The Star Online: Business
The Star Online: Business |
| Posted: 22 Jul 2011 05:48 PM PDT Global foreign exchange market HEADLINE risks remain dominated by US debt ceiling and European peripheral debt crisis this week amid policy uncertainty and potential stalemate. The euro and the US dollar both came under pressure at the start of the week due to debt woes. Euro/US dollar surged 1.76% this week and traded around 1.4380 levels at the point of writing after the Greek bailout package was well received. In the United States, there is still very few sign of progress on raising the country's debt ceiling ahead of the Aug 2 deadline. If Friday comes to pass with no major news, we could see panic selling of the US dollar and this would trigger sharp volatility across the financial market. Mixed US economic reports put extra pressure on the greenback while report from Standard & Poor's was another factor causing a new wave of US dollar selling, prompting the US Dollar index to decline by 1.52% to 74.11. An improvement in risk appetite combined with stronger economic data has helped to lift the British pound 1.05% to above 1.6300-region. With the fate of high beta currencies tied to the European sovereign debt crisis, what is good for the eurozone is good for the United Kingdom. In terms of economic data, pound traders were also pleased to see retail sales rebounded 0.7% month-on-month in the month of June. The Japanese yen had strengthened 0.78% during the week. Japan posted a merchandise trade surplus of 70.7 billion yen in June, heading back into positive territory after two months of deficits following the devastating natural disasters on March 11. With improved market sentiment fueling more risk flow, the Australian dollar pushed through the 1.0800 level while the New Zealand dollar reached all time high against the US dollar at 0.8643. Meanwhile, gold posted new record highs this week and reached US$1606 per ounce. This strength is likely to remain until a debt-ceiling deal is reached in the United States. Inflationary pressures continue to creep higher in Asian economies. Hong Kong's consumer price index grew for the eighth consecutive month in June to 5.6% year-on-year (y-o-y) from 5.2% in May. Elsewhere, Singapore's non-oil domestic exports grew slower than expected at 1.1% y-o-y in June, compared with 7.6% rise in May. China's manufacturing Purchasing Managers' Index fell to a 28-month low of 48.9 in July. Asian currencies strengthened as risk-averse sentiments abated. The Bloomberg-JPMorgan Asia Dollar index rose by 0.41%, while the ringgit strengthened to trade at 2.9800-region. As it stands, volatility in the foreign exchange would remain high in the coming weeks on better sentiment thanks to positive developments at European Union summit. One of Greece's problems financing uncertainty has been removed while voluntary private investors' participation may avert a credit downgrade and benefit from a more stable financial and economic environment. This should lift investor appetite. Focus is now on the implementation. Possible jump in appetite for risk, firm underlying ringgit fundamentals and pressure on Bank Negara to hike rates to curb rising prices should push US dollar/ringgit lower. As such, we are of the opinion that US dollar/ringgit could trade in a range of 2.9650 to 3.0100 in the coming week. US Treasuries (UST) market During the week, the UST yields aligned higher with the two- and 10-year UST yields increased 4bps and 9bps to trade at 0.387% and 2.997% respectively. Malaysian bond market This week, trading in local govvies saw thinner volumes with players preferring to stay on the sideline ahead of June CPI data release and details of upcoming 10-year GII reopening. Domestic inflation accelerated to reach a 37-month high of 3.5% y-o-y in June (May: 3.3% y-o-y) but was slightly lower than the Bloomberg consensus for a 3.6% gain. The increase in price was mainly driven by supply shocks sending food, transport and energy indices to edge higher. At time of writing, details for the upcoming 10-year GII reopening was announced with an issue size of RM4bil. Auction for the mentioned bonds will be held on July 28. In the Malaysian Government securities (MGS)/GII market, RM9.5bil worth of trades were transacted with a daily average trading volume of RM2.4bil, markedly lower than previous week's daily average of RM4.2bil. Trading activities remained focused on the belly of the yield curve, with RM2.1bil trades done on the five-year benchmark MGS. As of Thursday's close, the benchmark yield curve aligned higher with the three-, five-, seven-, 10-, 15- and 20-year benchmarks closing unchanged to 2 bps higher during the week to close at 3.26%, 3.5%, 3.7%, 3.88%, 4.04% and 4.18% respectively. In the public debt securities market, a total of RM870mil worth of trades was transacted with a daily average trade volume of RM218mil. The GG/AAA and AA segments contributed 34% and 66% of trades respectively. Within the GG/AAA segment, notable transactions were seen on Cagamas bonds maturing 2012-2014, which closed mixed at 3.41%-3.68% with RM102mil done in total, and Danga Capital 4/15 which closed little changed at 3.86% with RM50mil done. In the AA segment, trading interest was seen in banking bonds. Yields on CIMB 4/16 closed 3 bps lower at 4.1% with RM100mil done, Sabah Development Bank 8/11 closed 5 bps higher at 3.38% with RM70mil done, while AmIslamic 9/17 closed unchanged at 4.25% with RM40mil done. Ringgit interest rate swap (IRS) market Ringgit IRS rates traded 3-5 bps firmer on slightly better global risk sentiment. Trading activities were somewhat lackluster as market awaits mid-week June CPI data (released at 3.50%) and the announcement of the 10-year GII issuance. ● For enquiries contact: fx-research@ambankgroup.com or bond-research@ambankgroup.com Full Feed Generated by Get Full RSS, sponsored by Used Car Search. |
| Posted: 22 Jul 2011 05:47 PM PDT AFTER a period of correction process, Hiap Teck Venture Bhd staged a steep rebound in the wake of renewed bargain hunting interest, which witnessed the shares hitting to a near six-month high of RM1.18 during intra-day session before reversing to finish down nine sen to RM1.05 yesterday. The recent recovery was backed by encouraging trading volumes and it came after prices had re-tested the 20-month lows of 91 sen on July 14 to form a "double-bottom" pattern. This stock had penetrated the 14-day simple moving average (SMA), 21-day SMA, 100-day SMA, as well as the 200-day SMA on our radar screen, but we could not confirm that the prevailing trend has shifted to bullish just yet as the mid-term descending line remains intact. The outcome may be known soon and investors should take note that a decisive penetration of the mid-term descending line of RM1.18, also yesterday's intra-day peak, will signal a positive turnaround. The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index were fast reaching the overbought area after issuing a buy signal on July 14. Elsewhere, the daily moving average convergence/divergence histogram continued to expand positively against the daily trigger line to retain the bullish note. The 14-day relative strength index retained the bullish posture, fluctuating around the 80-86 points band. Analysis suggests that if the recent buying momentum is genuine and sustainable, a positive breakout will come about soon, which may see prices scaling higher on bullish-extended mode. To the upside, stiff resistance is expected at the RM1.57 mark, which is the previous major rally peak. Stop-loss exit is pegged at the 90 sen line. ● The comments above do not represent a recommendation to buy or sell. Full Feed Generated by Get Full RSS, sponsored by Used Car Search. |
| A probable sideways style on extended consolidation Posted: 22 Jul 2011 05:45 PM PDT REVIEW: Despite the steadier US markets overnight, Bursa Malaysia kicked off the week on a soft platform, with the benchmark FBM Kuala Lumpur Composite Index (FBM KLCI) declining 1.02 points to 1,576.23 in early trade on extended correction process. The broad-market sentiment was frail, as mounting concerns that the US sovereign debt rating may be downgraded and the prevailing European sovereign debt crisis kept many investors at bay. Apart from that, a slightly easier Asian stocks also prompted institutional players to adopt a cautious stance. In the absence of support, the local bourse sustained the downward spiral, falling steadily and violated the short-term uptrend line to touch an intra-day low of 1,561.97 in the afternoon before ending at 1,562.58, shedding a huge 14.67 points in lacklustre session on Monday. Technically, a clear breakdown like this does not bode well for the market the next day. Meanwhile, overnight Wall Street and crude oil prices reversed down in the wake of fresh selling due to lingering global debt situation. Elsewhere, another mixed showing in regional bourses also weighed on the local sentiment. Combined all together, they set the stage for more declines. In line with expectations, the key index sank from the opening bell to a low of 1,552.71 in mid-afternoon on follow-through liquidation amid dearth of market-stimulating leads. At this stage, the key index had plunged a total of 44.37 points, or 2.8% from an all-time peak of 1,597.08, established on July 11, and indicators were signalling a grossly oversold condition. For that simple reason, investors emerged from the sidelines to indulge in bottom fishing and that has helped the local bourse bounce off the ebb later but it was not good enough to lift the key index back to the plus side. At the end of Tuesday's session, Bursa was still down 6.94 points to 1,555.64. Nevertheless, bargain hunting activity continued to dominate the floor the following day, as a handsome rebound in World equities, especially overnight Wall Street amid easing debt fears, solid economy data and better-than-expected corporate earnings encouraged investors to return to risky assets. As usual, blue-chips led the recovery, propelling the FBM KLCI up 6.95 points to 1,562.59 in mid-week. Thereafter, the local bourse inched higher, adding another 3.22 points to 1,565.81 amid extended bargain hunting nibbling on Thursday before pausing owing to an apparent mild profit-taking activity, losing 0.75 of a point to 1,565.06 yesterday. Statistics: For the week, the principal index sagged 12.19 points, or 0.8% to 1,565.06 yesterday, compared with 1,577.25 on July 15. Weekly turnover stood at 4.901 billion units valued at RM9.245bil, versus 3.799 billion shares worth RM7.218bil changed hands a week earlier. Technical indicators: After issuing a short-term buy at the very oversold area in mid-week, the oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum continued to strengthen, ending at the 43% and 30% respectively yesterday. In stark contrast, the daily moving average convergence/divergence (MACD) histogram prolonged the downward expansion in tandem with the signal line to stay bearish. It flashed a buy on July 13. The past week saw the 14-day relative strength index recovering moderately from the oversold area earlier of the week to a high of 42 points on Thursday before reversing slightly to settle at 38 points yesterday. Weekly measurements were deteriorating, with the weekly slow-stochastic momentum on the slide and the weekly MACD in danger of slipping below the weekly trigger line. Outlook: Bursa extended the correction mode due to lack of buying incentives on the horizon, thus resulting the key index violating the short-term uptrend line during intra-week trading. Despite the breakdown, there was certainly no evidence of an unusual liquidation activity on the broad market, with volumes staying on the low side. This may mean that many people still have faith in the market, holding on to their shares. For now, the local bourse is showing signs of stabilising after the recent pullback and this is a positive development that may clear the path for shares to recover. However, some worrisome views about eurozone debt crisis and the global economy are still clouding the marketplace and likely to check gains. Given the mixed scenario, Bursa will probably tread sideways in the immediate term. Technically, most indicators on our tracking system are looking frail or negative, implying the local bourse may stay in consolidation, if not correction this week. A crack below the recent lows of 1,552.71 will see the lower 100-day simple moving average (SMA) of 1,542 and the 200-day SMA of 1,527, becoming much weaker. Current resistance is envisaged at the 1,575-1,576 points band, followed by the all-time peak of 1,597.08. Full Feed Generated by Get Full RSS, sponsored by Used Car Search. |
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