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Note From Publisher
The oil price continues to surge. Inflation rates are rising rapidly. Central banks are forced to be ready to further raise interest rates or stop cutting rates. At the same time, economic growth is under pressure from high commodity prices and a slowing US economy. These are the issues investors are worrying about at the moment.
On the domestic front, the political soap opera continues, complete with conspiracy, murder, sex, and power struggle. As in any exciting soap opera, the victorious party in Malaysia’s current political drama will only be known at the end and after many thrillers, twists and turns, and surprises. Investors are likely to get more worried and confused. i Capital will stay vigilant, objective, and focused during this difficult times and it will be reflected in our analysis.
____________________ Don’t Try to Predict the Future / Be In Harmony with the Market / Don’t fight the Market ~Charlie Wright
Strength from weakness ? Subscribers must have been shocked when we wrote that in last week’s i Capital. Since then, it looks like not only is Malaysia getting strength from weakness, but the weak is getting stronger. Don’t ask us how it can be done but our Malaysian magician politicians are of world-class standards, at least as world-class monkeys instead of world-class administrators. As the price of oil refused to budge, our politicians have also refused to budge.
With the latest sodomy charge emerging, our political monkeys, both in the ruling coalition and the opposition, have managed to turn the whole country in just a few months into a zoo, a zoo full of asses (pardon the pun). With one leader having to defend his back (again pardon the pun) and another leader having to face statutory declarations, the weak is actually getting stronger. For now, Malaysians are not bothered with this twist of event. Malaysians are more interested in wanting to know (or rather to gossip) who did it and why. The two most obvious persons that coffee-shop talk is focusing on are the 4th prime minister and the current prime minister. Both have a lot to gain.
The list of “who done it” does not stop there. There are so many possible politicians, all with plenty of political mileage to gain, who would gain from this sodomy addiction. There are so many theories as to who did it and all of them seemed plausible. Since you guys, aka political monkeys, are having so much fun at our expense, let us Malaysians have some fun too by gossiping. While your fun destroys the whole country and make all us poorer, at least our fun is harmless and helps to establish the truth behind this political hedonism. Business at coffee shops should be roaring. Can we do a coffee shop IPO ? At least its NAV would not drop. So, please do not sue us or make us sign statutory declarations of all kinds. Some theories are so interesting that we would not dare to publish it. Some even say that it is a powerful woman who did it. He…he…. As everyone is gossiping and no one is managing the country and the economy, we better stop here, as we need to pay attention to the economy and the stock market. One thing is for sure though. Looking at how dirty and unscrupulous our politicians can be, the May 1969 riot was certainly orchestrated by our unscrupulous politicians.
As Malaysia gets deeper into an oily patch, the price of crude oil gets deeper into stratosphere. The Malaysian government has promised no more price hikes after the recent jump. Can we afford it ? Can Malaysia with years of budget deficit afford to live beyond its means ?
When the government raised the price of petrol and diesel, many protested. Why should we have to pay higher oil price when Malaysia is an oil producer and net oil exporter ? The argument of the protestors is that we should not compare our oil price with Thailand’s or Singapore’s as they are net oil importers. Malaysia should compare its price with those of the oil producers which are absurdly low. Is this argument complete ?
Due to the unproductive and wasteful spending under the 4th prime minister, Malaysia has been “enjoying” many years of budget deficit. Although Badawi has been controlling it and reducing it gradually, by 2007, it was still 3.2% of GDP. When we were asked to compare our petrol price with those of the oil producers, how many of us know that these oil producers are running massive budget surplus in contrast to Malaysia’s budget deficit ? Table 1 below shows some comparisons.
Saudi Arabia
12.6
UAE
11.3
Kuwait
39.9
Libya
36.1
Venezuela
3.0
Malaysia
-3.2
Table 1: Fiscal Balance in 2007 (% GDP)
Instead of protesting the rise in petrol and diesel price, Malaysians, be they from the opposition or ruling coalition, should be asking where are all our spending going to ? Why are oil-producing countries like Saudi Arabia, Venezuela, Kuwait, Libya, etc all enjoying massive budget surpluses when Malaysia, an oil producer and a net oil exporter, is suffering from its 11th year of budget deficit ? Where are we spending our taxpayers money ? Why is our spending more than our revenue ? Get our budget into surplus, then, we can talk about our “high” petrol and diesel prices.
In Malaysia, the price of flour is still controlled. In Indonesia, the price of flour is not. In 2007, the price of flour in Jakarta jumped more than 100%. Incidentally, the Jakarta stock market is holding up very well despite the global turbulence and inflation and interest rates rising in Indonesia. Pakistan, with a budget deficit expected to rise to 6.5% of GDP, is getting her people ready to totally phase out fuel subsidies by Dec 2008. When is Malaysia getting ready to do the same ?
When will our political monkeys remember that they have a duty and responsibility to all Malaysians to ensure that the economy is managed successfully and responsibly ? Are there not effective and better ways of having a democracy AND a better economy ? Do not turn this beautiful country into a zoo.
The KLSE
First, the KLSE was sodomised by worries of a global meltdown. Then, it was sodomised by the 2008 election results. Now, the KLSE looks like getting it again. Maybe after getting sodomised so many times and with investors getting sore, the KLSE may already be numbed. i Capital revises its immediate-term outlook of the KLSE to a range of 1,150 to 1,300. For the short-term, i Capital retains its outlook to a range of 1,150 to 1,400. For the medium and long-term outlook of the KLSE, i Capital still expects the KLSE CI to hit 2,000 points. With the 2008 election results now history but with the political comedy still being acted out, i Capital will review its medium- and long-term outlook at a relevant time.
____________________ Don’t Try to Predict the Future / Be In Harmony with the Market / Don’t fight the Market ~Charlie Wright
[Updated on 05/07/2008]
Marketing research is a popular tool used by marketeers to determine what consumers want. Although used frequently, marketing research often lead to the wrong marketing decisions. Marketing researchers have found out that what consumers say and what they actually do very often diverged, leading to situations where the results of the marketing research lead to the wrong products being launched. The same can be said for consumer confidence surveys, which of late has been capturing the media headlines.
In response to surging oil price, consumer confidence in every country has plunged. From this, economists and investors are concluding that consumers are not spending. For the US, if this happens, it will be especially worrying as consumer spending makes up 70% of the US economy. Besides having to deal with the surging oil price, consumers have to contend with falling house prices. If the consumers are not confident, if the high oil price is not dropping, and house prices do not show signs of bottoming, why would the consumers want to spend ?
Just like the experience of marketing research, what the consumers say they will do is very different from what they actually do. Figure 1 below shows plummeting US consumer confidence versus continued growth in personal consumption. Since mid-2007, US consumer confidence has plunged. Yet, growth in US personal spending has not followed suit. In fact, one can safely say that personal spending has moved in the opposite direction of consumer confidence. This opposing trend has been in place since the subprime problem broke out in Jul 2007 and is not just a recent phenomenon. The confidence of consumers, i Capital suspects, has been badly battered by the mass media’s incessant coverage of the negative news, ranging from the subprime problem to surging oil price to the worst financial crisis to rising inflation. On the other hand, growth in US personal spending has been supported by the sustained rise in income, which in turn is the result of sustained economic growth. What the diverging trends show is that the US consumers, despite all the prevailing negativism, are still in the mood to spend. The consumer resilience brings hope that the doom and gloom scenario relating to the US economy is misplaced.
Figure 1 : US Consumer Confidence vs Personal Consumption
i Capital retains its short-term outlook of the NYSE at a range of 1,250 to 1,500. This is the part where the NYSE tries to establish its bottom and trading can be volatile. i Capital retains its long-held bullish longer-term target of the NYSE at 1,900 - 2,000.
____________________ Don’t Try to Predict the Future / Be In Harmony with the Market / Don’t fight the Market ~Charlie Wright
[Updated on 05/07/2008]
The bearish onslaught on the Shanghai market shows no signs of abating. It was only in 2007 that warnings after warnings were issued about the bubble developing in Shanghai. Now, there should be advice about selling irrationally. At the rate the Shanghai Composite Index is dropping, the largest stock market in China should be reaching a bottom sometime in the next few months and the Composite Index would probably be below 2,000 points by then. Many were expecting the Shanghai market not to fall before the Aug 2008 Olympics. The unexpected has happened. Now, few expect Shanghai to bottom out anytime soon and even fewer expect a new rally to emerge post the Aug Olympics. The unexpected will happen again.
For the Hong Kong market, a stabilised Shanghai stock market will make a major segment of its market look more attractive again. With the China stocks nowadays overshadowing the local stocks, the fall in Shanghai is unfairly capturing all the attention. During the fall, investors may have forgotten the long-term potential of China and thus, her stock market. In the first instance, the Hong Kong economy is in pretty good shape. Unemployment rate for Mar-May stayed unchanged at 3.3%. Even though the consumer price index jumped to a rate of 5.7%, up from Apr’s 5.4%, and the banks in Hong Kong are now beginning to raise mortgage rates, economic growth for the rest of 2008 and for 2009 are expected to remain healthy. Global economic growth is not falling off the cliff, despite the many naysayers saying it is. While property prices have risen substantially, signs of a bubble have not appeared. Overall, there are not any major macro-economic imbalances facing the Hong Kong economy.
At the same time, the 11th anniversary in the handing back of Hong Kong to China serves as a useful reminder of the peaceful and non-disruptive way China handles her affairs. One can expect the same peaceful and gradual approach in the next 11 years. 11 years from now, Hong Kong will be even more integrated with China. Hong Kong is bound to prosper further. One needs to be able to see beyond the current global financial turbulence. Notwithstanding the inevitable short-term disruptions, the longer-term outlook for the Hong Kong market remains uniquely attractive. i Capital is still expecting the Hang Seng index to scale greater heights with a medium-term target of 45,000-50,000. Meanwhile, the Hong Kong stock market is still trying to stabilise and form a bottom. i Capital retains its short-term outlook to a range of 22,500-27,000 for the Hang Seng index.
____________________ Don’t Try to Predict the Future / Be In Harmony with the Market / Don’t fight the Market ~Charlie Wright
Strength from weakness ? Subscribers must have been shocked when we wrote that in last week’s i Capital. Since then, it looks like not only is Malaysia getting strength from weakness, but the weak is getting stronger.
What are they talking about?
Strength from weakness? But weak is getting stronger?
What language?
Me think I can understand Master Yoda more.
Don’t ask us how it can be done but our Malaysian magician politicians are of world-class standards, at least as world-class monkeys instead of world-class administrators. As the price of oil refused to budge, our politicians have also refused to budge.
Fuuuuyoooh! World Class Monkeys?
So they taruh here and there... which I do see and agree their point of arguement.. but then.... their conclusion is really like a screw-ball man!
First, the KLSE was sodomised by worries of a global meltdown. Then, it was sodomised by the 2008 election results. Now, the KLSE looks like getting it again. Maybe after getting sodomised so many times and with investors getting sore, the KLSE may already be numbed. i Capital revises its immediate-term outlook of the KLSE to a range of 1,150 to 1,300. For the short-term, i Capital retains its outlook to a range of 1,150 to 1,400. For the medium and long-term outlook of the KLSE, i Capital still expects the KLSE CI to hit 2,000 points. With the 2008 election results now history but with the political comedy still being acted out, i Capital will review its medium- and long-term outlook at a relevant time.
Immediate term outlook revised to a range of 1150 to 1300? LOL! Huge revision hor.. previously it was 1200-1300.
Hmm.. so... in conclusion... icap outlook for KLSE is from 1150 to 2000.
Wah... so brave hor... icap has not cover its rear from below 1150?
