Bank Negara Policy Change

12 Dec 2016

Dear Fellow Investor,

Expect the KLSE to tread water next week as investors gauge the impact of the Bank Negara policies to stabilize the RM. 

The onshore and offshore RM rates narrowed considerably dropping from over 10 % premium to less than 1 %. This shows that fear/ panic  have subsided.

Due to the Bank Negara policy change there was panic selling in exporters and the rubber glove sector, and in particular Kossan and Riverstone which we hold. I called investor relations in these 2 companies and they explained to me why there would be minimal impact.  There was a some recovery as professional investors supported these shares.

Weekly KLSE showing congestion since October 2015.

 

Despite the fear, uncertainty, loss of confidence etc, the KLSE did not collapse and in fact had a mild up move.  Foreign funds were in fact small net buyers on Friday.

The fundamentals that drive a share or market are generally not known before a move begins. Once they are known by Joe Public the market has already moved. That is why we buy quality value shares when they are offered at reasonable prices and hold for gain. We watch volume and price (IVSA)  to get an early entry. 

The fundamental that has not been discounted in Asia is the Trump effect.  Investors in the US have driven up the Dow/ Nasdaq and S & P to new highs as the surprise election of Trump will be positive for growth, earnings, business and high wage jobs.  

Job and business destroying regulations will be cut. Taxes across the boards will be cut.  The US has the highest capital gains taxes in the world and Trump will massively lower them.  Fiscal stimulus will be used to stimulate growth. 

The world is awakening to these new policies. Asian stock markets will rally. Exporters will benefit.  

Singapore banks and blue chip stocks, as I mentioned last week are awakening from their long hibernation.  

Trump has constructed a cabinet with practical billionaire businessmen who know how to make money. I am not worried that he will shoot himself in the foot by placing large tariffs on China,  and Asian countries His advisers will make sure he does not act out of impulse. He is a pragmatist and pro business; not an idealist out of touch politician trying to change the world.  

Do check out this link to an interesting seminar by my friend Lee Cheng Hooi http://mnsglo.com/?event=traders-tavern-kl-9&event_date=2016-12-13#register .  He is a financial writer for the Edge and a prominent analyst. 

Invest well and grow your wealth,
 

Bill

An African bull elephant