Here come the bulls

Now is a smart time to buy stocks....

Historically, on average there have been two particularly auspicious times to buy stock each year. Right now is one of those times.

We are very bullish on shares, and for the following reasons:

We do not believe that the economy will experience a double-dip in the remainder of 2010.

A typical bull market does not end after just one year, but averages between 2-3 years, depending upon the measurement technique used. It would be unlikely for the bull market to end now after just a one-year advance, especially after the severe and lengthy onslaught inflicted by the 2007-2008 bear, whose wrath has left many groups undervalued by historic measures.

Many stocks are forming sideways price consolidation areas, known as bases. Subsequent to an intermediate-term correction or bear market, this has been our most reliable indicator of an impending intermediate-term advance for the past 20 years.

In fact, during this period, we have only encountered one other instance in which the market fell apart and moved to new lows despite the presence of many stocks building bases. Especially bullish is the fact that more stocks are forming bases at present than at any time since 1999, or before.

In particular, we like the fact the stocks are building, and breaking out of, sideways areas of consolidation, known as bases.

Maxis: 04/06/10 (RM5.24) Buy, target price RM5.90
Alam Maritim (RM1.65) Buy, target price RM2.40
Wah Seong: (RM2.08) Buy, target price RM3.40

EURO SQUEEZE

The euro resumed its slide as a recent short covering bounce faded. Traders said with liquidity in the foreign exchange market showing signs of drying up, investors were likely to shelter in the relative safe haven of the dollar.

The euro slipped to around $1.2300 from $1.2376 late in New York on Monday, when it lost more than 1.5 percent. Against the yen, the euro fell 1 percent to 110.53.

"Investors have started to sell the euro, believing that there'll be more banks in trouble, particularly in Southern Europe," said a foreign exchange trader at a European bank in Tokyo.

"The euro's fall has not run its course."

The South Korean won fell 2.8 percent against the dollar, its worst daily loss since March 2009, amid a sharp rise in tensions after Seoul accused its communist neighbor of sinking one of its warships.

The U.S. dollar and the Japanese yen tend to gain when there is a spike in volatility and loss in risk appetite. The dollar was up 0.7 percent against a basket of currencies

The Australian dollar extended its fall, dropping nearly 1 percent against the U.S. dollar and the yen at one point, as hedge funds and investors took profits on the higher-yielding currency's rally this year.

The fears of another financial crisis boosted the safe haven appeal of gold and U.S. and Asian government debt, with Japanese government bond futures hitting a two-year high. U.S. Treasuries also rose in Asian trade.

June 10-year JGB futures rose as much as 0.37 point to a two-year high of 140.62. The benchmark 10-year yield fell 3.5 basis points to 1.215 percent.
Ten-year Treasuries rose around 9/32 in price to yield 3.165 percent, down about 4 basis points from late U.S. trading.

U.S. crude futures fell 1.9 percent to below $69 a barrel, erasing the previous day's gains, on concerns the European crisis will choke off the nascent economic recovery.

NYMEX crude for July delivery was down $1.36 cents at $68.85.

Gold weakened in Asia due to the rising dollar, which makes the metal more expensive for holders of other currencies, after a rally overnight.

Spot gold was bid at 1,192.10 an ounce by 0610 GMT versus $1,194.95 an ounce at 1804 GMT.

Shares and euro fall as debt fears rattle markets.

Asia stocks fell to multi-month lows, the euro slid and oil and higher yielding currencies weakened on Tuesday on fears that Europe's sovereign debt woes will trigger a renewed crisis in the continent's banking sector.

Heightened tensions and talk of war on the Korean peninsula also jangled investor nerves in East Asia.

Europe's fumbling response to a Greek debt crisis and bulging deficits in other euro zone countries have unnerved markets over the past six weeks, and the central bank takeover of a small Spanish lender at the weekend stoked fears of a wider meltdown.

"This situation with the Spanish bank makes investors nervous because it raises suspicions that something else may be smoldering behind the scenes," said Hiroichi Nishi, equity division general manager at Nikko Cordial Securities in Tokyo.

European stocks looked set to dive, with futures for the Stoxx Europe 50 down 3.5 percent.

Funding conditions for banks have been tightening, with institutions in the United States increasingly reluctant to deal with firms with large exposure to Europe.

"Investors are selling into every rally in the euro," said Jonathan Cavenagh, currency strategist at Australia's Westpac.

"Worries about the euro debt crisis are showing signs of spilling over to the banking sector with funding costs rising, albeit from very low levels. All this will only see more demand for U.S. dollars."

Money markets have seen an increasing reluctance to lend, particularly for longer terms, raising fears that dollar-funding strains could further hobble troubled banks.

Report that North Korean leader had told his military it may have to go to war -- but only if the South attacks -- also prompted foreign investors to sell.

A trader at a European brokerage house in Tokyo said the slide in equities was at odds with macroeconomic fundamentals and earnings trends, and was likely part of moves by investors to cut exposure to risk, with one market player's stop-loss selling forcing another to cut positions as well.

"I don't think things will get to the point of a financial crisis, but the price action is similar to what was seen after the Lehman shock," the trader said.
Credit markets seized up and stocks tumbled after the collapse of Lehman Brothers in September 2008, marking the most dangerous moment of the financial crisis that roiled the world's markets and economies in 2007-2009.

Today’s KLCI Tracker: (21/05/2010) Friday

Overall medium technical readings say positive run is intact and but will ease a bit this week before up again.

- Expect KLCI to climb higher to test 1,350 – 1,370 band again soon. Range 1,400 – 1,410 is the next resistance.- 1,300 – 1,305 range is the immediate support; 1,275 – 1,280 is the next.

- Any pullback presents us with buying opportunities

Momentum tracker for the day:

MRCB- Medium – term positive money flow still intact and will continue- Stock is retesting the RM1.70 – RM1.80 range, eventually reaching the RM2.00 – RM2.30 band. The stock is consolidating positively in RM1.40 – RM1.55 range support.- Current pullback is a buying opportunity.

Results Note – CIMB Group (BUY, maintain) - Lower credit charge-off under FRS 139 adoptio

* Results Note – UMW (ADD, maintain)

- Inline* Results Note :

– Kossan (BUY, maintain) - A strong start to the year.

* Results Note – Nagamas International (Cease coverage) - Below expectations*

Flash Note – Kencana Petroleum (BUY, maintain)

- Outside Malaysia- U.S. stocks plunge on Europe as S&P 500 loses most in 13 months- U.S. leading index signals recovery to cool.

- Singapore economy grows more than forecast on exports- Philippines posts budget surplus amid spending freeze- Taiwan outpaces China as growth accelerates to 30-year high- Oil extends decline on euro debt crisis, U.S. recovery concern

Today’s KLCI Tracker:; (20/05/2010-Thursday)

Overall medium technical readings say positive run is intact and but will ease a bit this week before up again.

- Expect KLCI to climb higher to test 1,350 – 1,370 band again soon.

-Range 1,400 – 1,410 is the next resistance.- 1,300 – 1,305 range is the immediate support; 1,275 – 1,280 is the next.

- Any pullback presents us with buying opportunities.

Momentum tracker for the day:-

Tebrau Teguh- Medium – term positive money flow still intact and will continue.- Stock is consolidating positively in the RM0.55 – RM0.70 range before retesting the RM0.95 – RM1.00 resistance.

It has strong probability of breaking it with RM1.20 – RM1.40 levels eyed.- Current pullback is a buying opportunity.

Company Update :–

-YTL Power International (ADD, maintain)

– Media Prima (BUY, maintain) - Earnings in line.

Flash Note – Kencana Petroleum (BUY, maintain) - No go for Global Offshore* Flash Note – Alam Maritim (BUY, maintain) - Proposed 1 for 2 bonus issue*

Economy :

– World Competitiveness Yearbook 2010

- Malaysia is ranked 10th most competitive nation* Outside Malaysia- U.S. stocks drop on German trading restrictions, foreclosures.

- U.S. consumer prices unexpectedly decreased.

- Australia consumer confidence falls most in 19 months.

- Crude oil extends gains after euro climbs from a four-year low.

Today’s KLCI Tracker:- (14/05/10)

Overall medium technical readings say positive run is intact.
- Expect KLCI to climb higher to test 1,350 – 1,370 band again soon. Range 1,400 – 1,410 is the next resistance.- 1,325 – 1,330 range is the immediate support; 1,300 – 1,305 is the next.
- Any pullback presents us with buying opportunities.

Momentum tracker for the day:-
Unisem- Medium – term positive money flow still intact and will continue- Stock is retesting the RM3.50 – RM3.60 range, eventually reaching the RM4.00 – RM4.50 band. The stock is consolidating positively in RM3.00 – RM3.20 range support.- Current pullback is a buying opportunity.

Today’s Fundamental Highlights:
– Banking (OVERWEIGHT, maintain) - 2nd round OPR hike*
- Company Update – Sime Darby (ADD, maintain) - Negative impact of RM964m in 2HFY10*

- Outside Malaysia-
- U.S. stocks fall as banks, retailers decline; Cisco retreats- U.S. import prices increased 0.9% in April on oil.
- U.K. trade deficit widened in March on import jump.
- Thailand’s confidence falls a third month on protests- Oil poised for second weekly drop on dollar’s rise against euro.

Today’s KLCI Tracker. (13/05/2010)
Overall medium technical readings say positive run is intact- Expect KLCI to climb higher to test 1,350 – 1,370 band again soon.Range 1,400 – 1,410 is the next resistance.- 1,325 – 1,330 range is the immediate support; 1,300 – 1,305 is the next.- Any pullback presents us with buying opportunities.

Momentum tracker for the day.

MRCB- Medium – term positive money flow still intact and will continue- Stock is retesting the RM1.70 – RM1.80 range, eventually reaching theRM2.00 – RM2.30 band. The stock is consolidating positively in RM1.35 –RM1.50 range support.- Current pullback is a buying opportunity.

Company Update – Berjaya Sports Toto (REDUCE, downgrade)

Results Note – Dialog Group (BUY, maintain) - A satisfactory set of results.

* Outside Malaysia-
-U.S. stocks advance, erasing S&P 500’s loss from May 6 plunge.
-U.S. trade gap widens as growth rebounds.
-Europe’s economy grows at faster pace than forecast.
-Philippine exports rise the most in at least 29 years.
-Oil trades below US$76 after falling as U.S. stockpiles increase.