Sunday, April 12, 2009

Upcoming Important Market Catalysts

It seems that the markets have gone into bullish mode. Still, the majority are still very cautious on this run. To me, the bull runs from here on will come in spurts and stop-start as confidence has to trickle back in. What is probable is that we probably would not retests the lows achieved recently but rather finding new levels to build on. Hence we have to be more vigilant to look for short term markets catalysts that can push markets higher or cause a mild correction to set it. Its still a trading market, i.e. more like a 3 steps forward 2 steps back. We should be clear that the markets will not get anywhere close to previous all time highs this year, so bear that in mind. If we can even get back half of the losses i.e. 25%, that would be very decent for this year. For the KLCI, I can see an upper range of 1,050-1,100 being the high range for in 2009. I doubt very much it will break down past 850 again this year, unless something out of the ordinary happens.

To get a better idea of the market's pulse in coming days and weeks, we have to pick out the likely important catalysts. I have already mentioned how the markets started this rally: Pandit's announcement, Geithner's new plan, AIG's generosity etc. The rally was boosted again by an early announcement by Wells Fargo that it made $3bn odd for 1Q2009. The banks dragged the whole market down, their fortunes will again pull the markets up. Hence, Goldman Sachs 1Q earnings to be announced on April 14 is vital, so too will be JP Morgan's on April 16, followed by Morgan Stanley on April21. The first two can be said to be the bigger and more healthy banks running around now. It is crucial that they post decent and positive results. If we take Citigroup and Wells Fargo as examples, it is likely that they will post stellar operating profits. What is more crucial is the amount of write downs - that has to drop significantly in order for the markets to continue its bull run.

Having said that, a very strong run this week may indicate that many are trying to discount the very good earnings of the banks already. Hence it may actually be a sell on news following the earnings. Even so, if the banks showed positive results and little write downs, the correction will be swift and shallow, the run will still be intact.

We also know that Goldman Sachs is raising $5bn as we speak. It is very likely that Goldman will be the first to pay back $10bn to the US government's TARP. That should be greeted as good news as well.

Japan's new additional stimulus is another positive, and the amount of new lending in China has continued to be mind boggling. It is hard to see negatives for the time being. It doesn't mean its safe. Even when the conditions are good, markets will find ways to correct itself by being overbought, but its likely to be 3 steps forward 2 steps back kind of market tango in the upcoming weeks.

p/s photos: Gao Yuan Yuan


Gamelion said...

Think the most important market catalysts right now for all the nations to follow is the trendy ala- Keynesian to print unlimited money forever to prosperity !!!

Big Bad Wolf said...

I have doubt that this rally will be able sustain itself.
Look at it, the current economic scenario is unprecedented, and one may argue that we are in much more worse condition than the Great Depression in the 1920's.

Lots of major corporations in US were on the verge of collapsing barely a year ago (and some still are), and how could they have posted a turnaround in such short span? It is rather illogical dont u think?

And to see that US is accumulating more and more debts with each passing day, amounting to trillions! gosh, and they are still printing more and more money like there is no tomorrow. I dread that we are on the verge of irreversible damage!

Try to check out this article.

But on the Technical analysis point of view, the chart looks very good and has potential to rally even further. If want to go in the market, then make sure that you have a cut-loss plan in case the tide turned around!

Gamelion said...

Be expect more in future that The Fraudulent Accounting Standard Board (FASB) will change all the rules/standards to suit whatever the financial banking will think it is appropriate to do so just because it is not fair to them !!!!!!

see said...

US banks 1Q earnings courtesy of AIG. Really dunno if going forward it will be ugly. Even Jamie Dimon said March is bad. House mortgages is near its halfway mark but losses from credit card and commercial property loans is just beginning to show up and can be just as ugly. The best can hope for is market stay flat. Sure changing mark to market will help the market but then whats the point of TARP then since now no need to writedown toxic assets

As for M'sia, the bogeyman is never know whats gonna blow up next (no pun intended)

Datuk said...

If history is a good guide and the fundamental investing is not out dated yet, i think we are inclined to expects the current rally will be a rather short live. The reasons as below:

i) Based on the price and earning outlook in 2009,the rally will be punctuate soon.

The prices for blue chip counters are still high if based on the 10 years average records.

The earning outlook for electronic, building materials,banking textile, timber, furniture, wood industries and housing industries showing heading to down south.

Can the bull take charge when the economy is yet to hit bottom? I'm doubtful, completely!

ii) The prospect for the world economy is rather dismal in 2009 and 2010. As an export oriented and losing competitiveness trading nation, the journey of economy contration is still at the very beginning. Worst is yet to come.

iii) The outflow of foreign funds will be continous in view of the down grade in soverignty rating of Malaysia. If would be unrealistic to expect a net new inflow of foreign funds under such economy circumstance.

iv) The latest geo politic scenario in Malaysia & Thailand zero out all reasons for foreign fund to re-enter the market.

v)If would be naive to assume the investors confidence remain unchanged with the wealth evoporation as a result of an earlier busting of bubble and the upcoming employment retrenchement.

The only positive factor is the interest is near to the record low point. The question is without the participation of foreign fund, how far can bursa go?

Having pictured the above gloomy scenario, the key point for you to consider is.....if your equity exposure is at low end, perhaps no harm for you to move in 20% of your wealth into the equity market.

That would be the most aggressive advice for you right now.

For myself, i still maintained a zero position in equity market, at least until second half of 2009.

Good Day,