By Chris Weber
Now that the first half of 2009 is over, I have to say I'm very happy with the way gold, silver, and platinum have done this year. I've been keeping a large portion of my money in the metals for years.
I like the way that the spotlight has now turned away from them, but quietly – when you look back on the year so far – they all have had solid gains. Quiet gains; those are my favorite kind.
Gold has had three consecutive rising quarters now. But more important, it has been holding most of the huge gains of the bull market of recent years.
Most other assets that have jumped hugely spike up and then collapse for years: Think real estate and high tech stocks. But gold has been in a great bull market for a decade and, though still in a corrective phase, has still risen solidly for months.
It started the year at $880; at mid-year it is $926.70. That's a rise of 5.3%, or 10.6% annualized (though no one knows how the rest of the year will play out).
Again, to me, this is great action. Quietly, gold has added about one percent per month so far this year. And no one is talking about it. Huge falls have proven temporary, but these are what people focus on. All the while, over time, the price rises. I'd be happy to take a 10% annual rate of return consistently on anything.
And if double-digit annualized returns are what gold is giving when it is "sleeping," what will it do when it awakes?
Silver started the year at $11.33. At mid-year, it was $13.54. Again, maybe many are not satisfied. But do the math and you get a 19.5% return. That's nearly 40% annualized. What's to complain about? And even more so than with gold, the focus of the public is far from silver. You give me an asset that rises by nearly 20% in six months with no one watching it, and I'll be happy.
Finally, platinum climbed 27.5% in the first half of this year, the best of all. However, this one is the most volatile and thinly traded. Still, if the Dow had soared 20-something percent since the first of the year, everyone would be crowing.
And indeed, bullishness has returned on the stock markets. Most everyone now believes things will get great or continue great. But this kind of thinking for markets that have barely moved since 2009 began is misplaced. All that has happened is that they have risen from their March lows.
I expected this... Back in mid-March, when I suggested to my readers that one could buy virtually any stock, I said that a rally would cause great bullishness to return. And so it has. But one has been better off just by sitting in gold and silver and doing nothing else.
Moreover, the stock markets look quite vulnerable. The Dow Transport Index has not confirmed the last high in the Dow Industrials. And both the Dow and most other global stock markets have been doing nothing much for the past few weeks. Moreover, they have been doing it on ever-lower volume. It is possible that the bear market rally has seen its best days.
All this is why I'm happy to continue holding a large position in precious metals. Granted, their performance this year isn't as spectacular as many hoped it would be. But in gold, I own a relentlessly rising asset that benefits from the competitive currency devaluations I discussed last month. In today's world, that lets me sleep soundly every night.
Sunday, July 12, 2009
Why I'm Happy to Hold Wealth in Gold and Silver
Fund Managers Optimistic Over Longer Term
ASIAN equity markets look more promising over the longer term but short-term indicators and macroeconomic fundamentals will need to be firmer first before regional bourses start to make a more sustainable climb, fund managers and analysts said.
Money continues to flow into Asian equity markets with second quarter (Q2) funds flow totalling US$12.7bil, the largest quarterly inflow since 2001, in stark contrast to outflows of US$4bil in Q4 of last year, according to Macquarie Research analysts in a report dated June 26.
But they noted that cash holdings of fund managers remained high at 2.85% of their portfolios versus the long-run average of 2.4%. “This may suggest that investors remain cautious about the rally,” said Henry Hon, an analyst at Macquarie.
Liquidity is a big factor presently supporting the performance of stock prices, indicating investors are staying close to the exits while the still relatively large cash holdings suggest any market pullback may not be large, he added.
Prudential Fund Management Bhd chief investment officer Yoon Mun Thim agrees, saying the local market has risen sharply but may run a little ahead of fundamentals.
Although pent-up demand and ample liquidity may provide support for a surprise on the upside in the latter part of the year, macroeconomic fundamentals will have to catch up before the markets can move to a higher level on a sustainable basis, according to Yoon.
“The FBM KLCI has risen 20.7% in the first-half (H1) and has factored in to a large extent improvements in the global economy and rising corporate activities but the easy money has been made and the market may be more challenging in the second half,” he said.
Potential risks that may disrupt the positive momentum include a more severe outbreak of the A (H1N1) flu and worse-than-expected economic or financial data coming from the US or Europe, he warned.
Yoon said although Malaysia’s valuations were not cheap compared to regional peers, the local market remained attractive as it was less volatile, with stocks which have predictable and sustainable earnings.
“Since Malaysia has seen the largest net outflow in the region especially in recent months, with improving relative valuations, we may see some potential asset allocation to our markets,” he reckoned.
Credit Agricole Asset Management Malaysia Sdn Bhd managing director Roslina Abdul Rahman told StarBizWeek that regional markets have had a brilliant run with the MSCI Asia Pacific ex-Japan index rising 31% while the FBM KLCI rose 23% in Q2.
“It is therefore reasonable to expect a consolidation in the next few months while we expect Q3 to be fairly quiet and range-bound pending more evidence of improvement in macroeconomic fundamentals before the next push higher,” she said.
Roslina said the next leg of market re-ratings would be earnings-driven set against a backdrop of still-healthy liquidity conditions. “The upcoming (local) Q2 earnings season will be an important indicator of current conditions,” she added.
Roslina said relative to the region, Malaysia’s valuations were not as compelling as its regional peers due to higher price-to-earnings ratios and lower growth rates with low trading liquidity.
“Regional fund managers have their focus on China, India and Indonesia. These economies have the strongest domestic growth stories in Asia,” she noted.
Roslina remains positive over the local bourse’s medium to long term performance following the recent liberalisation measures announced by the government.
“The abolishment of the affirmative action policies is a significant step in addressing Malaysia’s competitive challenges. Whilst the benefits are unlikely to be felt immediately, it is a step in the right direction and sends a positive signal to the market,” she said.
Meanwhile, Schroder Investments Ltd multiregional equities head Virginie Maisonneuve said in a report that the key global trends that will drive the world economy and equity markets remain demographic changes, climate change and the continued development of emerging economies.
“This trend will continue with China and India as the two biggest emerging economies,” she said, noting that China now manufactures around half of the personal computers in the world and 85% of DVDs while India provides around 10% of the world’s software services and 60% of the research and information technology services of Fortune 500 companies.
Both countries are also significant players in the global financial markets with over 20% of global foreign reserves and being heavily invested in US treasuries, according to Maisonneuve.
“By 2020, they are estimated to account for over 17% of world growth while the combined market capitalisation of China and India already nears that of Japan,” she said.
Share Prices To Trade In Tight Range Next Week
KUALA LUMPUR, July 11 (Bernama) -- Share prices on Bursa Malaysia are expected to see a tight range in trade next week, in the absence of fresh leads and renewed pessimism over the global economy recovery, said analysts.
SJ Securities technical analyst Phua Kwee Hock said that there was not much news to be expected during the month, to boost the local market.
"The market would be in consolidation mode this month," he added.
Meanwhile, MIMB Investment it its research note said there were many technical indicators to support a downside in the short term.
Low volume and the fact that the market was stuck in a tight trading range during the week, basically confirms the cautious sentiment of traders.
OSK Research in its assesment said that it maintains a bearish view towards the near-term market.
"We will likely see the sellers selling more aggressively.On the upside, continue to look for an immediate resistance level at the 1,070 points-level and support at 1,057-1,064 points," it said.
The market was mostly lower for the week ended with the new FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) making a bearish debut on Monday.
The Index comprises the 30 largest listed companies by market value with at least a 15 percent free float. Its constituents are also prime market movers and represent about 60-70 percent of the main board's market capitalisation.
Bursa Malaysia introduced the FTSE global index standard to attract instant recognition and credibility amongst international investors.
Analysts say that the adoption of the FBM KLCI will in the long run push companies to beef up their performance so as to be among the top 30 counters.
However, they also cautioned that the use of 30 counters as opposed to 100 under the KLCI, might lead to volatility as price movements in just one or two weighted counters could swing the market either way.
During the week, Bursa Malaysia also saw its first foreign listing.
China's fifth largest outdoor sportswear manufacturer, Xingquan International Sports Holdings Ltd, opened at a 12-sen premium of RM1.83 per share on its debut on the Main Board of Bursa Malaysia on Friday.
Its closed seven sen higher at RM1.78.
Xingquan expects to raise RM165 million from its initial public offering, of which 34 percent would be utilised for the company's expansion,including building a new factory costing RM132 million.
On a Friday-to-Friday basis, the FBM KLCI eased 5.53 points to close at 1,067.76 compared to last week's closing of 1,072.69.
The Finance Index improved 10.1 points to 8,552.22, the Plantation Index fell 115.02 points to 5,260.82 while the Industrial Index slipped 3.13 points to 2,372.38 and the FMBEmas declined 28.27 points to 7,197.74.
The FBM2BRD lost 15.58 points to 4,709.49, the FBMTOP 100 edged down 7.55 points to 7,007.81, the FBM70 widened 90.95 to 7,121.64 and the FBMMDQ dropped 109.58 points to 3,866.73.
Weekly turnover dropped to 3.396 billion shares valued at RM5.021 billion from 4.996 billion shares worth RM5.389 billion the previous week.
Volume on the Main Board shed to 3.0 billion shares valued at RM4.9 billion versus last week's 4.421 billion shares worth RM5.209 billion.
The Second Board's volume eased to 205.906 million shares valued at RM81.8 million from 304.794 million shares valued at RM115.711 million last week.
Turnover on the Mesdaq Market dropped to 112.37 million units worth RM18.622 million compared to 144.723 million shares worth RM24.697 million.
The volume of call warrants declined to 60.278 million worth RM10.046 million from yesterday's closing of 69.152 million valued at RM12.177 million.
-- BERNAMA
Sunday, June 28, 2009
Prisoners Of Love: The New "Thriller" Re-enactment
Talk about deja view all over again. Earlier on 27th June 2009, the 1,500 orange-jumpsuit-clad inmates of the Cebu Provincial Detention & Rehabilitation Center on the east coast of Cebu Island in the Philippines reprised their phenomenally popular 2007 viral performance of Michael Jackson's "Thriller" in tribute to the King Of Pop, who died Thursday.
Saturday, June 20, 2009
Positive sign emerges
MARKET TREND
By K.M. LEE
The ‘golden crossing’ signals a bullish reversal trend.
REVIEW: Bursa Malaysia started the week on a firmer footing, with the Composite Index (CI) advancing 2.89 points, or 0.27% to 1,093.04, tracking the higher overnight Wall Street the previous Friday.
Market sentiment was clearly upbeat in initial deals, but institutional players were not willing to chase after rising stocks, as a decline in global crude oil futures prompted them to exercise some caution.
Given the lack of compelling news, trading on the local bourse turned mixed in mid-morning, with the key index trapped within a modest band throughout.
At the end of regular session, the key index nudged up 1.02 points to 1,091.17, outperforming its regional peers. Then overnight Wall Street took an unexpected dive, plunging 187.13 points to 8,612.13, its worst slide in a month, spooked by a poor manufacturing data.
Against the negative backdrop, share prices retreated. Blue chips took a beating while institutional investors stayed on the sidelines.Elsewhere, the second and third liners were not spared on lack of support from retail players, resulting in the CI losing 17.05 points to settle at 1,074.12 on Tuesday. Thereafter, the local bourse extended the downward correction, with the key index sagging 3.22 points to 1,070.90 in mid-week and an additional 16.49 points to 1,054.41 the next day, undermined by the poor offshore performance before stabilising, up 5.09 points to 1,059.50 yesterday.
Statistics: On a week-on-week basis, the CI slumped 30.65 points, or 2.8% to 1,059.50 yesterday, versus, 1,090.15 the previous Friday.
Weekly turnover stood at 7.923 billion units worth RM8.204bil, against 10.019 billion shares valued at RM8.628bil done a week ago.
Technical indicators: The daily slow-stochastic momentum index was fast approaching the oversold area. It triggered a short-term sell at the top on Monday.
After flashing a sell on Tuesday, the daily moving-average convergence/divergence (MACD) histogram expanded negatively against the daily trigger line to stay bearish.
Also, the 14-day relative strength index weakened sharply from a reading of 80 on Monday to the 36 points on Thursday before pausing. Weekly indicators were waning, with the weekly slow-stochastic momentum index in danger of moving out of the bullish territory and the upward thrust of the weekly MACD slowing considerably.
Outlook: Bursa Malaysia fell from a nine-month peak of 1,095.91 on June 12 to a low of 1,052.48 on Thursday before halting. Unlike the two previous consolidation phases that happened in late April and mid-May, the pullback this time was steeper than expected, catching many people by surprise.
A couple of weeks ago, we pointed out that the market was looking “top heavy” and also mentioned the journey ahead would be tough, dropping hints the local bourse is due for a breather soon. Hence, the retracement is very much anticipated and needed, viewed as a healthy process and should not cause any panic in the marketplace. So, we are not talking about this issue but something of more significance and importance.
According to the daily bar chart, a positive sign has emerged, namely a “golden crossing” of the 100-day SMA over the 200-day SMA.
Investors should take note that this type of crossing usually take several months to develop and when it happens, it basically confirms a bullish reversal of the existing trend, which is more reliable for the medium to longer term, but on conditions the CI continues to retain the posture above the 100-day SMA and 200-day SMA and the “positive crossing” stays intact.
Going forward, as long as the bulls can fulfil these criteria, we are certain Bursa is on the road to recovery.
Technically, short-term indicators are deteriorating, particularly the daily MACD, suggesting the local bourse may remain in consolidation mood for a while, with the CI probably flirting within a moderate range this week.
The immediate upside is capped at the 1,100 points level for now. The higher resistance is seen resting at 1,120 points, and the next, at 1,140–1,142-point band.
Initial support is envisaged at the 1,036-1,040-point range. If the next lower floor of 1,020-point gives way, look for the 1,000-point psychological level as the next base.
Sunday, June 7, 2009
Bursa Likely To Extend Gains Next Week
They said the market was likely to attract more fund managers eyeing a higher return quickly compared to the bond market which would take a longer time to mature and the yield would be low.
"Any sign of recovery in the global economy will encourage retail investors, especially the fund managers, to invest in the equities, commodities and property," a dealer said.
However, he said, the gains may be slow as pullback or consolidation could be expected following the rally since the beginning of May and last week.
"The question is whether the momentum is sustainable. That will depend on the recovery in the global economy, especially the market in the US," he said.
On a Friday-to-Friday basis, the KLCI closed the week at 1,075.5, up 31.39 points from last week's closing of 1,044.11.
The Finance Index increased 397.02 points to 8,401.51, the Industrial Index gained 31.14 points to 2,353.24 and the Plantation Index perked 146.5 points to 5,442.27.
The FMBEmas surged 229.33 points to 7,213.54, the FBM2BRD advanced 142.84 points to 4,4717.61, the FBM30 went up 176.58 points to 6,853.85, while the FBMMDQ rose 186.35 points to 4,226.04.
Weekly turnover increased to 8.923 billion shares worth RM7.974 billion from 7.899 billion shares worth RM8.034 billion last week.
Volume on the Main Board rose to 7.609 billion units valued at RM7.509 billion from 6.324 billion units worth RM7.632 billion previously.
The Second Board's volume climbed to 547.359 million shares worth RM255.268 million from 476.139 million shares worth RM213.275 million.
Turnover on the Mesdaq Market was higher at 519.182 million shares valued at RM137.890 million compared with 411.762 million shares worth RM100.502 million.
Call warrants, however, declined to 136.063 million shares worth RM24.392 million from 224.018 million shares worth RM36.326 million previously.
-- BERNAMA
Bulls eyeing 1,100 points
By K.M. LEE
From here, the going will be tough, unless there is a continuous stream of positive news flow.
REVIEW: US stocks rallied for the second consecutive session the previous Friday, as investors were encouraged by a slew of positive data, such as the May consumer confidence hitting its highest level in eight months, while a run-up in commodities fuelled optimism the global economic downturn may be easing, if not already on the road to recovery.
Tracking the bullish sentiment in the US and mirroring the strong performance in major Asian stocks, equities on Bursa Malaysia started out the new week on a solid platform, with the Composite Index (CI) advancing 3.51 points, or 0.34%, to 1,047.62 in initial deals.
Trading was brisk. While blue chips topped the up list amid institutional support, second and lower liners attracted significant interest on greater retail participation, as a better-than-expected purchasing managers index (PMI) from China kept alive hopes for a rapid global economic recovery and boosting local sentiment.
In active trade, the key index rose 17.69 points to 1,061.80 on Monday.
Overnight US markets continued to improve, with the Dow leaping a huge 221.11 points to 8,721.44 in heavy volume and crude oil spiking US$2.27 to US$68.58 a barrel, as economic data showing the US manufacturing sector contracted in May at a slower rate assured investors the US recession was indeed moderating.
Against the positive backdrop, the principal Bursa index gaped up nine points to 1,070.80 and quickly raced to a high of 1,072.07 early Tuesday amid broad-based buying interest.
The local bourse also received a boost from Datuk Seri Najib Razak’s first official visit to China as prime minister. However, when the regional markets started turning mixed in mid-morning, local investors opted to book gains and because of that, the momentum soon fizzled out.
Nevertheless, the CI still ended on the plus territory, firming 1.82 points to 1,063.62 on Tuesday due to gains in banking, plantation as well as oil and gas-related issues.
Subsequently, profit-taking activity kicked in, but selling was light and concentrated on select quality issues. Elsewhere, cheaper stocks bounced back to life after a brief respite, probably lifted by marginally steadier offshore performance.
Apparently, the two-tier market trend was clearly reflected on the scoreboard. Although the key index shed 8.22 points to 1,055.40, advancers overwhelmed decliners by 420 to 250 in mid-week.
Thereafter, the local bourse turned range-bound to moderately higher, with the CI rebounding 8.57 points to 1,063.97 on Thursday and an extra 11.53 points to 1,075.50 yesterday, mainly due to local fund support.
Statistics: For the week, the CI surged 31.39 points, or 3%, to close at 1,075.50 yesterday, against 1,044.11 the previous Friday.
Weekly turnover amounted to 8.923 billion shares valued at RM7.974bil versus 7.902 billion units worth RM8.027bil traded a week ago.
Technical indicators: The daily slow-stochastic momentum index was on the rise after triggering a buy on Monday.
Likewise, the 14-day relative strength index had indicated a ticking up pictogram from a reading of 63 to the 72 point level.
However, the daily moving average convergence/divergence (MACD) histogram remained in sell mode, lingering below the daily signal line.
Weekly indicators were strong, with the weekly slow-stochastic momentum index flashing a buy at the bullish extended-move zone and the weekly MACD retaining the buy call.
Outlook: Bursa Malaysia was generally range-bound with an upward bias, which saw the CI touching a nine-month high during intra-week session.
According to the chart, it had scaled a total of 274.23 points since bottoming out at 801.27 on Oct 28 last year. That represents a 37.91% recovery of the previous bear cycle and it needs to be kept in perspective.
The market is being driven by optimism that the worst is over for the global economy. As mentioned here previously, there is no reason to go against the tide at this moment, with the underlying tone staying upbeat but we are worried the market may have already factored in the recovery news.
Like all previous upturns, the bulls always run ahead of news and they usually find it hard to sustain the upward thrust to higher levels later, as stocks get dearer and valuation becomes more demanding after a strong rally.
In short, there may be more upside potential going forward, targeting the 1,100 points psychological level, but the going will be tougher, unless there is a continuous stream of positive leads pointing to a decisive recovery. The next overhead barrier is seen at 1,120 points.
Indicators are unclear. Though the weekly MACD continues to send out bullish signals, the daily peer retains the sell order, indicating the local bourse may drift sideways to marginally steadier this week.
Support floors are pegged at the 14-day simple moving average (SMA) and the 21-day SMA, resting at 1,050 points and 1,040 points respectively.
