It's a Friday! Weeee...

So much for the title, here is the market report for today. KLCI closed 0.17 percent higher today at 948.19 points today, up by 1.57 points from yesterday's index. Top gainers were led heavyweights Maybank and IOI Corp followed by DIGI and Kuala Lumpur Kepong. The most heavily traded stock of the day was IFCA MSC, a penny stock on MESDAQ with a total 192 million shares traded. I can't seem to find any good news or forecast that would justify such high trading volume, the only news I managed to find was a query by Bursa Malaysia regarding its unusual market activity. I would expect the price to fall when the trading hype softens because changes in prices accompanied by high trading volume should revert most of the time. Going forward, the lack of liquidity in the MESDAQ market contributes substantially to price volatility as stock prices behaves in a more erratic fashion whenever liquidity flows in and out, so my advice for the day would be, don't speculate on MESDAQ stocks unless you have loads of cash to stimulate an upward trend! Later all, going off now...

"i"

There has been much talkabout on Malaysia's interest rate recently and how the bond market is fluctuating away. Had a look at two yield curves for two periods, a 1 month interval. Yes...the yields are rising and bond prices are falling. The central bank will review its monetary policy on this Tuesday and many are anticipating anther 25 basis points hike. With so much anticipation eversince the last hike, I think the impact of a possible hike has already been impounded in bond prices. Say if the central bank decides not to hike its OPR this round, a hike in its next meeting on May 22 will be inevitable amid high oil prices fanning inflation. I believe the possibility of a rate hike has also made BNM cancelled its 2m and 3m repo tenders and the reason quoted was unfavorable rates.

Here it comes, another market report

Talking about Wiener process! 5 minutes ago the market was down 1.72 points but it closed 0.65 points higher at 946.62. The last minute 5 sen gain on Telekom Malaysia contributed 0.312 index points to KLCI. The most actively traded stock for the day was Jadi Imaging Holdings with approximately 135 million shares traded. This counter closed at 21 sens on its 1st day of trading on MESDAQ, don't really know much about this company but its no surprise to have such high trading volumes for new stocks. Typical of MESDAQ stocks...

Market report

I think I'll take the easy path today, post something simple which doesnt require much thinking! HAHA!

Let's see, let me report on the current market conditions.

The ringgit is currently trading around 3.6614MYR/USD. Still appreciation but sadly its only against the USD

MYR forwards tighten amid expectation of rate hike after the March CPI surged to 4.8 percent from February's 3.2 percent. Again, more reason for BNM to increase the OPR on April 25th.

Thanks to March's CPI, bond prices fell. More selling to come?

The International Monetary Fund has downgraded Malaysia's economic growth forecast for 2006 to 5.5 percent from 6 percent amid inflationary pressure.

On the equity side, it was revealed that Goldman Sachs bought a total of 40.08 million DIGI shares in early April, making them a substantial shareholder with a stake of 5.34 percent

Its 4:55 pm right now, KLCI is standing at 944.25, 1.72 points below yesterday's

Top gainers
IOI Corp $13.80 +0.20
Genting $25.50 +0.25
Gamuda $4.00 +0.16
Bursa Malaysia $6.20 +0.20

Top losers
Petronas Gas $9.00 -0.30
Maybank $11.10 -0.10
MISC $8.85 -0.05
Public Bank $6.60 -0.05

Moving out of Malaysia, Asian consumer eletronics stocks rose after earnings improved for US technology companies.

Well, thats all, back to work!

I think I need a holiday!

I thought covering the Pakistan money market was tiring enough, now I have the Malaysian money market to monitor! Have been maintaining and pricing forwards constantly for the past couple of days and I got this really bad headache today! I am thinking of a holiday to New Caledonia...weeeee!

The story about bond and equity

Does the coexistence of bonds and equities support the mean reversion theory? More specifically emerging market bonds. I remember reading an ariticle a couple of months ago suggesting that high yield bonds should behave in a way similar to equities. An explanation was not given but i presume this statement comes from the fact that emerging market bonds (high yield) and equities offer a higher return to investors. Apart from that, the erratic and stochastic behavior of emerging markets' interest rates suits the definition of equities perfectly. Could the movement of funds between these two instruments cause rates and prices to revert along their respective long-run averages? The dramatic decline in emerging market bond spread over the years adds complication to the question asked. I am thinking of all the possibilities causing the thinning of bond spreads Changes in liquidity, fundamentals and monetary policy, I believe these factors carry ramifications but which one of these should I point my finger to. Any comments? If the thinning of the bond spread is attributable to strong and robust economic fundamentals over recent years, the current tightening of monetary policy to contain inflationary pressure would have minimal implication on spreads. In contrast, should the thinning of bond spreads be caused excess liquidity in the market, a tighter monetary policy would eventually lead to a reversal in the spreads. I have yet to see any reversals in the market, thus I am assuming the Asian region has pretty strong fundamentals, fingers crossed, I hope this applies to Malaysia too! Continuation to come when I ponder on this issue again...lunch break!

The future of interest rate

With crude oil prices soaring high, the general view is that BNM will raise the interest rate by another 25 basis points, perhaps by this April 25th when they meet to review the monetary policy. The fear of rate hikes have been gradually weakening MYR govt bonds eversince BNM raise overnight policy rate to 3 percent. Looking at the current interest rate swap levels, I am anticipating Malaysian interest rate to hit at least 3.75 percent by end of this year, maybe 4 if the Iran standoff is not solved immediately (Iran being OPEC's 2nd largest producer). The 1 year interest rate swap level has risen approximately 29 percent since August 15th and it is currently standing at 3.966 percent. I seriously think its time to move funds away from bonds, according to sources, Malaysia's 5 year bonds opened lower today before auction. Time to concentrate on equity? I think its about time KLCI gets a push to set its direction right, UP!. Will the coexistence of these two markets facilitate the mean reversion theory? More to come...gotta work

Current issues

Recently, Fed unanimously raised the Fed Funds rate by another 25 basis points to 4.75 percent. Officials did mention that inflationary pressure is well under control but will that be sufficient to stop Bernanke's monetary policy approach? The world is expecting the Fed to raise the rates past 5 percent this year (possibly the 16th time this May) if crude oil prices continue to rally. Yes it did, as of today crude oil is trading at $68 per barrel (thanks to Iran's nuclear standoff). If current inflation is induced by volatile crude oil prices and not demand, I dont see how raising the Fed Funds rate will curb inflationary pressure. Why Mr. Bernanke? Someone educate me? A couple of months ago, the UST yield curve was inverted, to those who understand, it was an indication of recession. Well fine, the curve looks normal now, thank the rate of increase in the long term rates if you want but I reckon US is up for some real deep shit. American will soon feel the torment as readjustments are made on their morgages. Debt is becoming very expensive for businesses and growth will have to be compromised, who cares about the drop in the unemployment rate to a 4 1/2 year low, the fall is imminent. On a pecking order, China and Japan will have the first claim perhaps? For Asian countries relying heavily on exports to US, they too are up for some serious beating...well maybe not China. Sell your bonds!

My very 1st post

Great! my very own blog. A place for me to express my thoughts and report on current financial issues. I think my coverage will be pretty fluid, I'll move from FX to bonds to equity from time to time, depending on what interest me! Once in a blue moon, I'll post up my thoughts on the complexities of the market. I am no guru like Fischer Black so if there is a need to criticize, please make sure its constructive. Moment please while I jot up the next post :)