sime Darby may hold 60% and Tenaga 20% of the project. MAHB said that it was close to finalizing plans for the LCCT expansion while Dialog announced a new RM27m EPC LOI in Kertih. With the news that Synergy Drive is moving ahead, we feel that the market has enough catalysts to head towards the 1200 resistance level. Support now moves up towards the 1170 pts level. The rise in US markets last night after Yahoo reported good results should also support bullish sentiment while Tenaga’s results to be reported today should keep the focus on the blue chips.

January 23, 2007

Daily Commentaries 24th Jan 07

Momentum buying as well as sharp gains in Genting and Resorts following Star Cruise’s venture in Macau moved the KLCI higher yesterday to close at 1,169.12 points while regional markets closed mix. The PNB-related companies involved in the Synergy Drive deal are expected to ink the S&P agreement today. Other corporate news today are Genting’s foray into Macau, Kinsteel’s successful turnaround story and Media Prima’s plans to sell land and building for RM60m. Tan Sri Syed Mokthar has been reported as being keen to raise his interest in Utusan while EON has squashed talks of any capital repayment. For today, market is likely to remain strong, supported by the Second Finance Minister’s statement on the encouraging economic growth last year as well as the strong gains on the Dow overnight. However, the US$2pb gain on crude oil may hamper sentiment. With the sharp move on KLCI yesterday, support now stands at the 1,160 level with immediate resistance at the 1,175 level.

January 22, 2007

Daily Commentaries 23rd Jan 07

Foreign-led buying pushed the KLCI above the 1150 resistance level to a new high yesterday. Trading was brisk with index-linked stocks attracting renewed interest while timber concerns were darlings of the day. Public Bank tops business headlines with FY06 results coming within market expectations while Redtone disappointed. Among notable news today, IGB has been approached by both local and foreign parties to buy the Renaissance Hotel, Bursa’s plan to take up minority stakes in regional bourses and AirAsia’s denial that it is seeking a secondary listing in Hong Kong or London. The underlying bullish momentum on the KLCI remains intact although the fall in US markets overnight may evoke some profit-taking. Support moves to 1150 while the next immediate resistance can be found at 1158-1160.

January 21, 2007

Daily Commentaries 22nd Jan 07

Despite the anticipated profit-taking ahead of the weekend, the KLCI held on to its form to close flat. Among notable losers were that of Utusan and NSTP after news of the aborted merger. EON Capital could see further interest following a report that GE is keen on a stake with an indicative offer of RM9 a share. Meanwhile, Proton unveiled cosmetic changes to its Savvy and Waja models whilst indicating fresh models will be introduced by year-end. Other major news includes EON’s possible capital repayment, Scomi Marine's purchase of 7 new deepwater vessels to bank on burgeoning exploration activities and AirAsia highlighting again it has no plans for a share sale to finance aircraft purchases. Oil prices also recovered slightly after falling below US$50 per barrel last Thursday. For today, the market could potentially trade range bound in search of fresh leads with the positive upside coming from expectations of a good set of numbers for Tenaga. Over in the US, investors will continue to be glued to more tech earnings releases and few key economic data to be announced later during the week. Support and resistance levels for the KLCI remain at 1138 and 1150 respectively.

January 18, 2007

Daily Commentaries 19th Jan 07

The bulls continued to dominate the market with the 5th straight day of gains as volume broke the 1.5bn shares mark again. For today, news reports continue to highlight that timber prices are rising while another unconfirmed source mentioned that MRCB is expected to be the contractor for the Bakun undersea cable with Sime Darby acting as the owner. AirAsia added new routes to Penang from KK and Kuching as well as a direct route from Macau to KK and dismissed plans for a private placement. A JV including Salcon Engineering has been awarded a major water project in Sri Lanka and Tanjung Offshore won a RM50m contract from Petronas. Despite the generally positive news flow on the local front, the drop in oil price, which broke below US$50 per barrel briefly, and the concerns on the US technology sector may lead to some profit taking activities on the local front after 5 days of straight gains. Sentiment may well be positive on timber firms and negative on oil & gas players. Support and resistance remain at 1138 and 1150 pts respectively.

January 17, 2007

2007 Outlook

2007 Outlook by Kenanga Research

Daily Commentaries 18th Jan 07

The KLCI chalked up another multi-year high breaking through the 1138 pts resistance level with volume remaining strong although the broader market was mixed with gainers roughly equal to decliners. Tenaga is in the news with negotiations to double its export of electricity to southern Thailand as well as the potential conclusion of talks between the Government and IPPs next month. Green Packet announced a 2-into-1 share consolidation following its proposed move to the Main Board. Proton and Peugeot have concluded their feasibility studies on the proposed partnership between the two. Unconfirmed reports state that Tan Sri Syed Mokhtar may inject a RM1.6bn port development and management contract won by Seaport Terminal SB into the MMC Group. Other unconfirmed reports also state that Singapore GLCs may be keen to acquire a substantial stake in Suria Capital, the operator of ports in Sabah. For today, with the moderation in US markets after strong gains, we expect the KLCI to face some resistance. Initial support is at the 1138 pts level while technical resistance now moves to 1150 pts.

January 16, 2007

Daily Commentaries 17th Jan 07

Appetite for blue chip stocks remained strong. The KLCI stayed above its Monday closing to end a firm 5.2 points up yesterday. However, several regional markets closed lower. Top news headlines today are PM’s assurance that the merger of the PNB-related companies would go ahead, the signing of MOU between Utama Banking Group and Kuwait Finance, which gives Kuwait Finance the right to carry out due diligence on Rashid Hussain as well as the Gamuda’s optimism that the government would award the northern sector of the double-tracking project this month. In addition, Sime Darby Bhd is believed to have won a RM15bn contract to build submarine cables linking Bakun hydroelectric dam to Peninsular Malaysia. Follow through buying on the KLCI is expected driven by the gained on Dow Jones last night, weaker crude oil price as well as the strengthened Ringgit. Immediate resistance for the KLCI is at the 1,138 pts level with support at the 1,121 pts level.

January 15, 2007

Daily Commentaries 16th Jan 07

The KLCI mirrored the strong performance across Asian markets to trace another new high yesterday. Blue chips continued to be in the limelight with Genting and Bursa fronting the gainers list. For today, key news headlines came in the form of a possible snag in the Synergy Drive plantation merger as PNB could not agree on certain conditions in the proposal, Salcon being awarded a sewerage design and construction project in Sabah, Australian-based LCC Jetstar in discussions with AirAsia for mutual routes and the government's confirmation of GM's interest as a strategic partner in Proton. Shares of Konsortium have been actively traded following news that its haulage business is up for grabs while MAS is raising RM1.6bn via a right issues to finance working capital. Given the over 20 points run over the last 2 trading days, there is the tendency for investors to lock-in gains although the bullish sentiment remains firm. Support now moves to the 1121 level while 1138 remains the resistance.

January 14, 2007

Daily Commentaries 15th Jan 07

The market arrested two days of profit-taking to stage a strong recovery last Friday, closing just shy of the 1120 mark, buoyed by another record close on the Dow and corporate driven newsflows. Save for the floods in Johor, there were little notable business headlines. Among the more pertinent ones were MAS' decision to delay the abolishment of agency commission for another year, AMMB expects to finalise talks for the acquisition of Pan Global by the end of the year and SKVE Holdings looking to issue bonds or term loans to finance the RM1.3bn South Klang Valley Expressway. AirAsia also awarded a maintenance contract to ST Aerospace for its new fleet of A320s while FCW has proposed a 5-into-1 capital reduction. Given decent gains in the US markets on Friday and stabilizing oil prices, the market may look to trend higher but intermittent profit-taking cannot be discounted. Support and resistance levels remained at 1110 and 1138 respectively.

January 11, 2007

Daily Commentaries 12th Jan 07

The KLCI slid yesterday in line with falling oil prices as fears were raised on the level of future petroleum income for the country. For today, market watchers will note Datuk Ahmad Zubir’s, CEO of Sime Darby, appointment as the chief executive designate of Synergy Drive. Kuwait Finance House is believed to have been approached to take up a 30% stake in Tan Sri Syed Mokhtar’s Bank Muamalat. MAS is scheduled to hold discussions with India’s Jet Airways for a codeshare agreement to India while Thai AirAsia expects to expand its routes into Malaysia. Finally, AKN Technologies is exiting the semiconductor distribution business for RM70m cash. With oil prices extending their slide, the outlook is uncertain for the Malaysian market, nonetheless, the overnight jump in US markets should mean a rebound is likely after 2 days of losses in the KLCI. With yesterday’s losses, support retraces to 1100 pts while the 1110 pts level is now the resistance.

January 10, 2007

Daily Commentaries 11th Jan 07

The KLCI traded in negative territory for the day, along with the regional bourses due to the spill-effect of Thailand’s decision to tighten overseas investment rule. As expected, palm oil production slumped 26% QoQ to 1.14MT in December as heavy rainfall exacerbated a seasonal decline in output. TNB share price should react positively today to news that Perwaja Steel may settle its RM90m outstanding debt by October, eight months earlier than planned. Meanwhile, the death of two construction workers at the Pavillion shopping complex construction site should have a negative impact on Putrajaya Perdana as it is requested to stop work immediately. The KLCI may rebound today following the Dow’s 26 pts gained last night. Crude oil prices continue to slipped, closing at US$54pb and this is positive for the airlines and transportation sectors, as well as inflation and the economy as a whole. The KLCI’s near term support remains at the 1,110 level with immediate resistance pegged at 1,138 level.

January 8, 2007

Daily Commentaries 9th Jan 07

Asian markets took a breather yesterday fanned by concerns on the Fed’s ability to cut interest rates. For today, major headlines came in the form of Sime Darby putting on hold the takeover of Ramunia following the Synergy Drive merger, Tan Sri Syed Mokhtar setting up a JV with the Iranian government to develop a gas project and TM’s expectations of a turnaround in its fixed line business by 2009 with the help of internet- based services. Meanwhile, Supermax has proposed a 1-for-2 stock split to increase the liquidity and marketability of its shares. With the Dow clawing back earlier losses overnight ahead of the start of the official earnings season today, we expect the KLCI to follow through today. Near term support is seen at 1110 with immediate resistance pegged at 1138.

January 7, 2007

Daily Commentaries 8th Jan 07

The KLCI still managed to close a tad firmer last Friday on late buying of heavyweights. Market breadth was generally mixed with gainers only marginally tipping losers with volume exceeding 1bn. Key corporate news out of the weekend include the possibility of AirAsia upping its stake in FAX to a maximum of 30% stake while denying talks with Virgin and Easy Group , the MMC led consortium clinching a US$48.2m EPCC contract in Indonesia and Suncity's JV in India for the building of a high rise residential property. Supermax is also in the news this morning with continuing strong profit growth from robust global demand. Meanwhile, November export sales posted a 17.5% y-o-y rise, the highest since November 2004. With oil prices expected to remain soft, sustained retail flows and the spate of positive corporate developments, the market should continue to trend upward despite the weaker close on the Dow on Friday. Support and resistance are at 1110 and 1138 respectively.

January 4, 2007

Daily Commentaries 5th Jan 07

The KLCI was dampened yesterday with the previous mixed close in US markets but still managed to eke out a meager gain. For today, we expect the market to continue its march ahead with news in the form of Bumiputra-Commerce Holdings announcement of its proposed disposal of its insurance companies to Aviva and Allianz. Top Glove reported a reasonable set of results while FAX was granted a license to fly to Australia and Europe. Synergy Drive extended the deadline for its proposed acquisition of the various PNB related companies to 15 January 2007. Sunway City is carrying out a RM300m property development in India while locally builders are unhappy over the Government’s decision to backdate the price hike of cement from December 1st 2006. US markets still managed to close slightly higher overnight on falling commodity prices including oil and copper and we believe this will have a positive effect on our market. Technical support and resistance levels remain the same at 1110 and 1138 pts levels respectively.

Fearless and Profitable Trading

Everyone is a little afraid of losing. It's natural. You've worked hard to earn enough capital to trade, and it is reasonable to worry about losing it. But winning traders are objective when it comes to trading capital. Losing doesn't faze them. Some of the biggest winners are fearless. In her book, "On Becoming Fearless...in Love, Work, and Life," Arianna Huffington offers advice on how to become "fearless about money." Ms. Huffington astutely observes, "It is impossible to be fearless about money if we don't value other parts of our lives and ourselves more than we value our bank accounts."

Market observers have long observed that when traders need to make profits to maintain a highflying lifestyle, they usually choke under the pressure. Winning traders learn how to look at trading capital coldly and objectively. But as Ms. Huffington notes, "it's hard to be fearless about something that is so elemental, so wrapped up with survival." Not only are some people unable to view money objectively, they have deep seated psychological conflicts about money. For example, "poverty consciousness" is a problem for many. Poverty consciousness is the fear that no matter how much money you have, it's never enough. The idea of possibly losing it all can "fill us with gut wrenching terror," according to Ms. Huffington. Poverty consciousness can at times act as a motivator to drive us to accumulate so much wealth that we will never face poverty again, but many times, it is a constant source of anxiety. For people with poverty consciousness, money takes on symbolic meaning. Money may act as a social barometer of how well we are doing, or it may become associated with security, freedom, and choices. As true as this may be, it is the root of fear. It's hard to stay objective when significant psychological meaning is placed on money. For some people, the pursuit of money reflects a way of coping with fear. The quest for money may represent emptiness in one's life. When money has such symbolic meaning, a person can never have enough money. How do you overcome your fear about losing money? "True fearlessness about money can come only when we are not driven by an insatiable desire for security," according to Ms. Huffington. Instead, a person must live a life driven by passion and purpose, regardless of financial circumstances. When you are passionate about something, it will override your fear of poverty. If you have abundant passion, abundant optimism, and abundant nerve, you will overcome your fear of losing. In the end, our happiness depends on whether or not we find our lives meaningful, or at the very least, inherently rewarding. We must do something significant with our lives. It doesn't necessarily have to be significant like becoming the leader of a country or an inspirational guru, but in our own way, we must make some sort of contribution. We must believe that we have our own place in the world and that it is important. Money isn't everything. It's the process of how we live that matters, not the prize. It is much more satisfying to pursue objectives for the pure joy of pursuing them, regardless of how much money you can make. Winning traders are motivated by the inherent rewards of trading rather than profits. It's common to hear winning traders say, "I love trading so much that I would do it for free if I had to." They find trading personally meaningful. The markets fascinate them. Market action is intrinsically interesting. It is a rewarding intellectual challenge to devise innovative new trading strategies, and seeing how well your ideas pan out is exciting and enjoyable, regardless of whether you win or lose. Viewing trading from this perspective can act as powerful motivators. Individuals who pursue trading in this way are more likely to feel satisfied and can more easily manage the extreme stress the market is infamous for producing. When you aren't focused on the profits, it's easier to stay calm and focused. The money, and possible losses, is either secondary or not an issue at all. Successful traders love the challenges the markets offer and view their work as meaningful. And because they are doing what they love, they are fearless.

January 3, 2007

Daily Commentaries 4th Jan 07

The KLCI rallied up 20.85 pts on the first trading year of the year, one of its strongest performances ever. For today, unconfirmed reports state that Maxis had dropped out of the race for India’s Hutchinson-Essar. More details continued to emerge on the long haul budget airline plans to Europe with FAX now appearing to take the lead. BNM has further liberalized the policy governing equity investment activities by allowing banks to hold up to 5% in another bank. Results released yesterday include LPI Capital which announced a substantial 80 sen dividend. With US markets recording mixed performances overnight as fears of further interest rate hikes re-emerged, the KLCI could well take a breather today. Nonetheless, the long term uptrend remains intact and today could present opportunities to buy on weakness. Technical support and resistance now rest at the 1110 and 1138 pts levels.

January 2, 2007

Daily Commentaries 3rd Jan 07

With most Asian markets and the KLCI having closed 2006 on a bright note, expectations are for a firmer start after the long New Year holidays. There were little fresh news today save for the planned IPO of highway concessionaire, Prolintas, 3 investment banking licenses issued to universal brokers, OSK Securities, K&N Kenanga and Hwang- DBS Securities and Landmarks’ acquisition of 2 parcels of land in Bintan Island that will be developed into a water resort city. AirAsia is also expected to make an announcement this Friday on a key undertaking, following earlier media reports of a tie-up with the Virgin and Easy Group for a global low-cost carrier. On the results front, Kim Loong reported 3QFY07 numbers that were in line with expectations. US markets were closed yesterday in honor of the passing of former President, Gerald Ford but oil prices held steady at US$60 per barrel despite concerns of rising tension in Iraq following the execution of Saddam Hussein. We would expect the market to tread on a positive bias today in search of fresh 2007 leads with resistance and support levels pegged at 1,100 and 1,093 respectively.

It's Just a Business Expense

Stan is still kicking himself for losing $2,000 on a trade last week. As much as he knows he should just let the loss go and move on, he is obsessed with it. He thinks, "It's the holiday season. $2,000 is a lot of money. That's more than I spent on gifts for the holidays. I sure could have used that money to pay off my credit card bills." It is easy to fall into Stan's pattern of thinking. It is natural to equate trading losses with material objects you could have bought with the money you've lost. With every loss may come personal pain: "I lost a month's worth of lobster dinners on that trade, or a trip to Bermuda on that trade." It's understandable, but not very productive. Despite how much you end up losing, it's vital to look at losses coldly as business expenses.

Many people look at money personally and emotionally. They define their self-esteem by how much money they make or how much money they have. Indeed, money has real purchasing power in modern society, so it is natural to view money as emotionally significant and personal. But strong attachments to your money are not very useful when trading the markets. It's necessary to create psychological distance between your trading capital and your self-esteem. Creating psychological distance between you and your money can help you cope with setbacks and losses. How can you view money less emotionally? One method is to have separate mental compartments for your personal assets and your trading capital. In your head, you must think of money in two different and separate ways; it may be appropriate to have emotional ties to the money you use for living expenses, but the money you spend for trading should be treated indifferently as business expenses. In both cases it is necessary to spend your money prudently, but when it comes to business expenses, you must accept the fact that, just as with any business, trading requires money to stay in business. In trading, some business expenses are similar to other businesses. You need money for equipment, data feeds, and commissions. But in contrast to many other businesses, you must include the money you spend on losses in your budget. Losses are merely part of what you need to spend to stay in the trading business. If you trade with reliable, profitable methods, however, you will end up in the black in the long run.

When it comes to trading, an objective approach is useful. There are a few simple things you can do to maintain an objective view. 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 one can do to minimize the feeling of risk and potential loss will nurture an objective mindset. First, it's helpful to trade with money you can afford to lose. If you can't afford to lose the money you trade, it will be difficult to maintain objectivity. Second, it is crucial to manage your risk. By carefully managing risk on any single trade, you can 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, but over time it will become intuitively obvious. Finally, view profits and loses abstractly. Rather than focusing on concrete dollar amounts, try to focus on percentages, or just amorphous, theoretical numbers. Don't equate dollar amounts with concrete goods and services, such as car payments or utility bills. By maintaining emotional distance with the capital you use to trade, you will be able to trade the markets objectively, rationally and profitably.