30/04/2009 Market Update

	Close	Change	Low	High
STI	1,920	70	1,880	1,920

	Shares	Value
Volume Traded	2.01 billion	$1.74 billion

It was quite a chaotic day. But in the end, we came to realize that there was some window-dressing effect today, especially on the financial and property counters. This is because: (1) traded volume spiked up compared to yesterday, (2) the buyers were clearing the sellers' queues like nobody's business, and (3) most of our counterparties were institutions when we sold off. Coupled with a strong Hong Kong market and buoyant US futures, our market broke through resistance levels one after another. Matching up to close at day high of 1,920, our next resistance is our recent high of 1,947 and if we do succeed in breaking above that, we will be looking forward for the market to test/break 1,960.

Putting this window-dressing effect aside first, we shall try to reconsider all the current issues which should affect the market. Firstly, it seems like the swine flu fears were entirely casted out of mind today. The WHO had raised the alert level from phase four to five dated yesterday. I think the people right now, are just more concern about the actual number of deaths rather than the potential severity of this issue. For now, we have eight deaths with the new one from the US. I am guessing that as long as the fatality rate is not high, the markets will not panic.
Secondly, the US banks stress test results loom ahead though US regulators
said last night that the recession appears to be easing. No hard figures to confirm as yet (other than some leading indicators we have seen so far), so we can assume that investors were playing on sentiment. Just that we don't know if they are serious buyers or traders.
Lastly, other than this window-dressing effect on our market, I think it is worthwhile to note that Hong Kong HSI gapped up furiously at opening today. I will expect HSI to lose strength sooner or later and retrace down to close back this gap. As a result, our market will normally be led down too.

Chart wise for STI, we have a gap at 1,860. This level is being supported by a rising 20-day MA too. Therefore, this is a strategic level for us to re-enter again. If we can confirm that this is the new uptrend, then trend traders should be prepared to trend trade once STI breaks above 1,960. Otherwise, we should only buy on pullbacks. It is still too early to tell if this is a new uptrend, or purely some window-dressing effect playing a prank on us. We will have to see what happen over the weekend.

FrasersComm and F&N:
After sending my adhoc market update, FrasersComm announced that it might consider a rights issue to refinance an existing debt of $500 million due this year. Consequently, F&N continue to perform sluggishly only to be pushed up slightly nearer the end of the day. The common understanding here is that should FrasersComm decides to go ahead with a rights issue, F&N being an important shareholder, will have to undertake its fair share of entitled rights. It might even have to help take up unsubscribed rights in the event that other investors choose not to subscribe. And my current understanding of F&N is that it is not really in a very strong position to partake the rights issue. This may be the whole reason to its sluggish performance recently.

Note: Kindly read my first post, About Myself, on my disclaimer. Thank you.

29/04/2009 Market Update

	Close	Change	Low	High
STI	1,849	41	1,816	1,859

	Shares	Value
Volume Traded	1.52 billion	$1.16 billion

Things emerged rather unexpected today for our side. The market was cautious and quiet for the first half of the day. After lunch, we took the cue from Shanghai and Hong Kong as both markets rebounded strongly. Both markets closed nicely near their 20-day MA. We went as high as 1,859 before meeting temporary resistance from our 14-day MA and retreated back to close just a tad above our 20-day MA too.

From today's performance, it feels to me that the fund managers were doing some window-dressing. Now I wonder if there is still any chance of window-dressing effect tomorrow before we enter May next week. Now let's reassess the situation again after my thoughts yesterday. The WHO had reported new findings here: http://www.who.int/csr/don/2009_04_28/en/index.html

The actual death figure arose from the swine flu is actually only 7, not 152 as reported previously. Good news here, but we have 7 countries with confirmed human cases of swine flu infection. Maybe this explains why the markets were quite buoyant today. While if it is true that the swine flu issue had been over exaggerated, then the panic in the market yesterday could be the excessive fear which I was referring to. And this would imply that we missed the opportunity yesterday and now the markets are on their next wave upwards (because the US has managed to stay relatively resilient these few days). That is why I always advise that we don't try too hard to time the bottom, because we will only know it is the bottom on hindsight.

But it might be too early to conclude anything from here because things are still pretty uncertain. We never know if the swine flu will spring some unpleasant surprises at us again. Even if we can neglect the swine flu, essentially, we are somewhat still nervous about the US banks and the catchphrase, "Sell in May and go away." I guess we just have to remain alert here in order to jump onto some good opportunities. Meanwhile, I will suggest that if you have been trading at around these levels (1,800 - 1,850), close your trading positions early for the week and avoid the long weekend risk. If you have been seriously collecting some counters at the mentioned levels and are not considering to take profits yet, basically we will only buy more on pullbacks, i.e. at 1,780.

Kepland:
A few clients have been asking me about more details on its rights issue. I have just gotten them today.
CR will be until 11/05/2009. So if you buy/hold it till the end of 11/05/2009, you will be entitled to the "9 rights shares for every 10 existing shares held" issue.
XR will be on 12/05/2009. Depending on its closing price on 11/05/2009, the share price should be adjusted theoretically. But how it opens that day will depend on the market forces again.
For those who are entitled to the rights shares, the trading period for them in the open market is 19/05/2009 - 27/05/2009. After this period, if you are still holding on to the rights shares, you will have until 02/06/2009 to pay ($1.09 per share) and convert them into the mother share else they will expire.

Note: Kindly read my first post, About Myself, on my disclaimer. Thank you.

28/04/2009 Market Update

	Close	Change	Low	High
STI	1,808	-10	1,791	1,827

	Shares	Value
Volume Traded	1.38 billion	$999.17 million

In the end, more bad news did surface. While it is still gripped by the swine flu outbreak, Mexico got hit by an earthquake of magnitude 5.6. It can be said to be a really bad combination: flu pandemic plus earthquake. Then World Health Organization (WHO) increased the alert level for the swine flu from three to four.
At the time the news was released, our broad market took a beating as investors feared that in such a bad case scenario, economy recovery could be derailed. As a result, the financial and property counters took a beating, especially CapitaLand. Interestingly, medical associated counters such as Medtecs and Healthway enjoyed some heavy trading these two days.

Towards closing, the panic eased off and our market pared some losses. I think the current sentiment still weighs more towards caution rather than fear. This is reflected in the low traded volume. Then right after closing, channelnewsasia.com came out with reports that China is investigating several people with suspicious symptoms while there are still no confirmed human cases of swine flu in China as of now. STI is still holding above the 1,800 psychological level.

Some thoughts here:

Firstly, I suspect this swine flu virus can likely affect more areas before being halted. Secondly, from my understanding, it is not as deadly as the SARs virus, at least for now. Furthermore, various governments are more prepared and willing to act quickly to curb a pandemic outspread after the lesson from SARs outbreak. But I think a normal person out there on the street will feel more fearful than usual base on: (1) insufficient knowledge and information on this topic and, (2) all the small talk while interacting with friends/relatives, thus spicing up everything and inducing more fear.
If my thoughts are true, then I think the normal investors out there are likely to portray their overly excessive fears in our market. I guess such fears will push down the market more than it should retrace (base on fundamentals) in the near future, yet I have no idea just how much will be considered too much.

I guess the most important note here for us now is: there will be fear in the market, but we shouldn't fear if we want to reap this opportunity. Take the SARs incident as an example. Stocks recovered after that too. It is just a matter of trying to buy as low as possible. Don't try too hard though for I had already highlighted the consequences of trying too hard to buy at the low – miss the boat. Our next strategic entry levels are still at 1,780 and 1,720.

Note: Kindly read my first post, About Myself, on my disclaimer. Thank you.

27/04/2009 Market Update

	Close	Change	Low	High
STI	1,818	-34	1,796	1,855

	Shares	Value
Volume Traded	1.77 billion	$1.16 billion

An unexpected outbreak of the swine flu over the weekend killed our optimism on the US gains last Friday. Fear gripped our market initially as investors were reminded of the SARs outbreak in 2003, pushing STI below its support at 1,830, and even beyond the psychological level of 1,800. Panic selling and/or shorting were prevalent during the first half of the day before some bargain hunters came in towards the later part of the day, and pushed STI well above its day low.

I think the sudden emergence of this swine flu has created much uncertainty in the market. Here are my thoughts just to share: It is a fact that the 1,830 support has broken, while the next support levels are at 1,780 and 1,720 region. The question here is, "Will STI find support here and bounce upwards soon, or if it goes down, will it hold at 1,780 or 1,720? Or go even lower?" If you had not bought into the market during this level and the STI rebounds, then you will miss the boat. If the STI retraces down further, regardless of whether you have entered, we are just trying to buy more at cheaper levels. I think scenario two is more likely for now.

So now, which strategic support should we aim? In my opinion, we should enter at both levels should both levels be hit, because we seriously won't know where the STI will hold and rebound up exactly. If you have all received my adhoc market announcement this morning, based on my house technical analyst's current views on the swine flu, the market should hold at 1,780. But from the latest news, it seems like there might be a new strain of the flu virus, and should it evolved into an epidemic, then obviously, 1,780 is not likely to hold strength. I will leave it to individual's discretion on when he/she wants to enter. My advice will be: regulate your bullets and try some at every strategic level. Those investors who have always try to pick the low points should understand perfectly, because most of the time, we ended up missing the low points and buy higher instead.

For the very near term outlook such as tomorrow, we are just waiting to see how Wall Street will react tonight. If it closes weak enough, it might lead us to create a gap down at our opening, which will create an ideal entry point for both collectors and traders alike. This is because when the market gaps down, chances are that it will recover on bargain hunting to cover back the gap in its chart.

SIA:

Following my adhoc market update this morning, I continue to suggest it as a contrarian play. Whether it will turn out to be a short-term or long-term trade will depend on the overhang from the swine flu.

F&N:

Apparently, there are some market talks on the possibility of it doing capital raising after Keppeland announced its rights issue. That's probably why it has been underperforming so much compared to the rest. I guess it will only be more advisable to have it as a longer term investment. Do remember to keep extra capital on hand in case it really announces a rights issue.

Contra trading Vs. Contrarian trading:

I think some of you are mixed up between these two terms. Contra is basically buying, and closing out the position before the due date for payment. The contra period is within 5 days from trade date. And strictly speaking, is mostly betting on luck when traders play contra. On the other hand, contrarian trading or investing derives from the word, "contrary". The idea of going contrarian means doing the opposite to what the mass market is doing, believing that the mass market has overdone the selling or buying. Contrarian investing has a longer term connotation and is largely favored by Warren Buffett, the renowned investor. Contrarian trading is more short-term.

Note: Kindly read my first post, About Myself, on my disclaimer. Thank you.

24/04/2009 Market Update

	Close	Change	Low	High
STI	1,852	-7	1,840	1,859

	Shares	Value
Volume Traded	1.44 billion	$1.04 billion

Another quiet day with an even tighter trading range compared to yesterday. Volume traded is getting more and more pathetic. It is understandable that many investors prefer to stay by the sidelines in wake of US regulators discussing their findings with the banks. US officials also will outline publicly the process they followed in an attempt to show how rigorous the testing was. It is anyone's guess on how the US market will be affected tonight, though the final results will only be announced on 04/05/2009. The only clue we have now is the US futures pointing slightly negative.

The hot stocks today were still CPO counters, while Capitaland was under significant pressure after results came out weaker than expected. Chart wise, the STI is getting into an increasingly tighter trading range, which suggests that a breakup/breakdown should come along soon – probably to be brought about by the announcement of the stress test result. Support levels for the STI are at 1,830 and 1,780. These will be our
strategic entry levels as well.

Note: Kindly read my first post, About Myself, on my disclaimer. Thank you.

23/04/2009 Market Update

	Close	Change	Low	High
STI	1,859	+16	1,836	1,862

	Shares	Value
Volume Traded	1.55 billion	$1.25 billion

It was a quiet day with a lower level of activity compared to yesterday. I could feel a sense of caution in the air. Our market was trading with a pretty tight range for most of the day. Same thing again, decent recovery in the regional markets, especially Hong Kong, gave us some optimism. Strengthening US futures also helped to create a minor match-up in our index at closing.

It was observed that the main action today was in the crude palm oil (CPO) counters. This was most likely brought by a few houses upgrading the plantation sector on the basis that CPO prices should stabilize soon. Though our market strengthened in the end, I am afraid that this would be a flash in the pan as there are too many uncertainties out there in the US side. I will prefer to keep my trading position short and sweet so that I won't be exposed to unnecessary risks. For longer-term investors, we will continue to buy more whenever the market pulls back. Current support for STI is around 1,830. Immediate resistance is capped at 1,880 region.

Note: Kindly read my first post, About Myself, on my disclaimer. Thank you.

22/04/2009 Market Update

	Close	Change	Low	High
STI	1,843	-43	1,830	1,875

	Shares	Value
Volume Traded	1.72 billion	$1.36 billion

Our market was relatively normal for the first half of the day – some profit-takings as we had matched up higher the previous day. After lunch, regional markets began to retreat considerably. Their weakness took a toll on us, dragging us to as low as 1,830 before the 20-day MA lent some support. At pre-close matching, our market got matched up again, this time because of bargain hunting and maybe some short coverings.

As mentioned this morning, we will be anticipating more eagerly for these few results release tonight: Morgan Stanley, Wells Fargo, Apple and eBay. Then we will be witnessing very soon in next month if the cliché line, "sell in May and go away", applies this time round. For those who have been buying around this region, it is time for us to take a breather and see if STI will break below its 20-day MA and retreat to 1,780 before buying more again.

High beta vs. defensive stocks:

Same strategy again. The market is starting to feel a little wobbly again. Therefore, I think it is time to pre-empt the rest by going into the defensive counters first. In the event the mass market begins to take damage from a strong correction, they will flee to the defensive counters, which is when we will sell to them for some nice profits. And because the defensive counters have retreated a bit these few days, they are at relatively attractive prices already.

Note: Kindly read my first post, About Myself, on my disclaimer. Thank you.

21/04/2009 Market Update

	Close	Change	Low	High
STI	1,887	12	1,813	1,887

	Shares	Value
Volume Traded	1.58 billion	$1.23 billion

The activity is starting to shift back to the blue chips again. It was a case of "opened weak and closed strong" today. The underlying strength in the market remains strong even though the US fell so much last night. After breaking below the 1,835 support level, most blue chips were trading at levels very near to their 14-day MA. After lunch, regional markets started paring losses and led us up. Coupled with the US futures turning positive, STI regained upwards momentum and pushed towards 1,855 to cover a gap created there this morning. At pre-close matching, STI got matched up to day
high on the back of short coverings.

From today's performance, I think we have slightly more clues to the tricky situation I had mentioned yesterday. It seems to me that most investors are serious about buying and holding on to their blue chips. The traders are mostly trying to trade up the trend rather than to short down the market. These add up to bring about this resilient market I guess. Therefore, I suggest for us to continue collecting more shares whenever possible on pullbacks and/or using the 14-day MA as a gauge to time our entry. As of today's closing, I see the shot-term support for the STI at 1,850 region. It would be good to enter more from here or lower if you agree with me that in the near term, STI can possibly retest or break above 1,960 (the last high in January).

We will have to see how Wall Street performs tonight before taking our next course of action. Our closing this evening probably factored in a rebound at Wall Street already. Should this expectation fails, the traders will very likely take profits off the table very quickly tomorrow. So let's wait and see.

Note: Kindly read my first post, About Myself, on my disclaimer. Thank you.

20/04/2009 Market Update

	Close	Change	Low	High			Share	Value
STI	1,874	-21	1,857	1,896		Volume Traded	1.72 bil	$1.06

The volume traded was even lesser today. Same thing, the activity was concentrated on the penny counters. STI managed to stay relatively resilient for most part of the day as HSI lent strength to our market. But the rapidly plunging US futures made the STI matched down at closing.

From this low trading activity, it is exactly what I had mentioned before: investors are cautiously waiting for something to happen. There are 2 possibilities here: (1) the market is consolidating for a further rally soon just like 31 March, or (2) setting the stage for the pullback. At least I can say the view (2) is very likely to apply to those speculative penny counters because I deduce that many traders are having short-term positions in them currently. For the blue chips, the low turnover volume could mean investors are serious about holding on to them, or simply because they have not decided on selling their good counters yet. This is a tricky situation.

Nevertheless, STI chart seems quite determine to retreat towards 1,835 unless the US tonight produces some pleasant surprise. I continue to recommend that we load up good counters around 1,835 region and/or near the 14-day MA of the blue chips.

Banking counters:

They are starting to face stronger downwards pressure today after they led the rally up for so many days. This behavior might have something to do with bad rumors on the stress test results for the 19 top US banks. I think there is further downside for the banks in the near term. On another note, DBS and OCBC are quite near to their 14-day MA supports, but in terms of price-to-book value, DBS is slightly cheaper at 1.06 times while OCBC is at 1.18 times.

CMT:

It is finally starting to show signs of weakness after holding up for so many days. Let's watch on first.

Note: Kindly read my first post, About Myself, on my disclaimer. Thank you.