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Gameplan For The Week: Stock Market Tip Toeing Forward?
Perspective | 26 August 2013
By: Daniel Loh
Articles (40) Profile

Dow Jones Industrial Average (DJIA) did manage to finally break its consecutive six-day slide, which certainly has caused Asian markets to tumble. So far, DJIA has slid five percent from its top. Temporarily, we think this slide has halted since Wednesday. Thursday and Friday ended at least in the positive region, gaining 130 points in the last two sessions.

We do think that DJIA is poised for a short term rebound with the expectations of August’s Initial and Continuing Claims being the Mega report coming out this Thursday night. The Fed officials seem to all agree that the quantitative easing (QE) tapering decision hinges on economic data, before its decision in the FOMC meeting on the 17 and 18 September.

This should make the market tipping on its toes this week. No major panic or direction before the report should be the direction of Wall Street. In fact, we do predict that this week might end on a positive note for the DJIA rather than a panic-liked 6-day drop.

There are two talking points in Wall Street recently.

1) QE Tapering
The first is the well debated QE tapering. It does seem like Wall Street has accepted that tapering is going to happen this year. The only question is the intensity. We foresee expectations to be priced into the market by the decision date on the 17 September. We think the extent of the tapering will be the focal point. A minor adjustment might in fact be a catalyst for the market going forward rather than a market panic. And of course, a major adjustment will cause the market to tumble.

Given Ben Bernanke’s way of handling the stock market, we predict that if there is a taper, only a minor adjustment is on the cards this time round. Ben Bernanke is one who knows how to handle market expectations. We think for the first round of tapering, he won’t vote for a market panic. A first time trial minor adjustment to let the market adjust to the tapering will be the perfect choice. After the market accepts and adapts, then a bigger secobnd round cut may be on the way.

2) 10 Year Treasury Yield
The second talking point is the 10 year treasury yield. Recently, we know that the yield rate is rising. It is rising to a two year high and is still climbing. This is causing panic all across the world. We think that from now on, the yield should be on a long term uptrend. The US dollar should be on a long term uptrend. All major currencies should suffer. That is the reason why ASEAN recently had a currency panic. Malaysia ringgit, Thai baht, Philippines peso and Indonesia rupiah are all on a sharp decline against the US dollar recently. In fact this is not an ASEAN problem. A lot of the countries in the world are suffering.

The Indian rupee and Aussie dollar have both fallen nearly 15 percent against the US dollar over the past three months. Both the Indonesia’s rupiah and the Brazilian real are down 10 percent, the Turkish lira down over five percent.

The whole world is trying to adjust to a stronger US economy, a stronger US dollar and a rising interest rate. Not easy as US dollar has been weak for years, but I think this currency panic will end.

This process of adjustment needs time as we are accustomed to a weak US dollar and a low US interest rate environment. We do think that this currency panic should be over once traders accept this rising yield fact. There is no need to panic given a good US economy.

Singapore Market
We do think that Singapore has reached a region of supports. 3,000-3,100 is always the region we hope to accumulate some Singapore stocks. We mentioned it in an interview with Mediacorp radio station FM95.8 recently too. Our advice is not to invest all at one go, but a portion of your funds. We do expect a strong support at 3,000. Anything below that will be a bonus to us.

However, picking stocks in this seemingly lifeless environment is never an easy task. Good technical and fundamental skills are needed.

Do join us in our free seminar event below to find out which are the sectors that may outperform and what are the good stocks that you could study.

Malaysia Market
Malaysia market has recently slid on the fact that the ringgit may be attacked again like that seen in the 1997 crisis. We, however, think it will not  happen. The economy is good and still on an upward trend. A little rise in interest rate is actually good for the economy.

Once Malaysian traders accept this fact, the market should stabilise. And the fact that Kuala Lumpur Composite Index (KLCI) reached 1,710 is an incentive for me to take a good look at the Malaysian market. 1,700 is always the support we are looking for. Our view is it is always better to invest when KLCI is at 1,700 rather than a few weeks ago at 1,800. It is cheaper.

Daniel Loh’s Upcoming Seminar: Will STI 3050 Be The bottom? Is It A Wonderful Chance To Buy Stocks Now? 
Seats are limited. Simply register at http://www.danielloh.com/2011/12/registration-form.html. For more information, please call or sms 93676623.
DANIEL LOH is an investment coach that specializes in equities and derivatives trading. He regularly appears on TV financial programmes like “Morning Express”, "Good Morning Singapore" and "Hello Singapore". He is interviewed bi-weekly on radio station FM95.8.

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