After 4 weeks in 2016, our index suffers a lot of setbacks and continue to slide down after the windows dressing in December 2015. Panic, panic everywhere. Regardless our local market, foreign market also facing the same turmoil. I truly felt that the market is volatile, headless creature directionless. It is neither bull or bear, they call it Monkey Market (this year is a Monkey Year for Chinese), as the chart bounces up in a day, and bounces down in another day.
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| Mr Monkey Market |
In this post, i just want to gather and share some of my view regarding to the local market and some of the global market. I need to confess that my macroeconomic view is not good. But just hear me out. Hope you can gain some knowledge from my sharings. At least there are some things that we should be take note of prior to making any investment decision.
1. FBMKLCI
Lets look at our FBMKLCI for this year.
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| FBMKLCI Daily Chart |
This is a FBMKLCI daily chart. The chart had been in a bear market. In 1 January 2016 until 22 January 2016, index had dropped from 1686.82 to 1625.21, a drop of 3.79%. Look at the SMA200 had cross over SMA50 in June 2015. The gap between SMA50 and SMA200 is quite far. Currently the index is oversold by looking at RSI and the Bollinger Band on 21 January 2016. On Friday, there is a bullish engulfing and our index rebounded to the middle band partly because our our Bank Negara Malaysia's announcement on 21 January 2016. Our Bank Negara Malaysia announces the decrease in the Statutory Reserve Requirement (SRR) Ratio from 4.00% to 3.50%, effective from 1 February 2016[1].
What is actually this SRR? SRR is a monetary policy instrument used for the purposes of liquidity management[2]. Higher SRR means that the banks in Malaysia will have to keep more money as their reserves. This translates into lower loans growth for banks. Normally banks would imposed stricter loan approvals for borrowers, because less funds are available for lending[3]. Banking sectors will suffer the hardest hit. So, now our BNM will decrease the SRR to 3.5%, meaning to say, there will be more money available in the market, there will be more lenient loan approvals and more funds are available for lending. I think from the Finance Index, this is a good sign.
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| Finance Index Daily Chart |
On 22 January, notice there is a bullish engulfing there. From what we had read, and to further confirm whether the lowering rate of SRR is a good sign to the market, the chart tells us the best and accurate story. That is why i always value and appreciate the Technical Analysis. The chart will reflect the consensus of the market.
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| FBMKLCI Weekly Chart |
As for the FBMKLCI weekly chart, after 2 weeks of bearish candle, this week appears a hammer. This hammer might indicate that this is the first turnaround for our local market? The chart tells me yes, as of now...
2. Brent Crude Oil Price
For oil, we are always referring to Brent Crude Oil instead of WTI. It is because the Malaysia budget is always done based on the Brent Crude Oil. Not to forget, our PM will be announcing a new budget on 28 January 2016 as the previous budget was made based on the Brent Crude Oil of USD48. When talk about Brent Crude Oil, the most eye-catching news will be PETRONAS. PETRONAS to cut spending amounting to RM50 billion and will review the business structure[4].
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| PETRONAS to cut spending by RM50 billion |
And because of this, i think that the market is in panic situation. There are a lot of rumours about the PETRONAS recently. I am involved in the Oil and Gas Industry. So, i understand all the panic and the unsettled emotion around me. In 2013 GDP breakdown, Oil, Gas and Energy industry contribute 17% to the Malaysia GDP[5]. But in the latest data by Ministry of International Trade and Industry, Oil, Gas and Energy are no longer the major exports of Malaysia. But instead, Electrical and Electronic Products are the major exports for Malaysia, which covers almost 58% for the exports. Of course, PETRONAS news will still bring some impact to the Malaysia economy. I cannot deny that. To understand the whole story, you can take a look at the this Youtube link[7].
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| Brent Daily Chart |
Brent Oil had keep sliding and on Friday 22 January 2016, it had spiked up and close at USD32.18. As for weekly chart, it forms a beautiful Bullish Harami. As of this moment, the chart is looking as if it is trying to turnaround.
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3. USD/MYR
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| USD/MYR movement |
For USD/MYR, on Friday 22 January 2016, there is a bearish engulfing which for us it is good. Finally our Ringgit is showing some strength. I do not know what exactly strengthening our Ringgit. But i suspect something alongside with the SRR which announced by BNM. Anyway, as of now, our Ringgit is showing its strength, like our Malaysia Central Bank Governor, Tan Sri Dr Zeti always said, our Ringgit is undervalued. Is it the time for our Ringgit to show its strength?
4. Global Market Indices
Still remember our Shanghai Composite's fall and trigger its circuit breaker? It certainly caused the Asia market to tumble. Then the China government decided to uplift the circuit breaker. China market had a sharp fall affecting Hang Seng as well. Special highlight to the Nikkei 225, which rebounded 941.27 points (5.9%) on Friday. A very beautiful hammer formed.
Next, we look at a few major countries index in Europe, especially the Germany Index (DAX) and United Kingdom Index (FTSE 100)[8]. Both DAX and FTSE 100 shows reversal signal. Not to forget our western friend, Dow Jones Industrial Average. It's weekly chart is a beautiful hammer too, with a long tail. Please refer to the chart to confirm with your own eyes. For me, almost all the global market at least are showing a rebound signal.
5. Futures Market Indices
Another indicator we can refer is always the futures market. Personally i always refer to the DJIA futures and FKLI. The futures are not always telling the real story, but at least it can provide us some guidance and reference. All of the information are available in www.investing.com.
Summary:
From item 1 to item 5, from FBMKLCI, Brent Crude Oil Price, USD/MYR, Global Market Indices and Future Market Indices, almost all of them are showing good and promising datas. Since our Monday is a holiday, there are a few things that we hope:
1. Brent Crude Oil increases to above USD30, preferably above USD 32.
2. Ringgit Malaysia strengthens to between RM4.20 to RM4.30
3. Shanghai, Hang Seng, Nikkei, DAX, DJIA all closing in green on Monday.
If our wishes came true, okay. Now coming back to us. Will our FBMKLCI go green? Will it be a long term or just a short term? How long can it sustain? What will we do with our current stocks? Continue to hold? Sell? Buying opportunity? Average down? Keep cash? These are some of the questions that we should seriously consider in our investment decision. I believe by looking at my point 1 to point 5, i think at least you should know how the market will be next week. From my data that i have, next week should be a good week, a rebound week. But anything can happen and everything will change. The most important is we need to set our strategy. What we need to do in the whatever situation. Once we set our strategy, we need to be discipline and do not let our emotions control us. Easy to say, hard to practise...
If your stocks are still aligned with the theme of weakening RM, benefiting from low crude oil and exports, i can assure that those stocks are on the right track and people will continue to invest on these counters based on the theme. Keeping cash is also another option. Maybe we can try to allocate 50% cash and 50% stocks. All depending on your own decision and strategy. Market had been in Monkey Mode in 2016, volatile and jumping up and down. Remember your selling reason must align with your buying reason. Lets utilize these long weekend to set our strategy and hope all of us will continue to benefit from this Monkey Market. May the HUAT be with us~
Let's Ride the Wind and Gainvest
Gainvestor 10sai
23 January 2016
11.12pm
11.12pm
Sources:
[1]: http://www.bnm.gov.my/index.php?ch=en_press&pg=en_press_all&ac=3320
[2]: https://en.wikipedia.org/wiki/Reserve_requirement
[3]: http://financemalaysia.blogspot.my/2011/03/what-is-statutory-reserve-requirement.html
[4]: The Edge Financial Daily dated 19 January 2016
[5]: http://etp.pemandu.gov.my/Transformation_Unplugged-@-It%E2%80%99s_Not_All_Doom_and_Gloom.aspx
[6]: http://www.miti.gov.my/index.php/pages/view/2152
[7]: https://www.youtube.com/watch?v=hyqprG1pDzE
[8]: http://www.investing.com/indices/european-indices?majorIndices=on
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