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3 Responses to “Bull or Bear –Who Cares | Free Financial Futures Talk”

1. Jayce on July 2nd, 2010 at 6:12 pm

   Plan to learn it long time ago. But still don’t have the time to really study it.

2. alan on July 21st, 2010 at 8:48 am

   Firm Q2 earnings growth seen for three sectors
   By YVONNE TAN

   PETALING JAYA: The second-quarter earnings season should see a “firm” quarter-on-quarter growth trend for the banking, consumer and semiconductor sectors while aviation and rubber glove companies are likely to experience contractions, analysts predict.

   “The first three segments will likely report firm or stable earnings growth largely due to the global economic recovery which boosted demand for their products and services.

   “Earnings of aviation firms in the second quarter will be affected by the volcanic ash crisis in Europe (end-April into May) while glove makers, by the strong ringgit and high raw material costs during the period,” UOB Kay Hian head of research Vincent Khoo said.

   Without revealing specific earnings predictions, Khoo added that rubber glove producers were likely to experience their first quarter-on-quarter contraction since early 2008.

   Overall, he is projecting 2010-2011 corporate earnings to rise by 15.4% and 20.4% respectively, with this year’s growth driven largely by banking and gaming among the large sectors, and semiconductor among the smaller sectors.

   OSK Research head Chris Eng also expects the banking sector to lead the second-quarter results season.

   “Banks should deliver a good set of results, given the revival in capital market activities compared with a year ago,” he said.

   Glove companies’ earnings, at best, would be flattish for the same reasons while aviation companies with exposure to Europe, like Malaysia Airlines, would see earnings impacted, he said.

   Second-quarter results would not be spectacular and it would be the same for the following two quarters of the year, Eng said.

   In a strategy report dated July 8, AmResearch managing director Benny Chew said “earnings growth has peaked but not collapsed”.

   “We think it’s been a slower global growth trend these past few months and moving forward,” he said.

   Recent macroeconomic data have pointed towards a sluggish pace of job creation in the United States.

   In China, one of the fastest-growing world economies and biggest consumers of goods, the Purchasing Managers’ Index – an indicator for economic activity – fell 52.1 in June from 53.9 in May, signalling a possible slowdown after growing robustly since the global financial crisis abated in late-2009.

   Having said that, Chew believes second-quarter results would be “below expectations”.

   Kenanga head of research Yeonzon Yeow said companies that were largely domestic demand-driven would be “chugging along” in the second quarter while exporters “would probably see the last quarter of strong orders”.

   This would happen as the European Union sovereign debt crisis would have put some brakes on export orders for delivery in the subsequent quarters in anticipation of weaker demand, he said.

   UOB’s Khoo said moving into the second half of the year, earnings would likely “moderate” as growth in global economies, and hence demand, started to slow down.

   Among the vulnerable export-oriented sectors was the plantation sector, he said.

   “Debt troubles in Europe, which is a huge market for some Malaysian planters, could slightly impact plantation companies via possibly lower crude palm oil exports,” he said.

   Economists have said that with Europe contributing 12% to Malaysia’s exports in 2009, the effect of any fall in demand would be significant on the country’s gross domestic product.

   The second-quarter results season has kicked off with several large companies like Bursa Malaysia Bhd and DiGi.Com Bhd reporting their earnings thus far.

   The former’s results were below analysts’ expectations while the latter was within. The announcement of results will peak next month.

   fr:biz.thestar.com.my/news/story.asp?file=/2010/7/21/business/6701155&sec=business

3. alan on July 31st, 2010 at 10:33 am

   Interest rate hikes starting to help ringgit
   By JAGDEV SINGH SIDHU

   WHEN Bank Negara raised interest rates for the third time this year earlier this month, expectations were that the ringgit would appreciate.

   That, together with the removal of China’s yen peg to the US dollar, led to suggestions that the ringgit could regain some of the buoyancy in its value against the US dollar that had seen the local currency emerge as one of the best-performing currencies this year.

   There was also the school of thought that suggested those domestic interest rate hikes had created a buffer between rates in Malaysia and elsewhere that might see the local currency becoming a carry trade currency.

   While the ringgit is not yet seen as a carry trade currency, its slow ascendency against the US has been seen after the third rate hike earlier this month.

   After interest rates were raised by 25 basis points to 2.75% in the July 8 meeting of the Monetary Policy Committee, the ringgit saw a brief spurt against the dollar but has since see-sawed in a narrow band.

   But that has changed a wee bit as the ringgit has strengthened to its highest level this year as RM3.18 to the dollar yesterday.

   That pattern of trade has somewhat broken away from the initial pattern seen after the yuan ended its peg against the US dollar last month.

   After a surge, the Chinese currency has traded within a narrow band of between 6.77 and 6.78 to the dollar.

   Notwithstanding the slow rise towards the year high for the local currency, the interest rates hikes in recent months, which the central bank says is a move towards normalisation, has led to money entering Malaysia.

   While higher domestic rates might have been the main factor, another was the fact that selected Asian currencies were the flavour of the month, given the economic malaise in Europe and the sluggishness of the US economy.

   In a response from Bank Negara to StarBizWeek, the central bank says portfolio capital flows were influenced by both domestic and external factors. Domestically, the impressive 10.1% GDP growth in the first quarter of the year, talk of a stronger economy and the transformation of Malaysia into a high-income economy have whet the appetite of investors.

   The central bank said in the first quarter of 2010, portfolio inflows amounted to US$3.4bil, a healthy gain from the US$1.4bil in the fourth quarter of 2009.

   “Nevertheless, the pace of portfolio flows in recent months has been relatively modest, given the volatility arising from the European sovereign debt crisis and the lingering concerns over the global economic recovery,” says Bank Negara.

   “Overall, the flows have been manageable and well-intermediated by the financial system.”

   Bank Negara points out that because of the strength and depth of the domestic financial system, inflows are more effectively intermediated without causing undue risk to the economy.

   It cites the fact that the ringgit bond market is one of the largest in this region, with a size of 94.1% of GDP.

   Furthermore, the country’s Islamic bond market is also deeper than other markets, with the highest number of sukuk issuances recorded this year thus far.

   “At the same time, Bank Negara has developed a robust surveillance system that enables us to monitor capital flows on a near real-time basis and Bank Negara is equipped with a wide range of monetary instruments to sterilise these inflows,” says the central bank.

   “Bank Negara’s policy is solely to maintain orderly market conditions while at the same time ensure that the ringgit is not misaligned from its fundamentals so that it will not contribute to the build-up of internal and external imbalances.”

   Bank Negara adds that interest rate differentials is a determinant of capital flows, but it is not the only one.

   “Some of the other factors include economic growth prospects, exchange rate expectations, anticipated returns in the equity market and other investments, as well as investor sentiments,” it says.

   The central bank adds that the overnight policy rate of 2.75% was broadly in line with other regional interest rates and that there are many other countries that have higher official interest rates.

   The official borrowing rates of Indonesia, the Philippines, China, India and Australia are 6.5%, 4%, 5.31%, 5.5% and 4.5% respectively.

   A recent report by Morgan Stanley suggests that the interest rate hike might also have been used as a tool to attract foreign capital to bolster the country’s foreign exchange reserves, which have not kept pace with the rise seen in the reserves of Malaysia’s neighbours.

   Foreign exchange reserves saw a drop in the middle of last year and has basically plateaued from the last quarter of 2009.

   While the hikes would lead to more capital flowing in, which is welcomed, considering the quantum of the fall, the country is comfortable with the level of reserves as data for the middle of June says it is sufficient to finance eight months of retained imports and 4.4 times the short-term external debt.

   The interest rates hike, however, is seen to have an influence on the real sector as a means to cap skyrocketing property prices.

   “One of the major assets facing some strong pressure has been the property market,” says RAM Holdings group chief economist Dr Yeah Kim Leng.

   “We needed a tightening to prevent a further build-up in those asset prices.”

   The effectiveness of a 75-basis-point rise in interest rates might not quell speculation on properties but with the household sector debt now at 76.6% of GDP, higher repayments for debt taken to buy cars, houses and for other consumption needs would bite into private consumption.

   Yeah says the rate hike was a move towards a balance between consumption and savings.

   The rise in household debt to GDP was partly due to the contraction of GDP of 1.7% in 2009 but authorities are confident that the financial asset side of the ledger remained sound as financial assets to debt was 2.44 times.

   The ratio and growing affluence of households has allowed for increased access to financing and with gross non-performing loan ratio for household remaining low at 2.7% at the end of April 2010, over extension of debt might not be a problem just yet.

   fr:biz.thestar.com.my/news/story.asp?file=/2010/7/31/business/6719922&sec=business