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Wednesday, July 8, 2009

Looking For Dow Supports


Since our call for the arrival of the bears in the US’Dow Jones market last Friday, the bears have grown and have knocked down another 117 points off the Dow. Now the US bears’main weapon is investor concerns about the upcoming earnings season in the US. With the bears currently dominating the steering wheel for the US markets, we are looking for important levels of support to slow the US bears down.

Immediate Dow support : 8,000
The immediate support for the Dow Jones lies 163 points away at the 8,000 level.This support level is reinforced by the mid term 90-day Moving Average trend line. A break below this level would have severe repercussions and will bring the Dow Value to its next support of 7,500.

Next Dow Support : 7,500
The 7,500 level lies 663 points away and consists of the lows ofthe month of April. If this critical level breaks, we could possibly see a bleak scenario of the Dow venturing towards its ultimate low of 6,469.5 (6March low) and possibly creating a new ultimate low. However, we opine that the possibility of this scenario materializing is rather low.

KLCI :
Though we have called for the arrival of the bears in the US market, we have yet to call for the bears to arrive in our local KLCI market. Yesterday, despite the negative sessions of key global markets, the KLCI still managed to close marginally in the positive zone which signifies that the bulls are still fighting hard but struggling to ward off the bears.

We know that today will be a highly negative day for the KLCI which will force it beneath its 30-day short term Moving Average support of 1,065. However, we are still uncertain as to whether the bears will be present for a prolonged duration. Our benchmark is the selling volumein the KLCI today. If selling volume for the KLCI picks up, it would be an obvious sign that the bears are here to stay in the KLCI and may force the KLCI towards the 1,028 level.

Bursa Chat- News Highlights


Malaysia


Sunway Holdings Bhd’s (SGW MK, Hold, TP: RM1.09) interest in acquiring the local concrete plants, quarries and asphalt factories owned by HeidelbergCement AG may have waned, after the latter raised the indicative sale value for these assets to US$250m (RM885m) from US$200m. The German company upped the asset’s selling price following the emergence of three other interested parties. Submission for bids is expected to start next week. However, with the raising of the price, Sunway, as well as one of the three private equity firms are no longer keen to place their bids. (Financial Daily)
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Berjaya Land Bhd (BLand) has placed out a 3.18% stake comprising 40m shares of 10 sen each in numbers forecast operator Berjaya Sports Toto Bhd (BToto) (BST MK, Buy, TP: RM5.80) at RM4.75 per share for a total of RM190m cash to partly redeem RM848.1m, 8% secured exchangeable bonds that would mature on Aug 15, 2011. BLand said yesterday its major shareholder Tan Sri Vincent Tan Chee Yioun had also concurrently placed out a total of 15.6m shares in Toto, thus reducing his direct interest to 54.5m shares representing 4.34% stake in BToto. Following the placement, BLand group’s stake in BToto was reduced to 47.48% comprising 596.27m shares from 50.66% comprising 636.27m shares. BLand said despite the weak market conditions, there was ample interest to absorb a total of 55.6m shares, raising some RM264.1m cash. (Financial Daily)
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Axiata Group Bhd (AXIATA MK, Buy, TP: RM3.12) is considering an offer for Millicom International Cellular SA’s assets in Cambodia and Sri Lanka. The company may bid as much as US$500m (RM1.77bn) for Millicom’s stake in its Cambodian unit and US$200m for the Sri Lankan operations, according to two people with knowledge of the matter. Axiata declined to comment. (Financial Daily)
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Malaysian Airline System Bhd (MAS MK, Sell, TP: RM2.00) will suspend its thrice-weekly services from Kuala Lumpur to New York via Stockholm, and the return leg, effective October due to a drop in demand. The last flight would be on September 30, after serving New York since 1998. “The suspension is part of our continuous review to ensure that we retain the correct balance in network and fleet utilisation given supply and demand.” said commercial director Datuk Rashid Khan. (Financial Daily)
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Glomac Bhd (GLMC MK, Buy, TP: RM1.25) is cutting its property sales target by half for fiscal 2010 as the global economic slump hits buyers’ confidence. The property developer aimed to sell houses, shoplots and offices worth about RM400m in the year to April 2010, down from its previous target of RM800m, said managing director Datuk Fateh Iskandar Mohamed Mansor. The company was also in talks to sell en bloc a 25-storey corporate tower at Glomac Damansara. (Starbiz)
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AirAsia X, the Malaysian long haul budget airline partly owned by AirAsia Bhd (AIRA MK, Buy, TP: RM1.90), plans to fly to Middle East destinations including Abu Dhabi and Bahrain, chief executive officer Datuk Seri Tony Fernandes said. The unit’s focus will be on Japan, South Korea and Australia before expanding in Europe, he added. (Financial Daily)
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Proton Holdings Bhd yesterday launched the new Proton Saga SE and Proton Exora MT models. The Saga SE is estimated to be sold at RM43,000 and RM45,500 for the manual and automatic variants respectively. The Exora MT will be priced at RM64,998 and RM64,548 for the metallic and solid variants respectively. (StarBiz)
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Advertising expenditure (adex) of the various media in Malaysia grew at 11% for May 2009 compared with the previous month’s 1% contraction. M-o-M, among the adex that grew was newspaper at 7%, television at 17%, radio at 23% and magazine at 22%. (Starbiz)
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The draft for the national energy policy, which includes a section on nuclear energy, is expected to be ready in the next 3 months. The Minister of Science, Technology and Innovation, Datuk Dr Maximus Onglili said that the country had decided to be open to nuclear energy as another source, and so it was drafting the policy and guidelines for it. (BT)
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Bank Negara’s international reserves rose to RM322.9bn (US$91.5bn) as at June 30 from RM318.4bn (US$87.1bn) at June 15. (StarBiz)
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Global


Stocks plunged Tuesday, falling to two-month lows, as fears that the market has gotten ahead of any economic recovery were ramped up ahead of the start of the quarterly reporting period. A sell-off in commodity prices took its toll on the underlying stocks, adding to the market weakness and worries about the duration of the recession. Stocks have been inching lower since mid-June as a three-month stock market rally has lost steam. The Dow Jones industrial average lost 1.9% (-161.3 pts, close 8,163.6). The Nasdaq lost 2.3% (-41.2 pts, close 1,746.2) and the S&P 500 index lost 1.9% (-17.7 pts, close 881.0). In currency trading, the dollar gained versus the euro and fell versus the yen. U.S. light crude oil for August delivery fell US$1.12 to settle at US$62.93 a barrel on the New York Mercantile Exchange. (CNNmoney)
* * * * *
Job openings in the U.S. remained at a record low level in May, indicating that while employers have slowed the pace of layoffs they’re still hesitant to add staff. Openings, or the number of jobs available as a percentage of total employment, remained at 1.9%, Labour Department data showed yesterday in Washington. The reading matches that of March and April as the lowest since record-keeping began more than eight years ago. Total positions available increased to 2.55m in May from 2.51m in the prior month, the Labour report said. The separations rate, which includes dismissals and those who quit their jobs, fell to 3.3% of total employment from 3.5% in April. The hiring rate fell to a record-low 3% from 3.1%. At the same time, the rate of layoffs and discharges fell to 1.7% from 1.9% in April. (Bloomberg)
* * * * *
German manufacturing orders jumped the most in almost two years in May, adding to signs that the deepest economic slump since World War II is abating. Orders, adjusted for seasonal swings and inflation, rose 4.4% from April, the Economy Ministry in Berlin said yesterday. That’s the biggest gain since June 2007 and nine times the 0.5% increase forecast by economists in a Bloomberg News survey. Orders were still 29.4% y-o-y lower. The improvements in orders are domestic and export driven and cover all the main industry sectors, the ministry said in the statement. “The expectation for a broader stabilization has been confirmed.” (Bloomberg)
* * * * *
U.K. factory production unexpectedly fell in May for the first time in three months, suggesting the economy is still in the grips of the recession. Manufacturing output dropped 0.5% from April, when it stagnated, the Office for National Statistics said yesterday in London. The median forecast of 25 economists in a Bloomberg News survey was for a 0.2% increase. The recovery is not yet “guaranteed,” the British Chambers of Commerce said yesterday, as rising unemployment in the U.K. and around the world threatens to prolong the worst global slump since World War II. Eight categories of manufacturing fell on the month, led by paper, printing and publishing, and by machinery and equipment, the statistics office said. From a year earlier, factory production dropped 12.7%. (Bloomberg)
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The Bank of Japan may extend its emergency-credit programs as soon as next week as policy makers await evidence that banks are increasing lending to companies. Officials may want to decide on the matter months before the programs expire at the end of September to quell any speculation they’re ready to scale back their efforts, said Masaaki Kanno, who worked at Japan’s central bank from 1974 to 1999 and served as a senior adviser on research and statistics. The Bank of Japan’s board next meets July 14-15 in Tokyo. The debate reflects concern that the world’s second-biggest economy will struggle to emerge from its deepest post-war slump, and is a contrast from the U.S., where the Federal Reserve has already taken steps toward ending emergency-credit measures. BOJ Governor Masaaki Shirakawa this week said many companies are still struggling to borrow, after the bank’s quarterly Tankan survey last week showed access to credit remains constrained. (Bloomberg)
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