My Stock Secrets

Bank of America pays $33 million SEC penalty for misleading investor

2009-08-04T19:23:00.000-07:00

WASHINGTON (AP) -- Bank of America Corp. has agreed to pay a $33 million penalty to settle government charges that it misled investors about Merrill Lynch's plans to pay bonuses to its executives, regulators said Monday.

In seeking approval to buy Merrill, Bank of America told investors that Merrill would not pay year-end bonuses without Bank of America's consent. But the Securities and Exchange Commission said Bank of America had authorized New York-based Merrill to pay up to $5.8 billion in bonuses.

That rendered a statement Bank of America mailed to 283,000 shareholders of both companies about the Merrill deal "materially false and misleading," the SEC said in a statement.

Bank of America agreed to pay $33 million to settle the charges without admitting or denying the allegations. The settlement is subject to court approval.

"Bank of America believes that the settlement ... represents a constructive conclusion to this issue," company spokesman Scott Silvestri said in an e-mailed statement.

New York Attorney General Andrew Cuomo, who referred the case to the SEC in April, said his investigation is continuing. The SEC said its probe also is ongoing.

Bank of America, along with Citigroup Inc. and insurance giant American International Group, is among the largest recipients of government aid. It has received $45 billion from the federal $700 billion bank rescue program.

Charlotte, N.C.-based Bank of America agreed to purchase Merrill in a deal that was hastily arranged Sept. 13-14, 2008, the same weekend that Lehman Brothers collapsed. Bank of America CEO Ken Lewis and Merrill Lynch CEO John Thain announced the deal Sept. 15.

The acquisition came as Lehman's collapse caused panic in the financial markets and investment banks such as Merrill faced billions of losses on soured mortgage investments.

Merrill ended up paying $3.6 billion in bonuses in 2008, the SEC said, even though it lost $27.6 billion that year, a record for the firm.

Bank of America included a copy of the merger agreement with the proxy statement that it mailed to shareholders of both firms in November. That agreement said Merrill would not pay discretionary bonuses prior to the deal's closing, the SEC said.

A separate agreement authorizing the bonuses wasn't mailed to shareholders, the SEC said.

Shareholders in both companies voted to approve the acquisition Dec. 5, which then closed Jan. 1. The SEC said the bonuses were paid Dec. 31.

"Companies must give shareholders all material information about corporate transactions they are asked to approve," said Robert Khuzami, director of the SEC's enforcement division. "Failing to disclose that a struggling company will pay out billions of dollars in performance bonuses obviously violates that duty.

"The bonuses amount to nearly 12 percent of the $50 billion that Bank of America paid for Merrill.

Separately, Bank of America announced that Sallie Krawcheck, Citigroup's former chief executive of global wealth management, will join the company to run its global wealth and investment management operations.

Krawcheck, 44, also has served as chief financial officer of Citigroup, as chairman and CEO of Sanford C. Bernstein & Co. Inc., and an executive vice president of Bernstein's parent company, Alliance Capital Management LP.

Shares of Bank of America added 53 cents, or 3.6 percent, to $15.32 Monday. The company's stock has traded between $2.53 and $39.50 in the last year

Roubini Says Commodity Prices May Rise in 2010

2009-08-03T00:50:00.000-07:00

By Rebecca Keenan and Jason Scott

Aug. 3 (Bloomberg) -- Commodity prices may extend their rally in 2010 as the global recession abates, said Nouriel Roubini, the New York University economist who predicted the financial crisis."

As the global economy goes toward growth as opposed to a recession, you are going to see further increases in commodity prices especially next year," Roubini said today at the Diggers and Dealers mining conference in Kalgoorlie, Western Australia. "There is now potentially light at the end of the tunnel.

"Roubini, chairman of Roubini Global Economics and a professor at NYU's Stern School of Business, joins former Federal Reserve Chairman Alan Greenspan in seeing signs of recovery. Commodity prices gained the most in more than four months on July 30 as investors speculated that the worst of the global recession has passed and consumption of crops, metals and fuel will rebound.

"The things he was saying provide good indicators for our business," Martin McDermott, a manager for metals project development at SNC-Lavalin Group Inc., Canada's biggest engineering and construction company, said at the conference. "The commodities that we're involved with, being copper, nickel, gold, iron ore, all seem to have positive signs and we hope to take advantage of that.

"Greenspan said yesterday the most severe recession in the U.S. in at least five decades may be ending and growth may resume at a rate faster than most economists foresee. Oil has jumped 56 percent in 2009 and copper has surged 86 percent.

China Growth Target

Roubini predicted on July 23 that the global economy will begin recovering near the end of 2009, before possibly dropping back into a recession by late 2010 or 2011 because of rising government debt, higher oil prices and a lack of job growth.

Economic growth in China, the world's biggest metals consumer, accelerated in the second quarter, gaining 7.9 percent from a year earlier. China, the biggest contributor to global growth, overtook Japan as the world's second-largest stock market by value on July 16 after the nation's 4 trillion yuan ($585 billion) stimulus package spurred record lending and boosted prices of shares and commodities.

China will meet its target of 8 percent growth in gross domestic product this year, Roubini said. Manufacturing in China climbed for a fifth month in July as stimulus spending and subsidies for consumer purchases countered a collapse in exports, and helped companies from chipmaker Semiconductor Manufacturing International Corp. to automaker General Motors Corp. as well as mining companies such as BHP Billiton Ltd. and Rio Tinto Group.

China's official Purchasing Managers' Index rose to a seasonally adjusted 53.3 in July from 53.2 in June. A reading above 50 indicates an expansion. The manufacturing index has climbed from a record low of 38.8 in November.

Aussie Dollar, Aluminum

A rise in commodity prices may help the Australian dollar, Roubini said today, adding he is "bullish" on the currency. Countries including Australia, New Zealand and Canada have so- called commodity currencies because raw materials generate more than 50 percent of their export revenues.

The Australian dollar today rose to the highest since September before retail sales and house price data tomorrow that may add to evidence the nation's economy will rebound faster than the central bank forecast six months ago.

The price of aluminum, used in beverage cans and airplane parts, has declined by a third in the past year as the global recession crimped demand. A recovery in demand may be offset by the "huge amount of excess capacity," which could be a risk to the price, Roubini said.

The Reuters/Jefferies CRB Index of 19 commodities has risen 12 percent this year. It jumped 3.9 percent on July 30 to 253.14, the biggest gain since March 19.

Slow Recovery

"That recovery will continue slowly, slowly over time," Roubini said today. The global economy may contract 2 percent this year and swing to growth of 2.3 percent next year, he said.

Vale SA, the world's biggest iron ore producer, said demand for metals is starting to recover and it will begin boosting output. Vale Chief Financial Officer Fabio Barbosa said on July 30 that "the worst is over".

The price of oil may rise more than other commodities because of an expected rebound in demand, Roubini said separately in an interview with Bloomberg News. It may average between $70 and $75 a barrel next year, he said.

Oil Prices

Crude oil traded above $70 a barrel today for the first time in a month on speculation fuel demand will increase, amid signs the global economy is recovering from recession.

The U.S. economy, the world's biggest, is likely to grow about 1 percent in the next two years, less than the 3 percent "trend," Roubini said last month. President Barack Obama said on July 30 the U.S. may be seeing the beginning of the end of the recession.

In July 2006 Roubini predicted the financial crisis. In February of last year he forecast a "catastrophic" meltdown that central bankers would fail to prevent, leading to the bankruptcy of large banks with mortgage holdings and a "sharp drop" in equities. Since then, Bear Stearns Cos. was forced into a sale and Lehman Brothers Holdings Inc. went bankrupt, prompting banks to hoard cash and depriving businesses and households of access to capital.

http://www.bloomber g.com/apps/ news?pid= 20601087& sid=aUZbo8LjO3kw

Kim Eng Indonesia Equity Daily, 3 Aug 09

2009-08-02T23:54:00.000-07:00

OurComment

Mitra Adiperkasa posted abetter-than- expected result with bottom line increased 54% YoY to Rp118b in1H09.
The result was driven by 18% sales growth and Rp131b gain on foreign exchange.
Even excluding the gain on foreign exchange, the result came above expectation.
On quarterly basis, gross margin showed improvement, increased to 37.7% in 2Q 09 from 37.2% in 2Q 08 and 35..6% in1Q 09.
Greater contribution from high-margin specialty stores (45% in 1H 09 vs.42% in 1H 08) was the driver for the margin improvement.
BUY, TP is under review as the result came above expectation.

Medco announced poor 1H 09 result with 85% lower net profit YoY. Sales dropped by 59% to US$311m, not ably on lower sales of oil & gas and petrochemical products.
YoY, sales of oil & gas dropped by more than a half to US$227.2m in 1H 09, while that of petrochemical product fell to US$15m from US$125.1m in 1H 08.
Operating profit shrunk to 10.1% from 25.6% in 1H 08.
We see earnings to remain poorin 2H09. and expect a negative sentiment for the counter due to the disappointing result.
Maintain HOLD, TP is Rp3,000.

KatarinaSetiawan

Highlights
o Mitra Adiperkasa (BUY): Strong results
o MedcoEnergi (HOLD): Poor 1H09 result
o AnekaTambang (UNDER REVIEW): Sales down 16% YoY in 1H09
o Elnusa :Obtained US$126m new contracts in 1H09

From our chartist desk

o IDX: The index has limited upside until to 2427, and near-term target of 2246 level. The main triggers are coming from regional market, and Rupiah appreciation. Daily TD sequential is in buy countdown 12th day. Today´s trading range is between 2249-2284-2303(support) and 2337-2352-2386(resistance) .

o TLKM:Candlestick signal appeared on 29 July 2009, it is significant for a continued upside. TRADING BUY

o PGAS: We maintain our target price of Rp4100 (medium term). The stock has a very strong uptrend. TRADING BUY

Kim Eng Indonesia Equity Daily, 30 Jul 09

2009-07-29T23:06:00.000-07:00

Our Comment

Results are streaming in this morning.

A number of counter posted above-expected results:
Bank Mandiri (BUY), Gudang Garam (BUY), Indocement (BUY),and Unilever, (Under Review).

Other companies´ results are in line with expectations: Bank Central Asia (Under Review), Budi Acid(HOLD), Total (BUY) and Wijaya Karya (BUY).

China market was down 5% yesterday due to concerns over weakening loan growth, which will hurt the economy.

The selloff sent negative impacts to other markets in the region. This morning, regional stocks are still slightly down. Prices of most commodities tumbled this morning as oil price was down almost 4%as US oil stock rose.

We see the Indonesia market to continue its correction today.

Katarina Setiawan

Highlights

o Bank Mandiri (BUY): Offsetting effect of provision and tax movement
o Gudang Garam (BUY): Result beats expectation
o Wijaya Karya (BUY): Strong 2Q09 net profit
o Wijaya Karya (BUY): Awarded US$103m contract from Pertamina
o Indocement(BUY): Above expectation 1H09 net profit
o Total Bangun Persada (BUY): 1H09 net profit in line
o Budi Acid (HOLD): 1H09 net profit above expectation
o Unilever(UND. REVIEW): Result beats expectation
o BankBCA: Flat QoQ performance
o HMSampoerna: 1H09 results
o Elnusa:1H09 results
o MustikaRatu: 1H09 results
o JasaMarga: 1H09 results
o UtrajayaMilk Industry: 1H09 results
o Indomobil Sukses Makmur: 1H09 results

From our chartist desk

o IDX : We upgrade the lower target for the index from 2145 to 2180. Many stocks are overbought on stochastic signals. We prefer small caps with strong signal fromTD sequential buy. Today´s trading range is between 2116-2168-2196 (support)and 2248-2270-2321 (resistance) .

o TURI : Daily TD sequential indicated buy countdown 4th day, and we upgrade target price from Rp1700 of Rp2050. TRADING BUY

o SMRA: This stock included bullish cycle on property. We set our target of Rp600, referring to trend line. TRADING BUY

Dow Sends Buy Signal That’s Worked Since 1921

2009-07-29T22:51:00.000-07:00

By Eric Martin and Michael Patterson

July 29 (Bloomberg) -- The Dow Jones Industrial Average is sending a buy signal that has foreshadowed gains of 18 percent during the past nine decades.

The 30-stock gauge climbed to more than 10 percent above its mean level from the previous 200 days, rebounding from 34 percent below the so-called 200-day moving average in November, according to data compiled by Bloomberg. Eighteen of the last 21 times the Dow rallied from at least 10 percent below the 200-day level to 10 percent above, it posted gains during the next 12 months, Bloomberg data since 1921 show.

The CHART OF THE DAY tracks the difference between the Dow's last price and its 200-day average since 1989. The lower panel displays the measure's price, along with the buy signals it sent near the start of rallies in 1991, 1999 and 2003.

"This rally, while it will have its fits and starts, is the beginning of a new trend, not just a bounce," said Michael Williams, managing director of New York-based Genesis Asset Management, which oversees about $2 billion. "It is a significant opportunity.

"The Dow posted an average advance of 18 percent during the 12-month period following buy signals since 1921, Bloomberg data show. In the six-month period, there were 17 advances for an average gain of 8.2 percent. In three months, it climbed 18 times, averaging an increase of 5.7 percent.

http://www.bloomber g.com/apps/ news?pid= 20601109& sid=aCbacdLSWjCs

China Stocks Plunge Most in 13 Months; Jiangxi Copper Falls

2009-07-29T01:40:00.000-07:00

By Bloomberg News

July 29 (Bloomberg) -- China's stocks plunged the most in 13 months, led by commodities companies, as speculation recent gains have outpaced earnings prospects overshadowed China State Construction Engineering Corp.'s surge in debut trading.

Jiangxi Copper Co. dropped 6.9 percent, paring its annual advance to 336 percent, after saying first-half profit fell. China Cosco Holdings Co. the world's largest operator of dry- bulk ships, slid 6.7 percent as it forecast a loss. State Construction jumped 60 percent from its offer price in the world's largest initial public offering in 16 months.

The Shanghai Composite Index lost 235.17, or 6.8 percent, to 3,203.2 as of 2:26 p.m., set for its biggest decline since Juen 10, 2008 and snapping a five-day, 7 percent winning streak. The gauge has almost doubled from last year's low as government stimulus spending, record bank lending and an economic rebound spurred demand for equities. The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, slid 6.9 percent to 3,496.88

"Metals shares have moved ahead of fundamentals and the whole market is facing increasing risks as valuations are getting more expensive," said Yan Ji, who helps oversee about $850 million of investments at HSBC Jintrust Fund Management Co. in Shanghai.

--Zhang Shidong. With assistance from Chua Kong Ho in Shanghai. Editors: Richard Frost, Linus Chua

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104- 7014 or szhang5@bloomberg. net

U.S. Economy: New-Home Sales Up 11%, Most Since 2000

2009-07-27T22:46:00.000-07:00

By Courtney Schlisserman and Bob Willis

July 27 (Bloomberg) -- Purchases of new homes in the U.S. climbed 11 percent in June, the biggest gain in eight years, underscoring evidence that the deepest housing slump since the Great Depression is starting to stabilize.

Sales increased to a 384,000 annual pace, higher than every forecast in a Bloomberg News survey and the most since November, figures from the Commerce Department showed today in Washington. The number of houses on the market dropped to the lowest level in more than a decade.

Deutsche Bank Securities Inc. and Goldman Sachs Group Inc. economists said today's figures signal an end to the slide in home construction and sales. While that means the drag on economic growth will turn to a stimulus in the second half of the year, property values are likely to continue falling and rising unemployment will temper the recovery, analysts said.

"We're barely past the housing bottom, this thing is still fragile," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York. "It's not premature to talk about home prices bottoming -- it's somewhere in the next three to six months. There is light at the end of the tunnel.

"Builders' stocks jumped, with the Standard and Poor's Supercomposite Homebuilding Index gaining 4.4 percent. The broader S&P 500 Stock Index was up 0.3 percent to close at 982.18. Treasuries, which fell earlier in the day, remained lower, with benchmark 10-year note yields rising to 3.72 percent at 4:37 p.m. in New York from 3.66 percent at last week's close.

Construction Recovers

The Commerce Department earlier this month reported that builders began work on 582,000 residential properties at an annual rate in June, the most since November. Home construction has subtracted from U.S. gross domestic product every quarter since the start of 2006.

The jump in sales signals the U.S. economy is on the way to recovery, said Rebecca Blank, under secretary for economic affairs at the Commerce Department.

"Across the board this is good news," Blank, formerly a fellow at the Brookings Institution in Washington, said in an interview. "It's what you would expect to see at the beginning of a recovery.

"Standard Pacific Corp., the U.S. homebuilder that gets most of its revenue from California, is among companies seeing stabilization. It's net loss, the 11th consecutive drop, narrowed to $23.1 million in the second quarter from $249 million a year earlier, the Irvine, California-based company said last week. Revenue fell 29 percent.

Smaller Losses

"While we still obviously have not achieved the level of profitability that we ultimately need, we are a lot closer than we were a couple of quarters ago and believe that we are in pretty good shape in the short run," Chief Executive Officer Ken Campbell said in a July 22 statement.

While prices continue to fall, the pace of the decline is easing. The S&P/Case Shiller index of 20 major metropolitan areas tomorrow may show property values fell 17.9 percent in May from a year earlier, according to the median forecast in a Bloomberg survey. The measure was down 18.1 percent in the 12 months ended April.

"In terms of residential investment and home sales and housing starts, I think it has" bottomed, said Jan Hatzius, chief U.S. economist at Goldman Sachs in New York, referring to the housing slump. "We still have a period of declines ahead of us" in prices, he also said.

The decline in prices and a drop in mortgage rates have started to lure buyers even amid the surge in unemployment, which reached a quarter-century high of 9.5 percent in June.

Economists' Forecasts

Economists had forecast new home sales would rise to a 352,000, according to the median of 62 projections in a Bloomberg News survey. Estimates ranged from 335,000 to 377,000. Commerce revised May's reading up to a 346,000 rate from a previously reported 342,000.

The median price of a new home decreased 12 percent to $206,200 from $234,300 in June 2008. Last month's value compares with $219,000 in May.

Builders had 281,000 houses on the market last month, down 4.1 percent from May and the fewest since February 1998. The number of unsold properties fell a record 36 percent from June 2008. It would take 8.8 months to sell all homes at the current sales pace, the lowest level since October 2007.

Foreclosure filings reached a record in the first half of the year, providing competition for homebuilders and pushing down the value of all houses. Also, rising unemployment, which economists forecast will top 10 percent by early 2010, threatens to restrain any recovery in housing.

Fed Efforts

Federal Reserve policy makers have committed to a $1.25 trillion program to purchase securities backed by home loans in an effort to put a floor under the housing market and lower borrowing costs. Those purchases, as well as direct government purchases of Treasuries, drove the rate on 30-year mortgages to a record-low 4.78 percent in April, according to figures from Freddie Mac. Rates have since hovered around 5 percent.

Fed Chairman Bernanke said July 21 that the economy is showing "tentative signs of stabilization" and the "decline in housing activity appears to have moderated.

"Another incentive is the $8,000 tax credit for first-time buyers that is part of the Obama administration' s economic stimulus plan. Purchases have to be completed before Dec. 1.

http://www.bloomber g.com/apps/ news?pid= 20601087& sid=awkCLJRdSc9g

SEC rule on 'naked' short-selling now permanent

2009-07-27T21:06:00.000-07:00

By Marcy Gordon, AP Business Writer
On Monday July 27, 2009, 7:54 pm EDT

WASHINGTON (AP) -- Federal regulators on Monday made permanent an emergency rule put in at the height of last fall's market turmoil that aims to reduce abusive short-selling.

The Securities and Exchange Commission announced that it took the action on the rule targeting so-called "naked" short-selling, which was due to expire Friday.

Short-sellers bet against a stock. They generally borrow a company's shares, sell them, and then buy them when the stock falls and return them to the lender -- pocketing the difference in price.

"Naked" short-selling occurs when sellers don't even borrow the shares before selling them, and then look to cover positions sometime after the sale.

The SEC rule includes a requirement that brokers must promptly buy or borrow securities to deliver on a short sale.

Brokers acting for short sellers must find a party believed to be able to deliver the shares within three days after the short-sale trade. If the shares aren't delivered within that time, there is deemed to be a "failure to deliver." Brokers can be subject to penalties if the failure to deliver isn't resolved by the start of trading on the following day.

At the same time, the SEC has been considering several new approaches to reining in rushes of regular short-selling that also can cause dramatic plunges in stock prices.

Investors and lawmakers have been clamoring for the SEC to put new brakes on trading moves they say worsened the market's downturn starting last fall. SEC Chairman Mary Schapiro has said she is making the issue a priority.

Some securities industry officials, however, have maintained that the SEC's emergency order on "naked" short-selling brought unintended negative consequences, such as wilder price swings and turbulence in the market.

The five SEC commissioners voted in April to put forward for public comment five alternative short-selling plans. One option is restoring a Depression-era rule that prohibits short sellers from making their trades until a stock ticks at least one penny above its previous trading price. The goal of the so-called uptick rule is to prevent selling sprees that feed upon themselves -- actions that battered the stocks of banks and other companies over the last year.

Another approach would ban short-selling for the rest of the trading session in a stock that declines by 10 percent or more.

Schapiro said last week the SEC could decide on a final course of action in "the next several weeks or several months.

"Sen. Ted Kaufman, D-Del., one of a bipartisan group of seven senators who have been pushing the SEC to rein in short-selling overall or face legislative action, said Monday that "investors need to see concrete steps."

"Instead of proposing action today to deal with the problem, the SEC apparently is content to let potential solutions sit on the shelf for another two months," Kaufman said in a statement. "... If the market were to decline precipitously again and the banks propped up by taxpayer funds were to become vulnerable again, that is not an insignificant risk.

"In addition to making the "naked" short-selling rule permanent, the SEC and its staff are working with major stock exchanges to make data on short-sale transactions and volumes publicly available through the exchanges' Web sites, the SEC announcement said. It will result in "a substantial increase" over the amount of information currently required, the agency said.

"Today's actions demonstrate the (SEC's) determination to address short-selling abuses while at the same time increasing public disclosure of short-selling activities that affect our markets," Schapiro said in a statement.

The SEC also said it will hold a public hearing on Sept. 30 to address stock lending for short-selling and possible new disclosures related to short-selling that could be required.

The actions were announced the same day a new advisory committee, established to advise the SEC on regulatory issues, financial disclosure, trading fees and other matters, held its first public meeting at the agency's Washington headquarters.

Schapiro, who took the helm of the agency in January, created the committee to gather views from parties outside Wall Street and Washington -- one of a number of measures designed to strengthen the SEC at a time when it has been called on to help restore investor confidence shattered by the worst financial crisis in more than 70 years.

Separately Monday, Sen. Charles Schumer, D-N.Y., a member of the Senate Banking Committee, said he has asked Schapiro to ban the practice of so-called "flash trading," which enables some big Wall Street banks and hedge funds to get an advance look at investors' stock orders before they hit the market.

The use of super-fast computers by those participants to spy on orders gives them an unfair advantage, Schumer wrote in a letter Schapiro. If the SEC fails to act, Schumer said he would consider proposing legislation to ban flash trading.

"This kind of unfair access seriously compromises the integrity of our markets and creates a two-tiered system where a privileged group of insiders receive preferential treatment, depriving others of a fair price for their transactions, " Schumer told Schapiro.

Marc Faber says S&P-500 Index looking too expensive

2009-07-24T03:19:00.000-07:00

Published: Friday, 24 Jul 2009 http://arabianmoney .net/2009/ 07/22/marc- faber-says- sp-looking- too-expensive/

Legendary Swiss investment advisor Dr Marc Faber told Arabianmoney. net that the S&P was looking overvalued and was vulnerable to a correction, speaking on the margins of the Agora Financial Decade of Reckoning™ conference in Vancouver, Canada today.

In a powerful presentation Dr Faber blamed low interest rates at the US Federal reserve for the bubbles recently created in all major asset global classes, except in Zimbabwe. But now the reversal had brought asset price destruction across the world.

Light at the end of the tunnel

His presentation entitled Yes, there is light at the end of the tunnel™ came with two important caveats: first, he did not know how long the tunnel would be; and secondly, the light depended on investment in the right asset class to beat hyperinflation.

Dr Faber gave a strong evocation of his hyperinflation thesis which essentially turns of Fed chairman Ben Bernankes often repeated and never denied reputation as a money printer who would drop dollars from a helicopter if that would help the US economy.

There could well be a second or third stimulus package, and as much quantitative easing as necessary, in the view of this famous contrarian. He thinks the alternative scenario of allowing a debt deflationary spiral to develop is simply not on the policy agenda.

The investment implications are profound. Dr Faber is telling his newsletter subscribers to make their dollar escape plans and buy gold and silver. He regards last autums precious metal correction as somewhat similar to what happened in 1975-6 before gold prices advanced eight-fold by 1980, although a correction to $850-an-ounce is still possible.

Confident predictionsPinning the Swiss super-analyst down after his speech Arabianmoney. net found him very confident in his predictions which have tended to face in both directions since the crisis began.

What is less sure is whether stock prices will move sideways and then enjoy an inflationary advance, or suffer a correction on the scale of last year before heading back upwards. In any event Dr Faber thinks precious metals are the better investment in a highly volatile period.

For the Middle East he advised Arabianmoney. net that a revival in oil prices would be forthcoming and that actually set the region up for a much better recovery than appeared evident from current data on real estate and auto imports

Warren Buffett Cuts Stake in Moody's By Almost 17%

2009-07-23T00:06:00.000-07:00

Published: Wednesday, 22 Jul 2009 5:54 PM ET - CNBC.COMhttp://www.cnbc. com/id/32090379

Warren Buffett's Berkshire Hathaway has cut its stake in Moody's by 16.6 percent, reducing its exposure to the beleaguered credit rating agency by selling almost eight million shares over three days.

In a filing with the SEC late today (Wednesday), Berkshire says it held 40,013,700 shares as of July 21. That's 16.98 percent of Moody's shares outstanding.

Berkshire reported holding 48 million shares as of March 31. That would be a stake of just over 20 percent.

Moody's shares fell sharply in after-hours trading on the news. They closed today at $26.52 and were trading at $24.35 just after 6p ET.

Current price: [MCO 26.52 -0.28 (-1.04%) Berkshire's National Indemnity sold the shares on the open market over a three-day period starting Monday. The selling prices ranged from $28.73 to $26.64, with an average of $27.25. The sales raised $217.6 million for Berkshire.

Kim Eng Indonesia Equity Daily, 17 Jul 09

2009-07-16T20:36:00.000-07:00

OurComment

Bank Danamon announced 1H09 results with overall net profit stood lower than consensus, covering 45% of the Rp1.9t full year projection.

We see an increase in Net Interest Income on the back of higher asset yield (18,1% in 1H09 vs. 16,1% in 1H08), which is supported by high-lending- rate period and bigger portion of mass-market loan (51% in 1H09vs. 46% in 1H08).

Improvement in yield was sufficient to offset Cost of Fundthat rises 1.5% YoY to 7.5% in 1H09. However, total deposit continue toshow negative growth, of 10.2% YTD from Rp75.4t by end 2008.

It was then followed by a further contraction in loan, by 7.9% YTD from Rp66.9t in December2008. The bank indicated a full year loan growth target of less than 10% in2009.

Bank Negara Indonesia posted Rp1.2t profit in1H09. Overall, the QoQ figures are less attractive than the YoY development.Never the less, supported by strong result in 1Q09, the overall net profit in1H09 is still 10% above consensus estimates of Rp1.1t after being adjusted for a six months period forecast.

Loan growth target for 2009 is set at 14%-16%, but the bank has indicated the possibility of growth to reach only 10%due to delays in 10,000MW crash program.

BNI as part of bank syndication estimated only 50% of the total Rp10t fund allocated for the project will be disbursed in 2009.

We think the bottom end of the loan growth target is still achievable since in 1H09 alone, BNI managed to reach 7% loan growth.

This morning there have been 2 explosions at the Ritz Carlton hotel and JW Marriott hotel in Kuningan, a business district in Jakarta. The cause ofexplosions is still unclear.

A few years ago JW Marriott hotel, right in front of Ritz Carlton and belong to the same owner, experienced a terrorism act in the form of bomb explosion.

We expect a selling pressure in Jakarta today.

KatarinaSetiawan

Highlights

o BankDanamon: High provision put a weight on profit

o BankNegara Indonesia: 1H09 Result remain strong, backed by 1Q performance

o SummareconAgung: 1H09 sales at Rp570b Fromour chartist desk

o IDX: Wesaw doji shooting star, daily TD sequential buy countdown 12th day(near complete) and Bollinger band 20 day indicated strong signs for correction. We set the lowest target at 1985.
Today´s trading range is between 2044-2086-2102 (support) and 2144-2170-2212(resistance) .

o BBKP: Thestock price moved up above EMA 20 and 50 day. We set support level of Rp320. BUYON WEAKNESS.

o BBNI: GMMAand MA 20 day are still up. But in the near term, stochastic is in overboughtcondition. BUY ON WEAKNESS.

Barclays Knapp Drops Bearish Call, Sees S&P 500 Rising in 2009

2009-07-14T19:58:00.000-07:00

By Jeff Kearns and Elizabeth Stanton

July 14 (Bloomberg) -- Barry Knapp, previously Wall Street's most bearish stock strategist, now says the Standard & Poor's 500 Index may eke out a 3 percent gain in 2009 as industrial production recovers and credit markets improve.

Knapp, the head of U.S. equity strategy at Barclays Plc in New York, raised his S&P 500 target to 930 from 757, citing forecasts for a rebound in U.S. growth. Economists estimate gross domestic product will expand 0.95 percent in the third quarter and 1.9 percent in the fourth after contracting in five out of the preceding seven quarters, according to data compiled by Bloomberg.

Rallies such as the 33 percent advance in the S&P 500 over the last four months tend to continue after a "correction" of about 10 percent, Knapp wrote in a note to clients. The 47-year- old analyst said he failed to foresee the size of the gain since the index fell to a 12-year low on March 9 of 676.53.

"The magnitude of the advance took us by surprise -- it was double what we were expecting in half the time," Knapp wrote. "History suggests you get a 5 percent to 10 percent correction after the initial advance before witnessing another push higher.

"Previously, Knapp said slumping profits at banks and companies that depend on consumer spending would push the gauge down 17 percent this year. He said valuations were too high relative to sales, with the S&P 500 trading at 0.92 times annual revenue, compared with a low of 0.34 times in 1982, according to his data.

Biggest Bears

Knapp's new estimate compares with a mean projection of 985 for the U.S. stock benchmark among the 10 forecasts tracked by Bloomberg. His increase leaves Kevin Gardiner of HSBC Holdings Plc and Jason Todd of Morgan Stanley tied for the lowest S&P 500 projection at 900.

Knapp was alone among the biggest Wall Street firms in predicting at the start of the year that the S&P 500 would decline to its lowest level in more than a decade. He also called the March rebound in the S&P 500.

Government efforts to repair credit markets will help the S&P 500 gain 27 points from last year's close of 903.25, Knapp said. The Treasury Department is financing as much as $1 trillion in purchases of banks' distressed assets and the Federal Reserve pledged to buy more than $1 trillion of bonds.

The Libor-OIS spread, which measures banks' reluctance to lend, has narrowed to 31 basis points, or 0.31 percentage point, the lowest level in almost 18 months. It widened to a record 364 basis points in October, following the collapse of New York- based Lehman Brothers Holdings Inc.

Trading Desk

Promoted to chief stock strategist four months before Lehman's collapse, Knapp moved to Barclays when the London-based bank bought his unit and put him in charge of U.S. equity strategy. Before the appointment, he was a trader on Lehman's so-called prop desk where he bet the fourth-largest U.S. securities firm's capital on stocks and bonds.

Married with three children, Knapp is the son of an electrical engineering professor at the University of Connecticut in Storrs and a schoolteacher. He attended the University of Rhode Island on a soccer scholarship and aimed at a professional career in the sport -- until the North American Soccer League collapsed in 1984, the year he graduated.

The midfielder fell back on his economics and finance degree, landing jobs at Merrill Lynch & Co. in New York and Boston-based Fidelity Investments while pursuing a Master of Business Administration from Fordham University at night. He joined Lehman in 1989 to sell equity derivatives.

`Alive'

"The key point is that the capital markets have normalized," Knapp wrote. "The broad improvement in capital markets implies that the recovery is very much alive.

"No other analyst came as close to predicting how far the S&P 500 would fall as Knapp, who said the gauge would drop as much as 29 percent from the Dec. 31 level to 639. The index sank 25 percent through March 9, its worst annual start.

David Kostin, U.S. investment strategist at New York-based Goldman Sachs Group Inc., said the S&P 500 might dip 17 percent to 750 during the first quarter before moving higher. Thomas Lee, chief U.S. equity strategist at JPMorgan Chase & Co. in New York, said high borrowing costs would prevent gains during the first half of the year. Tobias Levkovich, chief U.S. equity strategist at New York-based Citigroup Inc., said any advance in stocks early in the year in response to economic stimulus measures "will likely fade.

"Forecasting Gains"

Levkovich expects the S&P 500 to end 2009 at 1,000, Lee at 1,100 and Kostin at 940.

The S&P 500 rallied the most in seven decades from its March 9 low to gain 40 percent to this year's peak of 946.21 last month. Knapp said the speed of the increase helped convince him to change his old forecast.

"To be frank, our previous target has been stale for a while since it was based, in part, on the probability that the S&P fell to a level we considered a valuation floor," he wrote. "Since we last revised our target, we wrote that the timing and the nature of the rally in equities made it look like the `real thing' to us."

http://www.bloomber g.com/apps/ news?pid= 20601213& sid=aVqZyonk01iU

AFP: Oil & pessimism

2009-07-14T00:53:00.000-07:00

Singapore, July 14, 2009 (AFP) - Oil recovered in Asian trade Tuesday but continued pessimism on the weak global economy will keep a lid on further price gains, analysts said.

New York's main contract, light sweet crude for August delivery, advanced 38 cents to 60.07 dollars a barrel.

Brent North Sea crude for August delivery gained 39 cents to 61.08 dollars.

Both contracts closed weaker Monday on concerns over the pace of recovery in the global economy, especially in the United States.

Analysts said any gains were likely to be capped due to caution over US energy demand and would be short-term in nature. The United States is the world's biggest economy and its largest energy consumer.

"Oil markets remain concerned that economic recovery in the main developed economies is likely to be a slow grind," said David Moore, a Sydney-basedÂ commodity strategist with the Commonwealth Bank of Australia.

Weak energy demand in the United States has been a dominant theme since recent data suggested its economy remained fragile despite a massive stimulus spending plan of 787 billion dollars by President Barack Obama's administration.

"The global energy market is lost in the fog as the economic outlook seems to be getting a bit murkier," said Phil Flynn of Alaron Research.

Data released last week by the Department of Energy showed a bigger-than- expected rise in gasoline reserves, indicating that Americans were cutting back at a time when they should be travelling for summer holidays.

"The bigger picture is that final demand is set to remain weak for years," analysts from London-based Capital Economics said in a report.

burs-bh/mba/ pst

Singapore Raises GDP Forecast as Nation Emerges From Recession

2009-07-13T23:22:00.000-07:00

By - Shamim Adam

July 14 (Bloomberg) -- Singapore's government raised its economic forecast for 2009 as the economy emerged from the deepest recession since its 1965 independence a mid a rebound in manufacturing and exports.

Gross domestic product will shrink between 4 percent and 6 percent this year, less than an earlier forecast for a contraction of as much as 9 percent, the trade ministry said in a statement today. The economy rose an annualized 20.4 percent last quarter from the previous three months, after shrinking a revised 12.7 percent between January and March, it said.

The revised forecast "reflects the less severe contraction in the first half of the year, while the underlying economic conditions remain weak," the ministry said. The expansion last quarter was better than the median estimate for a 13.4 percent gain in a Bloomberg survey of 12 economists.

Governments worldwide have pledged about $2 trillion in stimulus to counter the global recession, helping stabilize sales by exporters including Japan's Nissan Motor Co. and South Korea's Samsung Electronics Co. The region's stocks are among the world's best performers this year and the International Monetary Fund has raised its growth forecast for emerging Asia.

"If the Singapore economy can report improvement in export and production, it certainly suggests that elsewhere in Asia we will also see some sequential improvement in underlying demand," said Song Seng-Wun, regional economist at CIMB-GK Securities Pte in Singapore.

Bouncing Back

Singapore's $161 billion economy contracted 3.7 percent last quarter from a year earlier, better than the median estimate for a 5.4 percent decline in a Bloomberg survey.

Manufacturing, which accounts for a quarter of the economy, fell 1.5 percent from a year earlier, after sliding a revised 24.3 percent in the three months ended March. Industrial production has gained as pharmaceutical companies boosted output and exports.

"Asia is bouncing back in a V-shaped fashion," said David Carbon, head of economic and currency research at DBS Group Holdings Ltd. in Singapore. "Industrial production is 65 percent back to pre-crisis levels and exports have recovered about one-third of their lost territory.

" India's industrial production increased at the fastest pace in eight months in May, while Malaysia's declined the least in six months. South Korea's output rose more than estimated and China's accelerated. China will release gross domestic product data on July 16.

The Japanese government said yesterday the economy is "picking up," and upgraded its view of exports, business sentiment and consumer spending.

'Peter Out'

Asian policy makers have slashed borrowing costs and pledged more than $950 billion of stimulus plans to boost local consumer and business spending and offset the trade slowdown. The IMF said this month emerging Asian economies will probably expand 5.5 percent this year, more than a 4.8 percent estimate in April.

The faster-than- expected growth "owes to improved prospects in China and India, in part reflecting substantial macroeconomic stimulus and a faster-than- expected turnaround in capital flows," the fund said July 8. "However, the recent acceleration in growth is likely to peter out unless there is a recovery in advanced economies.

" The "volatile" pharmaceutical industry is helping shore up Singapore's economy, said Tai Hui, head of Southeast Asian economic research at Standard Chartered Plc in Singapore.

"If you look at the underlying economy such as the manufacturing of electronics, as well as the services sector, it does seem like the growth momentum has yet to fully recover," the economist said.

Las Vegas Sands

Singapore's services industry declined 5.1 percent last quarter, after shrinking by a similar pace in the first three months of the year. The construction industry gained 18.3 percent last quarter as Las Vegas Sands Corp. and other developers worked to complete hotels, office towers and condominiums.

"Singapore's recovery will be more pronounced than others in the region because pharmaceuticals swung the industrial production numbers a lot more than it did in other countries," said Vishnu Varathan, a regional economist at Forecast Singapore Pte. "We'll really be getting ahead of ourselves to say the recession is in the rear view mirror. Output levels are still well off where we were before the crisis."

U.S. Stocks, Commodities Retreat After Job Losses Top Estimates

2009-07-02T21:14:00.000-07:00

July 2 (Bloomberg) -- U.S. stocks fell, sending the Standard & Poor’s 500 Index to a third straight weekly drop, as a worse-than-projected decrease in jobs added to concern that rising unemployment will prolong the recession. Treasuries rose, while oil retreated to a five-week low.

Home Depot Inc., Alcoa Inc. and Travelers Cos. lost more than 3 percent after the Labor Department said payrolls shrank by 467,000 jobs last month, 102,000 more than the average economist estimate. Lear Corp., the second-biggest maker of automotive seats, sank on plans to file for bankruptcy. Europe’s Dow Jones Stoxx 600 Index plunged 2.4 percent, the most in almost two weeks, following the jobs report.

“It’s ugly out there,” Jack Ablin, who oversees $60 billion as chief investment officer at Harris Private Bank in Chicago, told Bloomberg Television. “We were trying to gain a little bit of traction on the jobs front, to get less bad numbers on a monthly basis. Clearly this month’s report is a setback.

” The S&P 500 tumbled 2.4 percent to 901.92 at 1:40 p.m. in New York, extending its slump since June 12 to 4.7 percent and erasing its 2009 gain. The Dow Jones Industrial Average retreated 176.54 points, or 2.1 percent, to 8,327.52. Thirteen stocks fell for each that rose on the New York Stock Exchange, the broadest decline since April 20.

The stock market’s three-week slump has been spurred by concern the S&P 500’s 40 percent surge since March outpaced prospects for a recovery in the economy and corporate profits. The U.S. equity benchmark is poised to cap its longest stretch of weekly losses since March. U.S. markets will be closed tomorrow for the Independence Day holiday.

Sector Divergence

A divergence of Dow Jones’s industrial, transportation and utility stock indexes suggests a rally in the U.S. market may stay stalled near current levels, according to Andrew Burkly, a technical analyst at Brown Brothers Harriman.

The Dow Jones Industrial Average last month rose to the highest reading since January before retreating to a level that’s still above the average of the past 50 days. The Dow Jones Utilities Average, on the other hand, extended its June rally into this month, hitting a five-month high yesterday. The Dow Jones Transportation Average, while also staying above its 50-day moving average, generated the least bullish pattern by failing to exceed a May high, according to Burkly.

Earnings Season

The second-quarter earnings season will kick off next week with Alcoa, the largest U.S. aluminum producer, reporting results on July 8. Analysts estimate profits in the S&P 500 declined 34 percent in the second quarter and will slump 21 percent on average in the third before rebounding 61 percent in the final three months of the year, according to Bloomberg data.

“I have a hard time imagining we’re going to go into a new raging bull market from here,” said Randy Frederick, director of trading and derivatives at Charles Schwab & Co. in Austin, Texas. “People can’t spend if their comfort level is low and they’re worried about their jobs.

” Home Depot, the biggest home-improvement retailer, lost 3.9 percent to $22.79. Alcoa, the nation’s largest aluminum producer, retreated 3.7 percent to $9.97. Travelers, the insurer that stayed profitable through the credit crisis, slumped 3.5 percent to $39.69.

Lear plunged 28 percent to 35 cents. The company, after reaching an agreement with representatives of lenders and bondholders, said it will “commence shortly” with a Chapter 11 reorganization.

GM IPO

General Motors Corp., the bankrupt automaker selling most of its assets to the U.S. government, may file for an initial public offering of its stock in 2010, according to an adviser to President Barack Obama. GM was in bankruptcy court yesterday seeking approval to sell most of its assets to the Treasury, which is paying for the company with the more than $27 billion in loans it has made to the automaker.

Johnson Controls Inc. posted the S&P 500’s second-steepest loss, sliding 7.4 percent to $21.07. The maker of car interiors and batteries was downgraded to “hold” from “buy” at Deutsche Bank AG on concern the stock price already reflects the company’s ability to navigate the auto industry slump.

The stock’s decline in the index was exceeded only by an 8.9 percent tumble in shares of Monster Worldwide Inc., the world’s largest online recruiting company, following the jobs report. The Labor Department figures showed the jobless rate rose to 9.5 percent, the highest since August 1983, from 9.4 percent.

‘Clearly Disappointing’

“It’s clearly disappointing,” Hugh Johnson, who manages more than $1.5 billion as chairman of Albany, New York-based Johnson Illington, said of the employment data. “I would argue that we’ll have a correction between 5 and 15 percent” in the stock market.

Oil retreated 3.5 percent to $66.89 a barrel, Treasuries rose and the dollar climbed against the euro on speculation a weak labor market will prolong the recession. The Reuters/Jefferies CRB Index of 19 raw materials fell 1.9 percent, led by lower gasoline and crude prices.

All 40 stocks in the S&P 500 Energy Index tumbled. Halliburton Co. and Hess Corp. lost more than 5.5 percent, leading the measure of oil drillers, explorers and equipment suppliers to a 3.1 percent slump.

Elan Corp. surged 13 percent to $7.88. Johnson & Johnson agreed to develop its medicines against Alzheimer’s disease and pay $1 billion for an 18.4 percent stake in the Irish drugmaker.

Benchmark indexes advanced yesterday, adding to gains from the S&P 500’s best quarter since 1998, as improving gauges of manufacturing and home sales added to optimism the worst of the recession is over.

Worrisome Rally

The steepest quarterly rally in value stocks is a bearish sign to some of the largest money managers, who say it shows the equity market has relied on companies with the worst finances to fuel its rebound.

Money-losing companies in the MSCI World Value Index with the most debt climbed an average of 38 percent last quarter, compared with a 20 percent gain for the MSCI World Index, according to data compiled by Bloomberg. That pushed value stocks, or those trading at the lowest level relative to their earnings or assets, in the index up 22 percent, the biggest increase since at least 1995.

Gains will be harder to come by as investors search for profit growth to justify the 41 percent rally in the MSCI World from March 9 through yesterday, according to James Dunigan of PNC Financial Services Group Inc.

Stock investors will monitor the Treasury’s auctions next week to see if demand holds up as Obama pushes the nation’s marketable debt to an unprecedented $6.45 trillion. The Treasury will hold four auctions next week for the first time to sell $73 billion of notes, bonds and inflation-protected securities as the U.S. accelerates debt sales to finance a record budget deficit.

Militants Hit Oil Supplies in Nigeria

2009-06-29T22:58:00.000-07:00

By WILL CONNORS and MICHAEL ALLENWARRI,

Nigeria -- Militants attacked two installations operated by Anglo-Dutch oil giant Royal Dutch Shell PLC in the Niger Delta on Monday, sending world oil prices higher and complicating government efforts to bring peace to the region.

Two oil-well clusters supplying Shell's Forcados oil-export terminal in Delta State were bombed by militants, spokesmen from Shell and the Nigerian military confirmed, just days after Nigerian President Umaru Yar'Adua unveiled an amnesty offer to militants.

"Some production has been shut in as a precautionary measure, while we investigate to determine what really happened," a Shell spokesman said. He didn't specify the amount affected by the bombings.

Another oil-company manager based in the region said the effect was severe, closing down at least 100,000 barrels a day in exports in Shell's western Delta region and further crimping Nigeria's oil output.

"We can't produce because we don't know what it did to the infrastructure, " the manager said. "It's pretty catastrophic, both financially and environmentally.

"On Monday, crude oil closed at the highest point in 2½ weeks, as traders reacted to supply threats. Light sweet crude for August delivery settled at $71.49 a barrel, up 3.4% on the New York Mercantile Exchange

Kim Eng Indonesia Equity Daily, 29 Jun 09

2009-06-28T21:58:00.000-07:00

Our Comment

The new President Director of IndonesiaStock Exchange Ito Warsito proposes to require all bank debtors with loan morethan Rp500b to list its shares in the bourse. He views the move will increase transparency and supervisory towards the debtors. Mr Warsito plans to discuss the plan with Bank Indonesia .

After a long meeting last Friday, Bumi´s shareholders approved management´s plan to pledge its assets as collateral, including shares inKPC and Arutmin. We highlight the risks of losing KPC and Arutmin, if thingsare not going in line with the management´s plan.

Farallon Capital Management sold its remaining 4.05% stake (986m shares) in BCA last Friday at Rp3,425/share or total Rp3.38t. The media reported Farallon soldits shares to some institutional investors, but not to Alaerka Investment Ltd,its partner in Farallon Indonesia (Farindo) Investment. Alaerka is a fund controlled by Djarum Group, which currently owns approximately 47% stake in BCA.

By - Ricardo Silaen

Highlights

o BumiResources (HOLD): AGM result

o SemenGresik (HOLD): Rp215 DPS (Yield=4.1%)

o Bakrie& Brothers: Consider to divestmetal units

o BCA: Farallon divested 4.05% ownership

o BankEksekutif: In a potential acquisition

From our chartist desk

o IDX: We see IDX still shows positive histogram on MaCD12-26 day, and reversal on middle line of Bollinger band 20-day. In terms of volatility, we should expect a wide swing trading opportunity. Today´s tradingrange is between 1965-2004-2022 (support) and 2062-2083-2123(resistance) .

o PTBA: The stock price shows a strong buying volume. We think the price would to continue rally, according to positive crossover momentum signal. TRADING BUY

o TLKM: We decide to pick TLKM because the price was successfully above MA 14, 20 and 25 day. We set target price of Rp7750 in near term. TRADING BUY

Blavatnik to sue JPMorgan over investment losses

2009-06-22T06:10:00.000-07:00

June 22 (Reuters) - U.S. billionaire Len Blavatnik is planning to file a lawsuit against JPMorgan Chase (JPM.N) on Monday, accusing the bank of mismanaging an investment account that held $1 billion in assets owned by Blavatnik's industrial holding company, Access Industries, the New York Times said.

In the proposed lawsuit, Blavatnik's lawyers blame Ted Ufferfilge, a JPMorgan banker advising Access, for losing $98 million of the company's money betting on risky subprime mortgage securities, according to the paper.

The proposed lawsuit contends that Ufferfilge told Access that its funds were being invested in conservative instruments, not securities that wound up at the center of the American mortgage crisis, the paper said, citing a draft of the complaint prepared by the law firm Quinn Emanuel Urquhart Oliver & Hedges.

An Access spokesman told the paper that JPMorgan bought the subprime securities for Access "at a time when the bank itself was unwinding its positions in similar investments. "JPMorgan intends "to defend this matter vigorously", a spokeswoman for the bank told the paper. "We believe this lawsuit is meritless and a transparent attempt to recover losses resulting from the unprecedented market downturn," she told the paper.

The bank has hired the law firm Paul, Weiss, Rifkind, Wharton & Garrison to represent it in the case, the paper added. JPMorgan and Access Industries could not be immediately reached for comment by Reuters. (Reporting by Chakradhar Adusumilli in Bangalore; Editing by Muralikumar Anantharaman)

© Thomson Reuters 2009 All rights reserved

Soros: Worst of global crisis is over

2009-06-22T06:03:00.000-07:00

Published: 2009/06/22

BILLIONAIRE hedge fund manager George Soros said the worst of the global financial crisis is over, and called for new international regulations to maintain open markets.

"Definitely, the worst is behind us," Hungarian-born Soros said in an interview yesterday with Polish television station TVN24.

He called the crisis the most serious in his lifetime, adding, "This is the end of an era. The question is what's going to come out of it in the future.

"Without new international regulations, "globalisation will fall apart," possibly spawning a system of "state capitalism" like the one that exists in China, he said.

Soros, who recently returned from China, said the world's third-largest economy is "growing in strength" because the country was relatively unaffected by the crisis. -- Bloomberg

Roubini: There will be a SIGNIFICANT market correction

2009-06-22T05:57:00.000-07:00

The price of oil, which is rising too fast, and long-term interest rates that are beginning to creep up are likely to suppress a budding recovery, famous economist Nouriel Roubini, also dubbed "Dr. Doom," told CNBC Monday.

"I see even the risk of a double-dip, W-shaped recessionÂ… towards of the end of next year," Roubini told "Squawk Box Europe."

"Oil could be closer to $100 a barrel towards the end of this year, this could be a negative shock to the economy," he said, adding that other dangers come from long-term interest rates and big budget deficits.

In the next few months, unemployment may reach 11 percent in the US and around 10 percent in Europe.

"There will be a significant market correction" in the coming months, as economic data will offer negative surprises, he said.

In Europe, the dangers came both from its weak economy and from exposure of Western European banks to Eastern European economies, he said. But protectionism is not an answer, Roubini warned.

"The reality is that too much protection would be dangerous," he said.

"In Europe there is a risk that even the single market is breaking down because of protectionism, let alone the rest of the world," Roubini added.

With reporting by Stephane Pedrazzi in Paris.

The three steps to financial reform

2009-06-17T17:47:00.000-07:00

Financial Times, Wednesday, 17 June 2009 - By : George Soros

The Obama administration is expected today to propose a reorganisation of the way we regulate financial markets. I am not an advocate of too much regulation. Having gone too far in deregulating - which contributed to the current crisis - we must resist the temptation to go too far in the opposite direction.

While markets are imperfect, regulators are even more so. Not only are they human, they are also bureaucratic and subject to political influences, therefore regulations should be kept to a minimum.

Three principles should guide reform.

First, since markets are bubble-prone, regulators must accept responsibility for preventing bubbles from growing too big.
Alan Greenspan, the former chairman of the Federal Reserve, and others have expressly refused that responsibility.
If markets cannot recognise bubbles, they argued, neither can regulators. They were right and yet the authorities must accept the assignment, even knowing that they are bound to be wrong. They will, however, have the benefit of feedback from the markets so they can and must continually re-calibrate to correct their mistakes.

Second, to control asset bubbles it is not enough to control the money supply; we must also control the availability of credit.
This cannot be done with monetary tools alone - we must also use credit controls such as margin requirements and minimum capital requirements.
Currently these tend to be fixed irrespective of the market's mood. Part of the authorities' job is to counteract these moods. Margin and minimum capital requirements should be adjusted to suit market conditions.
Regulators should vary the loan-to-value ratio on commercial and residential mortgages for risk-weighting purposes to forestall real estate bubbles.

Third, we must reconceptualise the meaning of market risk.
The efficient market hypothesis postulates that markets tend towards equilibrium and deviations occur in a random fashion; moreover, markets are supposed to function without any discontinuity in the sequence of prices.

Under these conditions market risks can be equated with the risks affecting individual market participants. As long as they manage their risks properly, regulators ought to be happy.
But the efficient market hypothesis is unrealistic. Markets are subject to imbalances that individual participants may ignore if they think they can liquidate their positions. Regulators cannot ignore these imbalances.

If too many participants are on the same side, positions cannot be liquidated without causing a discontinuity or, worse, a collapse. In that case the authorities may have to come to the rescue. That means that there is systemic risk in the market in addition to the risks most market participants perceived prior to the crisis.The securitisation of mortgages added a new dimension of systemic risk.

Financial engineers claimed they were reducing risks through geographic diversification: in fact they were increasing them by creating an agency problem. The agents were more interested in maximising fee income than in protecting the interests of bondholders. That is the verity that was ignored by regulators and market participants alike.

To avert a repetition, the agents must have "skin in the game" but the five per cent proposed by the administration is more symbolic than substantive. I would consider ten per cent as the minimum requirement. To allow for possible discontinuities in markets securities held by banks should carry a higher risk rating than they do under the Basel Accords.

Banks should pay for the implicit guarantee they enjoy by using less leverage and accepting restrictions on how they invest depositors' money; they should not be allowed to speculate for their own account with other people's money.It is probably impractical to separate investment banking from commercial banking as the US did with the Glass Steagull Act of 1933. But there has to be an internal firewall that separates proprietary trading from commercial banking. Proprietary trading ought to be financed out of a bank's own capital.

If a bank is too big to fail, regulators must go even further to protect its capital from undue risk. They must regulate the compensation packages of proprietary traders so that risks and rewards are properly aligned. This may push proprietary trading out of banks into hedge funds. That is where it properly belongs.

Hedge funds and other large investors must also be closely monitored to ensure that they do not build up dangerous imbalances.Finally, I have strong views on the regulation of derivatives. The prevailing opinion is that they ought to be traded on regulated exchanges. That is not enough.. The issuance and trading of derivatives ought to be as strictly regulated as stocks. Regulators ought to insist that derivatives be homogenous, standardised and transparent.

Custom made derivatives only serve to improve the profit margin of the financial engineers designing them. In fact, some derivatives ought not to be traded at all. I have in mind credit default swaps. Consider the recent bankruptcy of Abitibi Bowater and thatof General Motors. In both cases, some bondholders owned CDS and stood to gain more by bankruptcy than by reorganisation. It is like buying life insurance on someone else's life and owning a licence to kill him. CDS are instruments of destruction that ought to be outlawed.

The writer is chairman of Soros Fund Management and author of The Crash of 2008 (PublicAffairs 2009)

Gas prices rise for 50th straight day

2009-06-17T17:29:00.000-07:00

Gas prices rise for 50 straight days and counting; crude falls again, trading below $70 Chris Kahn, AP Energy Writer On Wednesday June 17, 2009, 10:18 am
PrintRelated: The McGraw-Hill Companies, Inc. ,United States Oil NEW YORK (AP) --

Retail gas prices climbed for the 50th straight day Wednesday, the longest streak in records dating to 1996, even as benchmark crude fell for the fourth day in a row.

Related Quotes Symbol Price Change MHP29. 51-0.09 USO 37. 81-0.70
Pump prices added a half cent overnight to a new national average of $2.679 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service.

A gallon of regular gas has jumped nearly 37 cents in a month. That's still cheaper than a gallon of gas three years ago at this point in June.

Historically, filling station prices tend to rise during the summer as millions of vacationing Americans pour onto the highways.

A surge in crude pricesduring the past few months and less production from the refiners that make gasoline has added even more pressure on prices.

On Wednesday, crude oil dropped below $70 a barrel ahead of a key government report on petroleum supplies and consumption in the United States.

Benchmark crude for July delivery fell 92 cents to $69.55 on the New York Mercantile Exchange.

In London, Brent prices fell 71 cents to $69.53 a barrel on the ICE Futures exchange.The Energy Information Administration is expected to show a 1.7 million-barrel drop in crude oil reserves for the week ended June 12, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Platts also expects gasoline stockpiles to fall by 650,000 barrels.Oil prices this week have come off eight-month highs near $73 a barrel amid some signs that the U.S. economy, while past the worst of a severe recession, is still weak.

Crude prices have dropped with equities markets this week, and they continued to fall Wednesday though the dollar was week. Because barrels are priced in U.S. currency, oil tends to rise when the dollar falls.

In other Nymex trading, gasoline for July delivery fell 4.15 cents to $2.0296 a gallon and heating oil dropped 1.35 cents to $1.8115. Natural gas for July delivery added 2.1 cents to $4.150 per 1,000 cubic feet.

Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.

Global Economics: Now What? The W-Shaped scenario

2009-06-16T18:33:00.000-07:00

June 16, 2009

Is this really the end of the recession?

The new framework for modelling the world economy in a post transition-phase state is still missing. The models we use still have major systemic errors in them, we obviously still have the same valuation problems and mis-specification of the policy mix. Despite some calling for the New Thinking, there is little new that has been put forward in reality.

Much of the problem in valuations is still here. Others argue that while the visible part of the sub-prime mess is mostly cleaned up, a lot of the less visible, but rather sizeable side-effects of it are still on the books, without `proper´ valuation. I would add my own observation, that the way the markets approached emerging markets has not really changed much, differentiation is still not really the name of the game. If the capital markets asked for the a realistic risk premium, some emerging market treasuries would have gone into default, whatever the urgent ambulance package was. In any case, we would see a much wider performance range from emerging markets than was the case the past months.

Plus, the policy response has been mostly inadequate. The global economy has gone through a transition phase the past ten years, making national level policy responses unlikely to do the job. The problem is that to tackle the kind of global crisis that is at hand, one would need to have enforceable monetary and fiscal policy in place, on a global level, and that is clearly not there. What has been there instead, after an initial bout of panic, is a set of protectionist measures, and a happen-to-be- at-more-or- less-the- same-time fiscal stimuli around the world that kind of works as harmonised global stimulus.

Yet, the current stimuli take most governments way-way beyond known territories: deficits are up to levels unimaginable before, and debt as well as debt projections are through the roof. For the majority of the governments the current stimulus it is a one-off action. This one really needs to work.

Which takes us to the really bad news: most of the `green shoots´ seem to be directly dependent on the fiscal stimuli. There is hardly anything else. Scratch any bit of `end of recession´ data around, independent whether the US, China, Germany, or Australia. Although there is some actual money in the pockets, it is not that much. The biggest across the board factor is the change of confidence. In other words, the governments are inducing a new bubble, and we lay all our hopes on it.

This might work. Yet, there is a significant momentum towards further slowing in the global economy. The multiplying effect of the initial hit is just taking shape. The main survival strategy in sectors hit only indirectly by the crisis has been to cut back spending as much as possible, and try to bridge over the shortage of revenues from reserves and bank loans. Banks are still hesitant to lend (even if they are ordered to by their respective governments, as we have seen many examples around the world), which means that the bridging exercise is mostly from own reserves. And there signs that reserves are running out.

If the global confidence boom will not be sustained, and there is plenty of reason why it should not be, then the coming fall might turn out to be even bigger than the one allegedly bottoming. The W-shape scenario might see a deeper, and longer, second trough.

Kim Eng Indonesia Equity Daily, 15 Jun 09

2009-06-14T23:10:00.000-07:00

Our Comment

Hexindo Adiperkasa will propose two dividend payments at EGM on 29 June 2009.
First, dividend from FY08 net profit 2008 with DPOR expected at 30%-40%, and second, dividend from 1Q09 net profit, with DPOR at expected 20%.
The above is because the company will change its financial statement from Jan-Des to April March, to follow policy of its parent company, Hitachi Construction Machinery Co Ltd.
Total of the two dividends is expected at Rp106-136 per share (yield: 4.5%-5.9%).

Separately, Telkom announced Rp296.95 DPS (yield = 3.88), representing payout ratio of 55%.
The company will conduct an extraordinary shareholders meeting after presidential election on changes in the board of commissioners.
Telkom is facing tough competition and pressure from lower tariff derived from lower interconnection. Maintain HOLD.

Acting Central Bank Governor Miranda Goeltom, estimated thatIndonesia annual inflation will reach 5% in 2009 as mild weather should guarantee sufficient domestic food supply, hence lower food prices.
She expects GDP growth to reach the higher end of Central Bank 3-4% forecast, as lower-than-expected inflation which should help boost purchasing power and consumer confidence.

Katarina Setiawan Highlights

Telkom (HOLD): Rp296.95 DPS (yield=3.88% )
Adhi Karya (HOLD): Rp11.51 DPS (yield=2.5%)
Hexindo: Obtained US$192m contracts to supply heavy equipment
Indika Energy: Acquisition plan
Economy: BI estimated 2009 inflation to hit 5%

From our chartist desk

IDX: The index has potential of a technical rebound referring to moving average 100-200 day. We maintain our target levels; 2029 and 2016. Enter at near support levels.

Today trading range is between 2023-2056-2073 (support) and 2107-2124-2157 (resistance) .

CPIN: Strong reversal on MaCD 12-26 days with positive histogram. We set our trend line target at Rp750. TRADING BUY

ELSA: We are still believer on this stock, based on flag pattern and daily TD sequential buy countdown. TRADING BUY

World Bank Sees Economy Shrinking 3 Percent This Year

2009-06-11T21:35:00.000-07:00

By NELSON D. SCHWARTZ - THE NEW YOR TIMES
June 12, 2009

PARIS - Underscoring the risk that hopes for a quick turnaround may be premature, the World Bank said Thursday that it expected the global economy to shrink nearly 3 percent in 2009, far deeper than the 1.7 percent contraction it predicted slightly more than two months ago.

Although the bank said that it expected growth in developed countries to resume next year, emerging-market countries could feel the effects of "aftershocks" for several years, as the full impact of the worst downturn since World War II became apparent.

"It´s quite clear that even if the developed world starts on a path of recovery, for many developing countries, it will take longer," the World Bank´s president, Robert B. Zoellick, said Thursday. "Financial markets seem to have broken the fall but there are clear fragilities and risks remain."

"Some of these fragile developing economies don´t have any cushion," he added.

The gloomy outlook is likely to top the agenda this weekend as finance ministers gather for a Group of 8 meeting in Lecce, Italy, and assess progress since the broader G-20 summit meeting with President Obama and other world leaders in London in early April.

Despite a recent burst of optimism that the American economy has turned the corner, with the pace of job losses showing signs of easing, economies elsewhere remain deeply troubled.

Since the World Bank´s last estimate for 2009, released on March, 31, Europe has continued to weaken. Meanwhile, unemployment in the United States is still on the rise, and house prices are also still falling.

New figures released this week showed German exports in April declined 28.7 percent from a year ago, the steepest drop since the government began keeping records in 1950. Meanwhile, industrial production fell 1.9 percent in April from the previous month, well below the 0.3 percentage point increase economists had been expecting.

Last week, the European Central Bank predicted the economy would contract 4.1 to 5.1 percent in 2009, sharper than the 3.2 percent contraction the European Central Bank predicted in March.

By contrast, the United States economy is expected to contract 2.8 percent this year, according to I.M.F. estimates, and many private economists say growth could resume in the second half of the year.

"We are seeing more signs of improvement in the U.S. than across the euro area," said Jonathan Coppel, a senior economist at the Organization for Economic Cooperation and Development. But both economies are still in recession, he pointed out, "and we´re not out of the woods yet in either region."

Upgrade INCO & ANTM to Buy

2009-06-11T00:25:00.000-07:00

After factoring in our new higher nickel px forecast, US$23mn insurance receipt, and 50% lower costs from efficiency program, INCO's earnings got quite a boost by 542% for 2009, 137% for 2010 and 87% for 2011.

Hence, Daisy upgraded INCO to Buy with PO Rp 6,500, based on 47% premium to NPV which Daisy thinks is justifiable as cyclical stocks did trade at a premium to NPV in past cycles in anticipation of rising prices (up to 2x for gold stocks).

As the saying goes "don't dance cha-cha when everybody is dancing disco", so just ride along because INCO will continue to rerate with nickel px recovery given close correlation (R²=0.9) b/w INCO’s shr px and nickel px.

Aside from being one of the lowest cost producer, INCO's other catalysts include solid2Q and higher dividend as it remains cash flow positive even at the currentlow nickel px environment.

Our commodity team raised nickel px to US$5.7/lb for '09, $6.4 for '10, $5.6 for '11 and $5.3 for LT…these are higher by 27%,26%, 15% and 9% respectively. ANTM also got upgraded to Buy with PO Rp 2800.

Daisy raised earnings by 227%, 203%, and 83% for 2009-11. Our new PO is based on 26% premium to NPVof Rp2,215.

Nickel contributes ~60% to ANTM’s revenue. We see turn around inANTM on the back of its nickel bizz returning to profit in 2Q with nickel px now above ANTM's breakeven level of US$5.5/lb (vs loss of Rp29.4bn in 1Q).

Further, with the re-commissioning of its FeNi3’s copper cooling system in Sept, we see limited downside risk to its ferronickel output.

PGN (PGAS): On A Solid Platform (Buy, TP: Rp3,975)

2009-06-09T23:23:00.000-07:00

Today we issue our initiation report on Perusahaan Gas Negara (PGAS) with a target price of Rp3,975.

Our key investment thes is are:

1) PGAS is prime to benefit from Indonesia’s moves to reduce dependency on fuel oil and promote gas usage

2) With infrastructure in place and inventory built up, PGAS sets to deliver the goods

3) Pricing and new gas supply will be the catalyst for PGAS’ performance going forward

4) Valuation wise, PGAS is attractively traded among Asian’s large cap gas utility players

CLSA INDO: nickel downgrades, INCO UPF, ANTM SELL

2009-06-09T22:57:00.000-07:00

"If a government is determined to create inflation and negative realinterest rates, there is really nothing standing in the way of its doing so," Marc Faber

Last report (Investing at the bottom) by our investment guru Russell Napier highlighted copper price as a particularly useful indicator in confirming the bottom for equities in the two near-deflationary recessions of 1982 and 2002.

Since then, copper prices had one of the most impressive rebound and so did equities especially those in emerging markets. One key conclusionfor equity investors is that they should be wary of buying any rebound inequities that coincides with a continued decline in the copper price, this has not happened yet.

In Russell's latest report "How the rally ends" (Must Read!!! ask me if you want a copy), he argues that we are in another rally in the long bear market that began in 2000. The last rally lasted from 2002-2007 and this current one should also last for a few years.

One can't call the end by using valuations or magnitudes of returns. Instead we must wait for inflation to claw its way back to around 4%. This report shows that inflation is a worry, but it is far too early in the business/reflation/ inflation cycle to worry now.

It is indeed likely that inflation and rising Treasury yields produce the next down leg in the bear market - but financial history strongly suggests that equities are major beneficiaries in that sweet spot when inflation rises from around zero to four percent.

To be frank in an era of global quantitative easing, almost nobody is likely to forecast exactly when and how rapidly inflation will return but equities will be dangerously extended when inflation nears 4%.

My best guess is that such a level will not occur until at least the end of 2010. Until that time, many other positives will develop for equity investors; and before inflation reaches 4% we will see economic and earnings recovery. Russell will be running through his new report on a conferance call this Thursday, 4pm HKT, details attached!

Research Today:
Nickel downgrades, INCO UPF, ANTM SELL Our analyst Olie revises down our earnings forecasts for both Inco (INCO IJ)and Aneka Tambang (ANTM IJ) by 30-60% mainly to reflect sustained weaknessin nickel demand.

INCO: downgrade to UNDER perform w/ Rp3,400 TP (from outperform, 2800).
ANTM: downgrade to SELL w/ Rp1,650 TP (from outperform,1300).
The new TPs are DCF-based. We continue to like in the medium to long-term prospect of INCO and expect the company to become bigger, adding 30% output, and better, lowering cost by 30%, within two years.

However,current valuation does not justify an O-PF. Upside on nickel price, thus earnings of both Inco Indonesia and Antam, hinges on US dollar direction, re-stocking of nickel inventory, and announcements of production cut and delays.

Soaring crude oil price, hencefuel cost, poses downside risk to earnings.What nickel prices are implied in the current share prices?

Current share prices imply a much higher LT nickel price than current spot,US$8.5/lb for ANTM and US$7/lb for INCO.

How do the nickel shares look relative to their historical trading ranges?

INCO was trading at its through-cycle multiple of 40x back in 1998/Asiancrisis and nickel price hit historic lows of US$2.0/lb, with low costssupply under way.

INCO and ANTM are currently trading at 68.5x and 91.2x of their 2009 earnings respectively, suggesting a 70% and 120% premium to the previous though cycle multiple, respectively.

Our earnings revision:Soaring oil prices poses more risk to INCO earnings as fuel cost accounts for 30% of the cash cost. Much less for ANTM due to higher gold contribution: 10% of the cash cost. How do our numbers look like compared to consensus? Our numbers are much lower than consensus. For INCO, we are 31% and 24%below consensus for 2009 and 2010, respectively.

For ANTM, our numbers are 75% below consensus for 2009 and 81% below consensus for 2010. I suspect this is mainly due to our much lower nickel price assumptions and highercost structure assumptions.

News Headlines/Others:
Government raises growth lending target for SOE banks. Currently, SOE banksare targeting around 14-17% full year lending growth for 2009.

This is likely to see upward revision to around 20%. Better than expected 1Q09 GDPgrowth showing a resilient economy is cited as a reason for the upgrade.

Bumi Resources (BUMI IJ) requests more time to review asset report. The coal miner has asked for more time to review the draft appraisal report by the independent valuer on the three acquisitions Bumi did recently.

The result will be announced by the end of this week.Three bidders for Elnusa (ELSA IJ). Pertamina, Ciptadana Securities, and consortium of Northstar and Saratoga Capital are vying for the 37.15% stake in Elnusa.

They have put in a bid price earlier this week. The winner will be announced next week. The last four months saw foreign inflows US$ 4bn.

Bank Indonesia officaisl report that foreign ownership in SBI (Indonesian T Bills) has increased by US$ 4bn in the last four months totaling Rp 89.04 tn (about US$9bn).UNESCO recognizes Batik as a world heritage.

The non-profit educational organization will recognize Indonesian batik as a world heritage in October2009. Local media reports that the city of Pekalongan in Central Java, long known as a batik center, has welcomed this award and hopes that this will give an additional boost to batik sales.

Indo-Premier still seeing an influx of new account openings. One of theInternet-based securities pioneer, Indo Premier Securities, now has around 12,000 customer accounts, reporting a fantastic 2300% growth since 2007 when the company had around 500 accounts.

Electricity installation fee to be raised. The SOE electricity company, PLN has introduced an immediate increase in its electricity installation fees upto 300% (range depending on the installed power capacity) for new customers in greater Jakarta area.

Under the new pricing structure, customers are responsible to help cover the cost for transmission of power from PLN'sclosest transmission tower to their house. Govt to inject Rp 50 bn to SOW sugar firms.

The Ministry of Industry has agreed to inject Rp50bn subsidy to SOE sugar firms, aiming to revitalize the sugar industry and attain self-sufficiency by 2014.

The financial support will be in the form of 10% subsidy for every machine purchased by nine SOE sugar companies including Perkebunan Negara and subsidiaries.

One term applied is the machines must be entirely assembled in Indonesia with min 40% local content.

Direct Cash Disbursement (BLT) may be discontinued next year. The govt plans to stop distributing the Direct Cash Disbursement next year. However, govt says that the BLT program may still be retrieved if there is an extraordinary event such as increase in fuel price that disturb povertyeradication.

Bank Central Asia (BBCA IJ) update.
Trading CUM-DIVIDEND for 65/sh today. Key Indicators: JCI: 2,056.65 -22.28 (-1.07%), T/O US$481.47 mil, YTD: +51.74%

ADR: TLKM US$ 30.63 = IDR 7,677 ISAT US$ 26.20 = IDR 5,253.
The market broke an 8-day winning streak as profit taking took hold yesterday afternoon. But support still very strong, and we could expect the market to revert back to its bullish mode.

Foreign investors have stepped upto the plate recently, and their participation level has increased (to around 25%) as fund inflows continue.We are 2.5x better buyer as of this morning.

Charts of the Day: Indonesia vs. Asia, New Buy Signal, from Laurence Balanco Overweight - Our decision to Overweight Indonesia ahead of the mechanicalbuy signal has been vindicated.

This signal which followed the break above resistance provided by the January 2009 highs has added credibility to ourpositive outlook for Indonesia. The oscillator remains in positive territory and has room to move to the upside.

Our view for the MSCI Indonesia (420) is unchanged as the uptrend remains intact. The next event should be a test of chart resistance at 449. Key support for the uptrend is found at the 335.

Source: Jakarta Post

Best regards,Wuddy Warsono, CFACLSA Indonesia Head of SalesPhone: (62-21) 573 9460Toll Free - HK: 800 938 000Toll Free - SIN: 800 621 1104Toll Free - US: 800 460 2581wuddy.warsono@ clsa.com

Cheapest commodity play

2009-06-09T02:45:00.000-07:00

Analyst: Liny Halim

Likely to secure more orders. After securing a US$175m order book (giant dump trucks and excavators) from the mining sector in 1Q09, Hexindo is now negotiating with Sinar Mas pulp business for 200 units of medium-sized excavators.

Hexindo is targeting equipment sales of 800 units in 2009E, down 50% yoy, but this excludes the potential order from the pulp sector.

In 1Q, Hexindo secured US$130m deal with KPC (owned by Bumi) for delivering 30 giant dump trucks and 4 big excavators. It also got another US$15m order from Newmont and US$30m from Thiess.

Margin should remain strong. Hexindo enjoyed high operating margin of 21.3% in 1Q09 versus 14.14% in 2008 due to increased contribution from high-margin spare parts business (gross margin of 35-40% vs equipment sales of 16%).

In 1Q09, spare parts accounted for 30% of revenues, up from 18% in 2008. Miners are extending their equipment lifecycle which therefore boosted spare parts sales.

As Hexindo sells more of the smaller equipment to the pulp sector in 2H09, it would benefit from higher margin of 17% versus the 10% margin for large equipment.Strong financial backing from parent.

We think Hitachi's recent move to set up financing arm (Hexindo has a 15% stake and Hitachi 85%) reflects the parent strong commitment to grow its business aggressively in Indonesia.This finance arm funded the equipment sales to KPC and to Thiess. Hexindo to contribute more to parent.

Additionally, Hexindo plans to change its financial reporting to US$ reporting so that it no longer has to suffer from forex losses. Its financial year will also be changed running to April-March, similar to parent. We think this implies that Hexindo will become a more important contributor to its parent, and therefore increased profitability.

Hexindo is 54% owned by Hitachi and 20% owned by Itochu.Paying dividend of Rp125/share or yield of 5.6%. Hexindo will hold an AGM on 29 June where it will declare a dividend of Rp125/share comprising of final 2008 dividend of Rp109/share (based on 35% payout ratio) and interim 1Q dividend of Rp16/share.

This translates to a yield of 5.6%.Strong profit in 2009. Hexindo booked a net profit of Rp62b in 1Q09 but this is after a Rp30b forex loss. If we were to adjust for the forex loss and annualised the 1Q09 earnings, this would give us a net profit of Rp340b in 2009E (+33% yoy), which should still be conservative.

As Hexindo booked more sales to KPC (the equipments are being shipped currently) and Thiess in 2H, this should increase profitability during the semester.Trading at half of United Tractors PER.

Based on back-the-envelope calculation of net profit of Rp340b (annualising 1Q09), Hexindo is trading on 2009E PER of 5.4x, at a steep discount to United Tractors PER of 13.3x.

We like Hexindo for its cheap valuation but we also like United Tractors as a bigger cap play in the commodity space.

Hexindo Adiperkasa (HEXA IJ) NOT RATED
Price: Rp2,200 Mkt Cap: US$189.7m Daily: Vol 8.0m (US$1.8m)1-Yr Hi/Lo: Rp3,400/510

Kim Eng Indonesia Equity Daily, 8 Jun 09

2009-06-07T23:29:00.000-07:00

Our Comment

Rupiah continued to appreciate despite the benchmark rate cut by the central bank. Stronger rupiah is positive for stocks with heavy exposure (in terms of costs and debt) in US dollar such as Astra International, Indofood, Kalbe Farma, Tempo Scan, Unilever.

On the other hand, export-oriented companies (i.e., mining and plantation stocks) will experience pressure, but the pressure is compensated to a certain extent by the rise in commodity prices.

Oil price touched US$70/bbl on Friday before sliding. There is speculation that oil price will repeat last year´s tumble.

The IMF upgraded its forecast on Indonesia ´s GDP growth in 2009 to 3%-4% from 2.5% previously.

Katarina Setiawan Highlights

o Elnusa: Board commissioners of Pertamina refused to increase stake in Elnusa

o Aqua: Plans to go private o Nusantara Infrastructure: To seek financing From our chartist desk

o IDX: Upward direction is still intact, referring to daily TD sequential on buy countdown on 7th day and strengthening Rupiah, with longer term target 2200 (lower target is 2029 - but it is unlikely).. We maintain Rupiah target at Rp9300. BUY ON WEAKNESS is recommended. Today´s trading range is between 1971-2017-2048 (support) and 2094-2109-2155 (resistance) .

o INKP: The stock price will try to break above moving average (MA 14 and 20 day). This sentiment is supported by increasing money flow. BUY

o BBCA: Net-buying position on averaging during last 10 days. We like this stock, as its price is above MA 50 days. TRADING BUY

Meltdown 101: Why the S&P 500 index is important

2009-06-04T10:01:00.000-07:00

By TIM PARADIS - 12 hours ago

NEW YORK (AP) - The ups and downs of the Dow Jones industrial average may get most of the attention, but there's another stock index you should be watching: the Standard & Poor's 500, which offers a broader sense of how stocks are doing and determines the performance of many mutual funds.

Many market pros keep an eye on the Dow, of course, but when they need a close-up look at the U.S. market they turn to the S&P 500. Investors rely on it as a barometer for the economy, and it serves as the market's primary benchmark - trillions of dollars in investments mirror its moves, and the performance of many investment funds is measured against it.

Here are some questions and answers about the S&P 500, including what it says about the state of the economy.

Q: What is the S&P 500 index?

A: It's a grouping of the stocks of 500 large companies that's designed to give a big-picture view of the U.S. stock market. It reflects about 75 percent of the value of the U.S. stock market. The index is run by Standard & Poor's, which is best known as a credit rating agency.Data for the index's predecessors extend back to 1923, so it gives market analysts a long history to review for clues about how stocks might move in the future. It once included as few as 90 companies, but was expanded to 500 in 1957.

Q: What makes it important?

A: Everyday investors are more likely to have their money tied to the S&P 500 index than the Dow. About $1.5 trillion in investments mirror the moves of the S&P index and $4.9 trillion in investments are measured against it; the Dow, by comparison, has about $32.6 billion in investments that track it.

Jeffrey Kleintop, chief market strategist at LPL Financial in Boston, said he's been getting more questions from investors about the S&P 500 index in the past year as the stock market tumbled.

"The Dow used to represent 30 strong companies that could be bought and held forever and that whole concept is rapidly fading if not gone completely," he said.In an illustration of this, multiple longtime Dow companies have been dropped from the index during the recession. This week, Dow Jones & Co. said it was dumping General Motors Corp., which filed for bankruptcy protection, along with Citigroup Inc., which was dropped because it's less of a publicly traded company than it used to be - federal bailout money has made the government a major shareholder.

In the fall, the Dow dropped insurer American International Group Inc. after bad bets on mortgages threatened to topple the company and the government pumped in billions of dollars to keep it afloat.

Fans of the Dow's simplicity point out that it moves the same way as the S&P 500 index 95 percent of the time, but Kleintop said the S&P is quicker to factor in new forces in the economy.

"A lot of new industries and sectors get their representation in the S&P 500 well before they show up in the Dow," he said.The S&P 500 is also important because, as with other indexes, its moves can offer some idea of how the economy is expected to fare.

A sustained slide in the S&P 500 can signal that investors expect the economy to slow.The S&P 500 began sliding in October 2007, months ahead of the recession's start in December 2007.

Q: How is the S&P 500 set up?

A: It is divided into 10 groups that represent the leading industries in the U.S. economy. For example, there are industrial companies, like General Electric Co., and information technology companies, like Microsoft Corp.

Q: Why do the groupings matter?

A: Investors can look at how the stocks of different types of companies are performing, which can provide clues about the health of the economy.

When the economy is wheezing investors tend to flock to businesses that are seen as less vulnerable, such as health care stocks, like Johnson & Johnson, and makers of consumer staples, like Procter & Gamble Co.

These sectors tend to be more resilient because they provide products and services that people always need, regardless of the economy.On the other hand, retailers, like Macy's Inc., might fall out of favor if investors worry consumers will be cutting back.

Q: What determines how the index moves?A: The S&P 500 doesn't simply rise or fall based on changes in share prices. Based on price alone, Google's $432 shares would have more pull than Exxon Mobil Corp.'s $72 shares.

The index also takes into account how many shares of a company can be traded in the marketplace. So Exxon, with more shares floating around, is valued at $355.8 billion compared with $135.3 billion for Google - and thus has far more influence over whether the index goes up or down.In contrast, the Dow Jones industrial average is moved most by those of its 30 stocks with the highest price. So in the Dow, IBM at $106 has greater say in what the blue chips do than does Exxon at $72.

Q: I know that a 200-point drop in the Dow doesn't feel good. What's considered a significant move in the S&P?

A: Analysts caution against reading too much into any one day's moves. But to get a good sense of what the market does, focus on percentages. A 2 percent move in a day is a big shift.

Q: How are companies picked for the index?

A: An S&P committee considers publicly traded U.S. companies worth at least $3 billion in the eyes of the stock market. There are many considerations, including how readily a stock can be traded. Warren Buffett's Berkshire Hathaway, for one, is plenty big enough to make the cut, but S&P has left it out of the index because it considers the company too cumbersome to trade. The reason: Its shares are priced at $89,500 apiece.

Q: What is the S&P 500 index telling us about the U.S. economy right now?

A: The index is still way down from its peak in October 2007, but it's surged about 40 percent from a 12-year low in early March - meaning it's quickly made up almost exactly half of what it's lost during the downturn.

The three-month rally translates to a gain on paper of $2.4 billion - though the loss since the peak still totals $5.6 billion.The gains show that investors are becoming more confident about an eventual recovery in the U.S. economy.

Still, that doesn't mean the rebound won't be bumpy.In downturns during the past 60 years, the S&P 500 index has hit bottom an average of four months before a recession ended and about nine months before unemployment hit its peak. So if history repeats itself, recovery may be near - but any growth in jobs may be many months away.

Copyright © 2009 The Associated Press. All rights reserved

Adaro investors raise $150 million in a sell-down

2009-06-04T09:52:00.000-07:00

By Daniel Inman

The deal will greatly increase the number of international investors with a stake in the Indonesian coal miner.

Three existing investors yesterday teamed up to reduce their stake in Indonesian coal miner PT Adaro Energy, raising Rp1.5 billion ($150 million) in a placement launched and completed before the start of trading in Jakarta.

A total of 1.25 billion shares, representing 3.9% of the company, were sold. The shares were offered in a range between Rp1,230 and Rp1,260 per share, which translated to a discount of 8% to 10.2% versus Tuesday's closing price. The deal was priced at the bottom, at Rp1,230, with a corresponding discount of 10.2%. Adaro's share price fell 5.1% yesterday after the transaction.

The sellers were GIC Special Investment, Goldman Sachs and Noonday. Before the deal, the investors held a combined 17.3% stake in Adaro and this was reduced to 13.4% after the transaction. Since Goldman was one of the sellers, it was only natural that it was also the sole international bookrunner.

Adaro listed on the Jakarta exchange last summer following a $1.3 billion initial public offering, which was the largest Indonesian listing in 2008 and the second largest equity transaction in the country. Despite the scale of the deal, only around $200 million was open to public investors, since most of the shares were set aside for pre-IPO investors as part of a restructuring. Around 65% of this stock went to the company's management, while around 20% went to international pre-IPO investors.

Of the publicly offered shares, most went to domestic investors, while international presence was limited to a core group of long-term stakeholders. The end result was a highly illiquid stock, so the stake sold yesterday is equivalent to half of the company's free float.

Yesterday's trade was sold to around 40 international accounts, greatly increasing the number of small international shareholders. Most of the investors were long-only accounts with a view on the commodity cycle, while the liquidity dynamic was not so attractive to hedge funds. Around two-thirds of the demand originated from Asia, with good interest from the US and a few investors from Europe, said a source close to the deal.

The source said that the deal was attractive to investors partly due to the coordinated approach taken by the sellers, and also because sellers agreed to be bound by a 90-day lock up, suggesting that they retain an interest in the company's future.

Adaro mines coal in the Tanjung district of South Kalimantan Province where the government has given it rights to operate until 2022. Among its mines is the largest open pit coal mine in the southern hemisphere with reserves of 2.8 billion tonnes. The company has plans to double its 40 million tonnes of production capability over the next few years.

The company's share price took a terrible beating last year when the commodity bubble burst. Over the course of just four days' trading at the beginning of October, the share price lost 48% of its value. However, the stock has recovered significantly since the beginning of the year and now trades at around Rp1,300 a share, close to the Rp1,500 level where it traded last September.

In early April, when the stock was trading at around Rp880 a share, some analysts were calling on investors to take profit. Yesterday's sellers will be glad that they held their nerve.

Indonesia's equity markets have been quiet this year, with Bank Danamon Indonesia involved in the major deals. Two weeks ago, an unidentified shareholder sold $60 million worth of stock in the bank; and in April, the bank completed a $362 million rights issue.

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China coal imports +60% MoM, upgrading PxT on properties

2009-05-22T01:59:00.000-07:00

Thermal coal: China imports 60% more coal in April vs. March

Two new developments in the thermal coal space this week :

(1) China trade data this week supports demand strength, confirming 9.2 mt of imports(including coking and thermal coal), up 3.4 mt (60%) from March and 5.7 mt (168%)YoY. (

2) Mc CloskeyEuropean Coal Outlook Conference - Macq commodities team came out of the conference less bearish on prices from here, at least in the Pacific.

On China , the most bullish assessment came from Philip Gasteen, head of marketing and logistics at Asian coal and electricity producer Banpu.

He suggested thata round 55 mt of thermal coal is due to be delivered into China this year under recently completed deals. This would drive imports 20-25 mt higher, while export volumesare likely to fall 15-20 mt. Thus, he sees China's net imports increasing by 40 mt this year.

My take -closer to home, many Asian coal analysts & corporates will attend the Coal Trans conference in Bali during the first week of June.

We shall see whether they will come back with the same positivetake-aways on China/India coal demand. Indoproperty: upgrading price targets Macq research coverage of Indoproperty sector remains on the transition phase, since our previous analyst Lydia Toisuta left the firm on Nov 2008.

In the meantime, ahead of Macquarie Asean conference in June (Bakrieland & Lippo Karawaci have confirmed attendance), Elaine Cheong (Macq property analyst based in Singapore) re-affirms our positive sector view today by lifting price targets on Bakrieland fromRp100 to Rp330 (22% upside), Ciputra Dev from Rp320 to Rp650 (18% upside), andLippo Karawaci from Rp250 to Rp530 (35% downside).

Essentially, she has reduced the NAV discounts implied by those price targets, without changing the NAV estimates by much. She applies a 35%NAV discount for Bakrieland (NAV estimate of Rp519), 35% NAV discount for Ciputra Dev (NAV estimate of Rp1,001), and 35% NAV discount for Lippo Karawaci (NAV estimate of Rp816).

She re-iterates Outperform rating on Ciputra Dev &Bakrieland, Underperform rating on Lippo Karawaci.

Her key arguments for the narrower NAV discounts:

1. Resilient domestic demand in Indonesia

2. Lowering of interest rates PGAS : smoothing out ways for gas price hike (Adam Worthington) Yesterday, PGAS met with government officials and industry players to discuss the future of the gas market.

Upside risk to gas prices post presidential election, re-iterate Outperform.

Three key points:

1. Supply shortage: The domestic gas market is in a supply shortage, and further exploration and development is required at the upstream level.

2. US$ pricing appropriate: Industry participants agreed that US$ pricing is appropriate given that capex, financing cost of gas production, and transmission and distribution costs are US$denominated.

3. Gas is undervalued vs its closest substitute: Participants noted that the selling price of gas has not been raised since July 2007 despite the surge in other commodities, and that at the current exchangerate, the selling price of PGAS 's natural gas is approximately Rp2,038 perdiesel equivalent litre, a competitive price when compared with othersources of energy.

The participants discussed the potential for gas price increases (in the upstream and downstream) to encourage exploration and development of reserves.

Snippets :

Macro - VP candidate Boediono will focus on integrating fiscal, monetary, and sectoral policies, ifhe got elected.

Medco - BPMigashead Mr.Priyono confirms that Medco will get a 20-year extension for its block A project, located in North Aceh, when the term expires in 2011. Block A is a high priority project for the government, since the block will supply to PT Pupuk Iskandar Muda and to PT PLN (85 trillion BTU in 2010-2027). The other partners in block A are Premier Oil (42% stake) and Japan Petroleum Exploration (16%).

Crude Palm Oil - The government may impose 3% tax on palm oil exports, according to theJakarta Post.

PT Telkom -will cancel its plan to acquire a stake in the Telecommunciations Company of Iran, according to Tempo and Bisnis Indonesia.The cancellation is due to the requirement by the Iranian government that the bidders be free of American shareholders. PT Telkom has ADRs listed on the NewYork Stock Exchange.

PT Timah - will pay a dividend of Rp133/sh or equivalent to a 50% payout ratio. The company is budgeting Rp350 bn for capex.

PT Unilever Indonesia -will pay a final dividend of Rp220/sh. The total dividend is Rp315/sh or equivalent to a 100% payout ratio. The company is budgeting Rp700bn for capex.

PT Jaya Ancol -is exploring a Rp250 bn rights issue, according to Bisnis Indonesia. The company will pay adividend of Rp37/sh.

ML INDO : PGAS volume could surprise Flows CPO Fund Mgr Survey (22 May 2009)

2009-05-22T01:28:00.000-07:00

While investors continue to have doubt over PGAS execution risk, PGAS volume ramp-up up to April does not disappoint. Gas delivery rose from 720 mmscfd in 1Q to 770mmscfd in April.

At this rate, Daisy's FY09 volume expectation of 720 mmscfd could be easily surpassed. Also, the no. of customers that took up gas below the minimum payment level fell from 270-350 in 1Q to 260, while gas contracts not absorbed by customers dropped from 2-3% in 1Q to 1.6%.

Separately, 3-days planned gas supply stoppage from Conoco Philips for maintenance is not a concern, as impact is minimal at 5-2 mmscfd for transmission and distribution respectively.

On the customer front, by end-09, 56% of PGAS' revenue will come from state owned PLN. This will underpin PGAS's robust growth as we expect PLN's gas consumption to grow at 3-yr CAGR of16%.

We only expect PGAS to grow 7% for 2008-12. Trades at 9.8x '10 P/E,a 41% disc to regional utilities. Potential earnings upside from higher volume, lower tax rate,and higher dividend.

Buy PO Rp3,200

Market News

* Politics:
During a presidential debate,incumbent President SBY pledged to boost economic growth to 7% by 2014 (more conservative than VP Kalla's +8% promise and Megawati's +10%), to accelrate reform of the bureaucracy and cut red-tape for business startups. (Jakarta Post)

* Timah (TINS) cut back this year's capex to Rp 350 bn from Rp 900 bn as it delays plan to buy coal mining company and to built an ash plat plant due to limited fund following the drop in tin prices. (Bloomberg)

* United Tractors (UNTR) to pay dividend of Rp 320/shr or 3.2% yield, of which Rp 100/shr interim has been paid last year. This represent 40% of 2008's profit. Separately, UT allocated Rp 650 bn to acquire coal mines. They continue to do due dilligence on target mines. Funding will come from rights issue proceed from last year. (Bisnis Indonesia)

* Indocement (INTP) - post +14% performance over the past 3 days, media Bisnis Indoensia is speculating that Heidelberg may change their mind on selling 15% stake in Indocement. (Bisnis Indoensia)

* Medco (MEDC) to get 20-year extension for its Block A gas field in Aceh. Medco's current contract for Block A will expire in 2011. Medco owns 41.67% in the field. (Bisnis Indoensia) EM more inflow EM equity funds saw $2.5 bn inflow in week to 20 May, bringing total inflows over past 9 weeks to $20bn ,the largest 9 week inflow since EEM $55 peak in Nov-07. BAS-ML fund flow trading rule still signals Sell, as inflows over past 4 weeks represents 3.2%of AUM.

In recent weeks trading rule has been wrong-footed by big policy stimulus and reallocation into equities. But Mike Hartnett feels the case for EM pause/pullback is now strengthened by big EM bullishness revealed in Fund Mgr Survey, e.g. 55% asset allocators OW EM, 80% of PMs OWChina, i.e. "pain trade" no longer up.

Note also EEM struggles once its gets >20% above its 200 mda (was 17% above yest'). By region: inflows into Asia ($0.9bn), GEM ($0.9bn),LatAm ($0.6bn). EMEA flows flat. By country: big inflows into Brazil & China. CPO: beginning of the fall?Jeffrey Ngreiterates his bearish view on CPO following the futures mkt down as much as 4.7%yest', breaking key support of RM2,500/mt as rain lashed oil palm growing regions and on concerns that high prices may curb demand.

He has been bearish since the rally began in late March. The rally, in our view, was driven by liquidity, tactical positioning by refiners and supported by low inventory data.Meanwhile, long term fundamentals are unchanged - production to recover, US soybean planting starts might be revised upward in June and stockpiling is over. CPO price in 2009 is supply driven and with production picking up in2H09, the only direction CPO going is downward. Jeff sees current levels as agood opportunity to take profit.

Global Fund Mgr Survey: No"Sell in May"

Investors are now positioned for global economic recovery according to the May Fund Mgr Survey. The unrelenting gloom 3mths ago has been replaced by fairly typical early-cyclicalsentiment, with the only hint of potential irrational-exuberance in Emerging Markets.

For the first time since March '05, investors expect corporate profits to improve in the next 12 months, with many forecasting EPS growth to exceed10%. Asset allocators are still hedging their bets: they remain U/W equities (-6%)and have only marginally lowered cash O/W (+21% from +24%).

A brief 9-month so journ into bonds ended with allocators cutting to a net 3% U/W. They stay U/WEurope & Japan, but a record net 40% of investors see GEM as the region toO/W for the next 12 mths.

Investors´ top 3 global sectors are now tech , energy, & materials as May saw a rout in defensive sectors: pharma fell to-2% from +21%, staples -1% from +9%, and utilities -19% from -15% (now the mostU/W sector). In Asia, cash positions droppedsharply with a net 9% saying they are now UW cash.

U.S. Recession May Be Over, Barclays’ Knapp Says: Chart of Day

2009-05-11T20:10:00.000-07:00

U.S. Recession May Be Over, Barclays' Knapp Says: Chart of DayBy David Wilson

May 11 (Bloomberg) -- The longest U.S. recession since the Great Depression may have ended last month, according to Barry Knapp, a strategist at Barclays Capital.

"We appear to be in the sweet spot of a recovery," Knapp wrote in a weekly report on May 8.

The CHART OF THE DAY highlights spending on services, one indicator that Knapp used to reach his conclusion. Outlays rose 1.5 percent in each of the past two quarters after a 0.1 percent drop in last year's third quarter, the first decline since 1991, according to data compiled by the Commerce Department.

"Service-sector employers expected sharp drops in demand, and may have overshot in terms of cutting back on workers", he wrote. The report cited figures from ADP Employer Services that showed job losses at service companies slowed to 229,000 last month from 384,000 in March.

Quarterly percentage changes in demand for durable goods, made to last more than three years, and other goods are included in the chart. Both rebounded in the first quarter after tumbling in 2008's final three months.

The National Bureau of Economic Research may eventually declare April 2009 as the end of the recession, Knapp's report said. The slump began in December 2007, according to the panel, which took a year to set that date.

While capital markets are also on the mend, stocks "have overshot the improvement of the economic outlook," Knapp wrote. His year-end estimate of 757 for the Standard & Poor's 500 Index is the lowest among 11 strategists in a Bloomberg survey.

Coal Stocks Push up Australia

2009-05-04T21:31:00.000-07:00

SINGAPORE -- Asian share markets were higher Tuesday on hopes for some stability in the global economy, and as coal stocks rose, although trade was quiet with markets shut in Japan and South Korea for holidays.

Australia's S&P/ASX 200 was up 0.5% -- after a 3% rise Monday to six-month highs -- with New Zealand's NZX-50 up 2.1%, briefly hitting its best levelsince Nov. 11.

The Dow Jones Industrial Average jumped 2.6% while the S&P 500 turned positive for the year to date.

There's "quite a bit of literature from around the world these days about economies slowly picking up," said PeterYoung, an adviser at Forsyth Barr.

Data from the U.S. and China have been reassuring in recent days, althoughthere are also signs of ongoing economic weakness and concerns about the health of the large U.S. banks."We have made a lot of money over the last eight weeks and continue to think the trick from here will be to keep that money," said analyst Jeffrey D.Saut at Raymond James Equity Research in the U.S.

"Longer-term we are pretty optimistic. Near-term, we are cautious."Stocks tied to the economic cycle led the way in Sydney, with David Jones up6%, Macquarie Group up 5.2%, Boral up 7.5% and Rio Tinto up 3.8%.Coal-sector stocks took their lead from a rise in U.S. coal shares Monday after Goldman Sachs raised its coverage view on the companies to attractive from neutral, saying there was expectations for an economic recovery in China.Maccarthur Coal was up 4.2% with Centennial Coal rising 9.6%, while Whitehaven Coal added 2.5%.

Singapore's Noble Group said it was increasing its cash offer for Gloucester Coal, calling on the board of Gloucester toact immediately to declare the offer superior to a proposed merger deal with Whitehaven Coal.In Australia, BlueScope Steel, the country's largest steel maker, said it planned to raise up to 1.41 billion Australian dollars ($1.11 billion) through an entitlement offer to cut debt and streng then its balance sheet.

That stock was suspended from trade.Cyclical stocks were higher also in New Zealand, with chip maker Rayon up13.6% after announcing a research project, to be half funded by a government grant.

Fisher & Paykel Appliances was up 13.7%, Fletcher Building up 4.4%,Contact Energy up 2.7% and Telecom 2.6% higher.

The euro was still stronger in currency markets as risk appetite improved,with the single currency at $1.3421, from $1.3405 late in New York, and at¥132.68, from ¥132.60, off an early low of ¥132.35.

"I am bullish risk, so Iam bullish the euro," said ANZ Bank senior dealer Alex Sinton.The U.S. dollar was at ¥98.86, from ¥98.93 in New York, while the Australian dollar was sticking near US$0.7400 before the Reserve Bank of Australia's interest-rate decision, with the central bank expected to stand pat.

Despite the recent market inclination to sell the U.S. dollar, Westpac said that, based on leading indicators, it was the most desirable currency among the Group of Three, followed by the euro and the yen.

"The temptation is to ignore these signals and to be short the dollar by focusing exclusively on improving risk appetite," said analyst Richard Franulovich, "but sentiment is fickle.

"Spot gold was down 95 cents at $902.25 a troy ounce after a strong performance in New York.

Three-month copper on the London Metal Exchange gained 2.7% in electronic trade after Monday's London holiday, to $4,720 a metric ton.

David Moore, an analyst at Commonwealth of Australia, said the market was taking a "glass is half full view" on the global economic outlook.

Front-month Nymex crude oil futures were down 14 cents on Globex at $54.33 a barrel, having risen $1.27 in New York.

By - Rosalind Mathieson

Stock Market Insider: Week Ahead - Stock Market Could Face Headwinds

2009-05-03T06:07:00.000-07:00

Topics:Earnings Banking Currencies Stock Market Investment Strategy

Stocks are likely to encounter headwinds as the market tries to keep pushing higher in the week ahead.

The S&P 500 has gained in seven of the past eight weeks, and is positioned to keep rising after closing above a key resistance level Friday. The S&P finished the week up 1.3 percent, at 877, a level not seen since Jan. 9.

Yet, traders say there are a number of risks in the coming week, the biggest of which will be the results of the government's stress tests on 19 banks, now expected to be released Thursday. There are also a number of economic reports, some major earnings, and testimony from Fed Chairman Ben Bernanke before the Joint Economic Committee Tuesday.

A real wild card for the markets is the swine flu outbreak, which has so far been ignored but could become a factor if it is seen as a more deadly threat in the U.S.

Berkshire Hathaway's [BRK 92005.00 -1995.00 (-2.12%) ] annual meeting was scheduled for Saturday, and that could be a catalyst for stocks Monday depending on what its CEO and legendary investor Warren Buffett tells investors.

At the top of the list for markets though are those stress tests of the biggest banks that took funds under the government's Troubled Asset Relief Program. The results for each of the institutions were expected Monday but the release was moved to Thursday. Several banks are expected to need capital but it is not clear how that information will be reported and what solutions for capital raising will be included with the reports.

"They postponed the stress test again so people are saying they want to tiptoe into next week," said Art Cashin, director of floor operations for UBS. "The floor has always thought the stress test was a no-win situation... from the minute it was conceived it was thought to be a a not so hot idea. They're just worried about the presentation now.

"David Kotok of Cumberland Advisers said it's important the tests are seen as credible. "If some pass and some fail, the market will adjust the prices between the two groups," he said.

Steven Stanley, chief U.S. economist at RBS, said it appears the government's negotiations with the banks are what stalled the release of the tests. "I think the government just assumed the banks would take whatever results were presented to them, and the banks are complaining they did it wrong. As far as big events next week, that's clearly one and the other one is the payroll number on Friday," he said.

Stanley said he expects that April employment report to show unemployment has climbed to 8.8 percent. As for the pace of job loss, "we do expect to see some improvement. . a decline of 535,000 (non farm payrolls). It's gargantuan but an improvement relative to March. Our sense is, as with other indicators, that things are still pretty bad but they are starting to decelerate," he said.

"We're now starting to see evidence that suggests that things, at a minimum, are getting worse at a slower pace but perhaps stabilizing in certain areas," said Stanley. He said he will also be watching chain stores' April sales Thursday, which will provide a good look at the consumer.

Another big market event will be the Treasury's issuance of more than $70 billion in 3-year, 10-year and 30-year notes in three days of auctions. The yield curve steepened in the past week as the long end came under pressure on supply concerns. The yield on the 10-year rose to 3.174 percent, its highest level since Nov. 24.

Whither Stocks?

Kotok believes swine flu could become an issue for stocks if there are more deaths in the U.S. or other parts of the world. "The stock market has ignored swine flu for all intents and purposes. It's busy with its green shoots," said Kotok. "Do you weigh risk proactively or reactively? If proactively, you have to manage risk events before they are understood..

"If the public does start to have a greater fear of the flu, the resulting social behavior would have the potential to cause an economic shock. "When things are good, large shocks are dealt with...This shock would come when the economies around the world are weak, and the U.S. is particularly weak," he said.

Kotok said there are other risks for the market in the economy, including the growing problems in commercial real estate and commercial mortgages. Unlike housing, there is no political sympathy for commercial property owners and now the shuttering of auto dealerships puts more pressure on the sector which already faced oversupply.

Richard Bernstein, former chief investment strategist at Merrill Lynch, also sees some hurdles for the stock market. He said investors are not considering the type of economic impact that could come from the ripple effect of General Motors [GM 1.81 -0.11 (-5.73%) ] shutting down its production for nine weeks, a process that starts Monday. He said that shutdown will show up in economic statistics as it impacts suppliers and other related parts of the economy. Chrysler, which filed for bankruptcy Thursday, is also shutting down its production while in bankruptcy.

The Currency:

Euro, British Pound, Australian Dollar All to Face Rate Decisions

"Another thing people aren't considering when trying to anticipate the turn...is that it's not just lower interest rates. It's lower interest rates and pent up demand. it's hard to imagine there's pent up demand for housing," he said.Bernstein, like many, thinks the market has gotten ahead of itself. "I think a pull back is pretty likely," he said.

"I think consensus has changed quite quickly that we're out of the soup, and things are getting better...I think he only one that's showing real improvement is the stock market.

"Bernstein said though there are some positives, including the slope of the yield curve. "There's no doubt about that. The question is how bad are the bank balance sheets," he said. The dollar's strength is also a positive. "I think people should be more bullish about the dollar. I think people forget what it is financial institutions and banks do, that is create dollars. We had a credit bubble, and the dollar was exceptionally weak. If you are a bear on credit, you want to be a bull on the dollar and vice versa," he said.

Reserve Bank of Australia Rate Decision – May 5The Reserve Bank of Australia is anticipated to leave their cash rate target unchanged at 00:30 ET on Tuesday, after surprisingly cutting the rate by 25 basis points to 3.00 percent, but the Australian dollar may only respond to a surprise rate cut or a biased monetary policy statement. After the central bank’s last meeting, RBA Governor Alan Bollard said, “The stance of monetary policy, together with the substantial fiscal initiatives, will provide significant support to domestic demand over the period ahead,” suggesting that further reductions were unnecessary. As a result, it will be important to look to Bollard’s statement, as signs that the RBA may consider cutting the cash rate target again eventually could weigh on the Australian dollar, while indications of a broadly neutral bias could support the currency.

European Central Bank Rate Decision – May 7According to a Bloomberg News poll of economists and Credit Suisse overnight index swaps, the ECB will cut rates by 25 basis points to 1.00 percent on Thursday morning. A reduction in line with Bloomberg's estimates could exert bearish pressures on the euro, but where the currency ends the day may have more to do with what ECB President Jean-Claude Trichet says during his post-meeting press conference at 08:30 ET. Many ECB members have indicated that they will announce “unconventional” measures following this meeting, which many have taken to mean credit easing, and if Trichet makes such an announcement, the euro could tumble. On the other hand, if the ECB leaves rates unchanged, indicates that they have no intention of bringing interest rates lower in the near term, or if they put off credit easing, the euro could rally.

"Econorama"

Jobs data is the big one, but there is plenty to watch in the coming week. On Monday, there is pending home sales and construction spending data. The ISM non manufacturing number is reported Tuesday, and Wednesday is the ADP employment report, a kind of preview to Friday's number. On Thursday, more hints at the jobs number come when the latest weekly unemployment claims data is reported. Productivity and costs and consumer credit are also reported that day. In addition to employment on Friday, wholesale trade data for March is reported.

Besides Bernanke's Congressional testimony earlier in the week, the Fed chairman speaks at the Chicago Fed's conference on bank structure and competition Thursday at 9:30 a.m. Chicago Fed President Charles Evans speaks at the same conference, as does FDIC Chair Sheila Bair.

Other Fed speakers include Fed President Thomas Hoeing who speaks in New York on the financial crisis Monday, and Richmond Fed President Jeffrey Lacker speaks in Charlottesville, Va. Monday afternoon. San Francisco Fed President Janet Yellen speaks at U.C. Berkeley Tuesday on financial turmoil.

Earnings Central:

Nearly 80 S&P 500 companies report earnings in the coming week. On Monday, Tyson Foods, Sysco, Sprint Nextel, Loews, Entergy, Estee Lauder, Chesapeake Energy and McKesson report. Disney, Kraft Foods, CVS Caremark, Duke Energy, UBS, Archer-Daniels and Teva report Tuesday.

Wednesday's reports include News Corp, Anadarko, Devon Energy, PG&E, Transocean, and Marsh and McLennan. On Thursday, Axa, Dynegy, D.R. Horton, Thomson Reuters, Unilever, Sara Lee, Nasdaq OMX, CBS, Public Storage, Allstate, and Nvidia report. Friday's major companies are Toyota and Berkshire Hathaway.

Sell in May and go away?

2009-04-30T23:54:00.000-07:00

Commentary: Markets teasing investors with more hardship on the way

NEW YORK (MarketWatch) -- Mark Twain once said history doesn't always repeat but it sometimes rhymes. Investors around the world hope that doesn't again prove true.

We asked last year whether we should sell in May and go away following the spirited sprint off the March lows. In the 12 months that followed, the S&P was sliced in half as a confluence of negatives combined to create the financial equivalent of a perfect storm.

We humbly offered in January that 2009 could see two 20% bear-market rallies that litter the landscape with false hope and empty promises. As we digest the initial lift, the obvious question is whether we'll see a meaningful decline before a second such move arrives later this year.

The most constructive possible path at the end of March was a sideways digestion of the gains as a function of time rather than price. That worked off the overbought condition and created potentially bullish reverse head-and-shoulder patterns across the major indices. We must respect that scenario if it triggers with a trade above 875 on the S&P.

Be that as it may, I believe the current rally will prove a massive stock tease. We monitored the cumulative imbalances as they built through the years and it would be myopic to assume we've swallowed the bitter pill in its entirety. While there are two sides to every trade, we must remember that social mood and risk appetites shape financial markets.

I don't know how conditions are where you live, but through my lens, times are tough and tension is elevated. While news is always worst at the bottom and best at the top, our finance-based global economy is dependent on employment, leverage and the velocity of money. One way or another, the bar bill of our collective excess must be paid by this generation or the next. The big picture is made of many smaller ones, and the destination we arrive at pales in comparison to the path we take to get there. As such, as we gaze across the global horizon, I wanted to touch on five dynamics that should remain on our radar as we find our way through this prickly fray.

When pigs fly

As if we didn't have enough on our minds, the specter of a global pandemic adds another layer of uncertainty to an already complicated equation. The World Bank estimated last year that an influenza pandemic could cost $3 trillion, trigger a 5% drop in global GDP and lead to 70 million deaths. As we hope for the best, risk management requires that we respect potential contagion, particularly if the specter that the virus was manmade seeps into the mainstream mindset.

Pakistan

One of our 10 themes for 2009 was the evolution of societal acrimony to social unrest and geopolitical conflict. The world stands at a critical crossroads, with orderly debt destruction and eventual globalization on one side, and isolationism, protectionism and the unfortunate truth that all world wars were born from economic hardship on the other. See link here. With the Taliban 60 short miles from the Pakistani capital of Islamabad, we would be wise to keep this nuclear state on our radar.

He said, she saidThe back-and-forth between embattled Bank America CEO Ken Lewis, Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Hank Paulson has massive implications for the psychology surrounding the government's role and responsibility in the capital market structure.

As Minyanville offered in August 2007: "The Federal Reserve attempted to buy time on the back of the tech bubble with fiscal and monetary stimuli that encouraged risk-taking, reward-chasing behavior. While debt is front and center, credit of a different breed -- credibility -- has emerged as the issue at hand. If and when investors begin to perceive that central banks are no longer larger than the markets, a crisis of confidence will ensue.

Stress test

The "more adverse" scenario offered by the government is a 3.3% contraction, 8.9% unemployment and a 22% decline in home prices, followed by a rebound in GDP of 0.5%, 10.3% unemployment and 7% degradation in home prices the following year.
That's debatable at best. It's clear that some banks will need to raise more capital, further diluting equity holders, and others won't make it to the other side of this prolonged socioeconomic malaise.
I, like most of you, stand to benefit from an economic expansion that buoys our spirits with the rising tide of good fortune. The popular opinion is rarely the profitable one, however, and my hope is that sharing these potential caveats provides utility as we collectively prepare for the future.
Financial staying power, risk management over reward chasing and proactive financial intelligence remain three staples of any successful investment approach.

Fidelity Says `All Things in Place' for Bull Market (Update1)

2009-04-30T20:55:00.000-07:00

April 30 (Bloomberg) -- Anthony Bolton, president of investments at Fidelity International, said a bull market in equities has already begun and financial shares are poised to drive recent gains higher.

Low valuations indicate advances that began in March are the start of a bull market, Bolton said. He favors financials, consumer cyclical, technology, and "value stocks," such as retailers, automakers and construction- related shares.

"All the things are in place for the bear market to have ended," Bolton said in an interview with Bloomberg Television in Hong Kong. "When there's a strong consensus, a very negative one, and cash positions are very high, as they are at the moment, I'd like to bet against that.

"The MSCI World Index has dropped 3.2 percent this year, extending last year's 42 percent slump, the worst annual performance since at least 1970. Shares plunged as a collapse in U.S. consumer spending and a freeze in credit markets sent the U.S., Europe and Japan into their first simultaneous recessions since World War II.

The declines dragged the gauge's price-to-book value, or the ratio of stock prices to company assets, to 1.5, down from 2.4 at the beginning of 2008.

Bolton, who is based in London, said that in September he started putting money into Fidelity's China-focused fund, which invests in Hong Kong-listed H shares of Chinese mainland companies, and into Japanese stocks.

Not Bear Rally

Investments in money market funds in the U.S. have reached a record and could fuel a bull market during the next two to three years, he said.

Bolton's view contradicts that of Nouriel Roubini, the New York University professor who predicted the financial crisis. Roubini said last week he was "still bearish" and that an economic recovery is going to take "longer than expected."

"Nearly all the broker research I read says `bear-market rally,' that's one of the other things that makes me think it's the beginning of a bull market, not a bear-market rally," Bolton said. "When everyone is extremely negative, I want to bet against that. If you wait for things to get better, you'll miss the rally.

"Fidelity International managed about $157 billion as of January, according to Hong Kong-based spokeswoman Megan Aitken.

Swine Flu Virus Infects World Stock Markets

2009-04-27T23:40:00.000-07:00

As authorities around the world rush to work out where swine flu will turnup next, the movement of markets Monday was far more predictable. Withcases of the new H1N1 virus confirmed from Mexico to Spain Â— and tests onpossible cases underway from New Zealand to Britain Â— investors battledtheir own nerves.

Recovering slightly from earlier losses, Britain's FTSE100 index of leading shares was down just under 1% in early afternoontrading. Indices in France and Germany, likewise up on their earlier lowsMonday, were nonetheless subdued amid the global jitters triggered by thespread of the flu virus. Earlier, shares in Hong Kong closed down 2.74%.For investors already wounded by the global economic crash, news of apotential pandemic came as a further blow.

"As if we didn't have enough tocontend with," strategists at the Royal Bank of Scotland wrote in a noteto clients Monday, "it's just what we need now, a flu pandemic in themidst of the biggest financial crisis since the Great Depression." Amidthe sell-off, travel industry stocks fell sharpest. Shares in Lufthansa,Europe's second-largest airline, tumbled by more than 12% beforerecovering slightly.

Those of rival British Airways pulled back fromsimilar lows, trading 8% down by mid-afternoon in London. Tour operatorsand hotel groups took similar hits. (See pictures of the swine fluoutbreak in Mexico.)From the volatility of global travel, investors sought the calm of safehavens. Both the dollar and the Japanese yen rose against majorcurrencies. Defensive stocks, such as pharmaceuticals, registered healthygains. Shares in Roche, the Swiss maker of Tamiflu, an antiviral drugeffective against swine flu, had climbed almost 6% by Monday afternoon.

Rival GlaxoSmithKline, which makes the influenza treatment Relenza, sawits shares rise even higher. (Read: "Swine Flu: 5 Things You Need to KnowAbout the Outbreak.")How long stocks hold those positions in the face of the threat from H1N1remains to be seen. The fact that shares hit hard early had regained lostground Monday suggests markets had earlier "responded in the time honoredfashion," says Howard Wheeldon, senior strategist at BGC Partners inLondon, namely with "a degree of overreaction.

"Given the lack of clarity over the threat posed by the virus, that'sperhaps understandable. But gauging the impact of the outbreak Â— formarkets and economies just as for health officials Â— takes time. Shouldthe virus's potential for a pandemic be realized, though, its financialimpact would be severe.As with the outbreak of severe acute respiratory syndrome (SARS), whichdevastated the Asian economy in 2003, economic consequences would bemeasured "not so much in the number of people that go down with it, orunfortunately are killed by it," says Justin Urquhart Stewart, investmentdirector at Seven Investment Management in London, but by "the impact ofthe potential [population] that could be effected. Once it starts togather momentum, it takes very little to start knocking serious percentagepoints off global trade and GDP." Right now, that's a momentum we couldall do without.

Kim Eng Indonesia Equity Daily, 24 Apr 09

2009-04-23T20:35:00.000-07:00

Our Comment

Teguh Sunyoto published an update on Total Bangun Persada. The management indicated that the 33% YoY net profit decline in 1Q09 was mainly attributable to higher-than- expected operating expenses and higher tax rate (final tax 3% on revenue vs. old system 30% on pretax income).

On a positive note, 1Q09 net profit has already represented 78% of last year´s net profit of Rp17b.. Gross margin was up to 7.9% in 1Q09 (from 5.6% in 2008 and 7.6 in 1Q08), as expected. This was not only helped by lower cost of construction but also because of the successful management strategy to break up and subcontract (delegate) its large-size projects which typically command smaller margin (gross margin 4% or less) to other smaller contractors.

We reckon there are at least three repeat customers, which potentially will give an important contribution to Total business. Those are the Para Group, Ramayana and Bina Nusantara Group. Para Group´s subsidiary, Bank Mega for example, plans to open nearly 300 new micro banking unit/branches up to 2010.

We upgrade our recommendation on Total to BUY due to the expectation on higher profitability and its promising prospect especially from its repeat customer base. Our target price of Rp180 is based on 7x FY10 P/E which is 33% below valuation of Malaysian construction firm at 10.5x FY10 P/E.

Bank Danamon reported that a net profit declined 30% YoY to Rp393b in 1Q09., below consensus estimate. Lower net profit was mainly caused by higher provision, higher operating expenses and non-recurring expense from arising foreign exchange forward contracts. Net interest income slightly increased by 5% YoY.

Total Loan in Q109 showed growth of 13% YoY, driven by growth in mass market and micro and small-scale business which grew by 25% YoY and 4% YoY respectively. Gross NPL increased by 60bp to 2.9% as deteriorating operating environment has impacted the credit quality. Capital Adequacy ratio (CAR) declined to 16.9% in 1Q09 from 20.8% in 1Q08 due to growing in earning assets and a decline in Tier 2 Capital (the bank has fully amortized its US$300m subordinated debt in March 2009).

Indonesia stock market experienced technical problems in relation to the new system implemented by the stock exchange. The market was forced to close early. Directors of the exchange said that the problems have been fixed this morning. We see that volume will probably be lower today as market players hold their trading while making sure that the system is running well.

Golkar announced Jusuf Kalla as candidate for President. Golkar-Partai Demokrat break up has caused concerns in the market. We see that announcement of President Yudhoyono´c running mate will erase the uncertainties.

By - Katarina Setiawan

Highlights

o Total Bangun (BUY): On the right track
o Bank Danamon: Net profit declined 30% YoY to Rp393b in 1Q09
o P Gas Negara (BUY): Government to cancel Duri-Medan pipeline
o Telkom (HOLD): Obtained tax incentive
o Semen Gresik (HOLD): To appoint Bank Mandiri to seek financing
o Timah: Production may fall below forecast

BNBR Tick Chart with Trade Volume Index

2009-04-23T01:19:00.000-07:00

TRADE VOLUME INDEX

Overview

The Trade Volume Index ("TVI") shows whether a security is being accumulated(purchased) or distributed (sold).

The TVI is designed to be calculated using intraday "tick" price data. TheTVI is based on the premise that trades taking place at higher "asking"prices are buy transactions and trades at lower "bid" prices are selltransactions.

Interpretation

The TVI is very similar to On Balance Volume. The OBV method works well withdaily prices, but it doesn't work as well with intraday tick prices. Tickprices, especially stock prices, often display trades at the bid or askprice for extended periods without changing. This creates a flat support orresistance level in the chart. During these periods of unchanging prices,the TVI continues to accumulate this volume on either the buy or sell side,depending on the last price change.

The TVI helps identify whether a security is being accumulated ordistributed. When the TVI is trending up, it shows that trades are takingplace at the asking price as buyers accumulate the security. When the TVI istrending down, it shows that trades are taking place at the bid price assellers distribute the security.

When prices create a flat resistance level and the TVI is rising, look forprices to breakout to the upside. When prices create a flat support leveland the TVI is falling, look for prices to drop below the support level.

Still, Cheapest Coal Stock…Upgrade to BUY

2009-04-17T01:11:00.000-07:00

We upgrade our recommendation on BUMI from Hold to BUY and put BUMI’s Target price back on its DCF valuation without any discount of Rp1.302. Higher investor’s risk appetite with huge liquidity on market justified our action to put BUMI’s on it’s normal valuation and ignoring corporate governance issues that already dimmed by now. With selling pressure easing and strong bullish momentum on Indonesian market, we believe BUMI will get the most beneficiary as investor start looking the cheapest stock available. BUY.

Higher Risk Appetite as the Main Catalyst on BUMI Shares
We believe, investor’s risk appetite currently are higher compared to last quarter on the back of optimism on bottoming global financial crisis and brighter outlook on economic recovery. This will become the main catalyst on BUMI’s shares on market as investor are become more eager to buy stocks, especially the cheapest one and ‘ignoring’ some risks behind it.

Highest Liquidity among Others
Compared to other peers, BUMI is the most liquid coal stocks on market with Ytd average turnover of Rp243 bn/day compared to peer’s average of just Rp60.8 bn/day. Even almost four times higher than its closest competitor of PTBA with only Rp64.6 bn/day. This should give BUMI the best leverage when market starts to entry the bullish path.

Best among the Under-owned Group
In our view, BUMI is the best asset in Bakrie Group portfolio and also the biggest weighted on BNBR’s earning. As we know, Bakrie group stocks had underperformed the market since Oct ’08 after BNBR announced its liquidity problems and result in a Repo Mess. Currently, those selling pressure are overdone as BNBR liquidity profiles had improved and the best will prevail.

Don’t Forget the Dividend Offer
Even if we’re believe that this issues had mostly being factored in the market, but we are positive on BUMI’s huge dividend yield about 10% (Rp110/share) will be able to create a base on its price movement. Not many companies offer 10% dividend yield for fiscal year of 2008, even not those SOE’s.

Valuation: Put BUMI back on its DCF Value of Rp1302
We eliminate our discount for BUMI’s DCF valuation and put our Target price of Rp1.302 using WACC of 14,1% and 0% LTG. Currently BUMI traded at F09 PE/PBV of 3.2x/1.4x and EV/EBITDA of only 2x. Other peers average valuation hovering at F09 PE/PBV of 5.3x/2.1x and EV/EBITDA of 2.9x. Evem with current rally on stock prices, BUMI still the cheapest among others with a lot of un-factored positive catalyst. BUY.

By Adrianus Bias Prasuryo

CLSA INDO: Panin Bank downgrade, higher NPL risks

2009-04-16T01:45:00.000-07:00

Good Morning. It's been less than a month when we talked about howunpopular we, stock brokers, have been. How even property brokers ignore usand many people feel sorry for us at gatherings (Cocktail party theory ofPeter Lynch). Some even thought we are the mastermind behind this globalbust. "All guilty", that is everyone in finance. Then we saw our majorcompetitors in the broking community has just dramatically scaled down theiroperation in Indonesia and even rating agency Moody's decided to shut downtheir Indonesia office (feels like Phase 5 of the emerging markets cycle asnoted by Marc Faber in Tomorrow's Gold). Seeing all the evidence that themarket had reached max pessimism, we at the sales desk turned more positive.

However, what caught us by surprise is how fast and strong this market hasrebounded (The Rp is now the best performing Asian currency YTD) and howsentiment took a 180 degree turn just like that. Yesterday, my salescolleagues Eugene and Daniel went to a popular bar for happy hour, andamazingly, they are popular once again. Friends and acquaintances startedasking them what stocks to buy. Talk about from hero to zero to hero again.Very scary indeed. Resembles the ultra high volatility global markets wesaw in the 1970s when inflation raged.

Amazingly enough, CLSA's Feng Shui Index predicted the current rally..lookat month by month predictions. April 5 to May 5 - the return of the Dragonpromises wealth for the watchful and the fleet of foot, so jump back in andfill your boots.....5th May - 4th June - Beware the Slippery Snake..but lookforward to 7 August - 6th Sept - Watch this cheeky Monkey scamper high abovethe earth, carrying a pouch of metal money on his back...this month holdsgreat promise for those who have been carefully and cleverly building solidpositions... (ask me if you want to copy again but who needs Feng Shui nowwhen everyone could be a stock picking genius)

While we are wildly bullish on the longer term outlook for commodities hencethis market, it would be sometime until we see actual data pointing toinflation from deflation. As such, we will be a little more cautious in theshort term.

Research Today: Panin Bank downgrade, higher NPL risks

Nico Oentung downgrades Panin Bank (PNBN IJ) from BUY to SELL. New TP isRp450 (from Rp800). Nico also downgrades PNBN's earnings by 5-26% reflectingweaker revenue dynamics (slower loan growth, thus lower NIM) and higher NPL.

One of the main reasons to buy PNBN is the M&A catalyst. As global bankscontinue to de-leverage and focus on the domestic market, M&A catalyst isunlikely to return in the near future. Key points from the report:Higher NPL risk due to aggressive loan growth.

* PNBN has almost doubled its loan book in the last two years vs. 65%for banking sector. * New loans now account for 50% of its total loan portfolio vs. 39%for the sector. * Sharp pick-up of NPL and special mention loans in 4Q08. . Weak revenue dynamics + higher volatility: expect NIM to be underpressure as loan growth continues to slow from tightening of underwriting. . PNBN has the lowest provisions in the sector at 79%. We expectprovisions to almost double in 09. . Valuation not attractive. PNBN trades at 1.5x P/B and ROAE about8% (due to weak revenue dynamics + rising provisions). As a comparison, BankDanamon (BDMN IJ) also trades at 1.5x P/B but ROE is higher at mid-teenpercentage.

News Headlines/Others: Mandiri (BMRI IJ) is proposing 7% divestment. Local press reported thatMandiri intend to capture 5% tax benefit resulting from having 40% freefloat. Currently, free float for the bank is 33%. Comment: We estimate a 5%reduction in tax rates will add about Rp400bn to net profit or 7%additionalearnings growth and 110bp boost to ROE. However, Mandiri will needgovernment approval for the divestment which could take some time given thecurrent election process. We continue to maintain U-PF on Mandiri due to itshigher risk loan portfolio, especially large exposure to corporate segment,under current economic downturn.New margin and short selling regulation will go in effect May 2009. The newregulation puts a limit of 1:1 margin (the margin facility can only be aslarge as the customer deposit). Also, the ban on short selling will remainin place.

Elnusa (ELSA IJ) stake for sale? Tri Daya intends to sell its 37% stake inthe oil services company Elnusa. The stake is valued around Rp1tn. SOEPertamina controls 41.1% of ELSA. Local media reports that Pertamina,Malyasian Petronas, and Northstar Pacific are interested bidders.SOE miners Antam (ANTM IJ), Timah (TINS IJ), and Bukit Asam (PTBA IJ) to getnew BOD? Local media reports that the SOE Ministry is in the process ofchanging the BOD.President SBY's running mate cannot be a political party chairman. TheDemocrats, buoyed by last week's election have decided that party chairmanwill not be eligible to be running mates of President SBY. This means thatcurrent VP Kalla would have to relinquish his chairmanship of the Golkarparty. Separately, the Democrats have commented that a presidential ticketof SBY-Kalla is still very possible. The VP candidate will be announcedthis month on April 25 during the Democrats national meeting.

International Airport Terminal 3 launched yesterday. Currently, theremaining work is in finishing several supporting facilities such as parkinglot, ticket booths, and shopping arcades. This new terminal is designed tobe an environmentally friendly and energy-saving building, and expected toaccommodate as many as 4m passengers each year for two airlines. Reclamation project to be constructed this year. This project whichreclaims the North Jakarta coastal area and is planned to prevent flood inJakarta due to low land location. The area will include industrial zones,tourist sites, offices, business districts, transportation facilities, andresidential areas. Arpeni Pratama (APOL IJ) to discontinue derivative transaction contract.Due to losses in derivatives transactions (Rp361.58bn in 2008), APOL has nowdecided not to extend its derivatives contracts and start to operatebusiness conservatively

Chart of the Day:Thermal coal price FOB Newcastle and Richard BaySome supportive data for thermal coal from Europe and China, and this mightindicate that downside risk on spot thermal coal price in Asia and Australia(Newcastle Spot) is somewhat limited. We have assumed contract price of US$72/t for FY09 while Newcastle spotprice currently hovered around US$63/t. Note that since average FOB cashcost for thermal coal from Indonesia and Australia hover around US$45/t toUS$50/t, there had been concern that spot thermal coal price could dipcloser to this level. Thermal coal future in Europe (API4, the blue line) bounced strongly fromits low in the last 4 weeks, massively outperforming spot thermal coal pricein Newcastle, Australia (CLSPAUNE, the red line).

Our sources in the industry mentioned that thermal coal fundamentals inEurope remain weak as port and power station stockpiles are still at highlevel, seasonally coal burn is falling due to milder weather, and gas pricesare declining. There are, though, some positives that supported Europeanthermal coal price, including
. Russians suppliers pulling out from the market as they have thehighest cash costs, around US$65/t, . No supply from the US for the same reason as the Russian, . South African supply remains tight because of inland transportconstraints.
. Colombia has endured a series of strikes for about 3-4 weeks,affecting many producers.

Worth highlighting that the US export was quite strong, up by 38% YoY inFY08, but no official data is available of export during 1Q09. Key Indicators: JCI:1,593.66 +23.40 (+1.49%), T/O USD 418.61 mil, YTD: +17.58%ADR: TLKM US$27.57 = IDR7,489ISAT US$25.95 = IDR5,639

The market is set to continue its recent run. Sentiment is running high aswe have seen both local and foreigners moving back into the market. Foreignfocus on the big caps, and local focus on miners,plantations, property names.- RUPIAH: very strong this week (post-parliamentary elections) and up 6%now. Asset reflation plays, like banks and property, have been strong intandem, and the currency has helped overall sentiment tremendously.As of this morning, we are 2x better buyer.Did You Know That?

Java and the Madura islands are no longer separated. A new 5,438-metre- longbridge that connects the city of Surabaya in Java and the island of bullracing Madura is now almost fully completed. The bridge is designed to lastfor 100 years and the construction work began in 2002. It is funded bysoft loans from the Chinese govt and employed 3,500 workers from Indonesiaand China. Total cost is around Rp4tn (US$368mn). The bridge used up 28ktons of steel and 600 tons of steel mixture. But the construction processwas not all plain sailing. Last month, 4 fishermen were arrested for allegedsteel theft at the bridge construction site. The men stole the material over3 months using magnets and managed to collect about 3 tons of steel rods!!

Best regards,Wuddy Warsono, CFACLSA Indonesia Head of SalesPhone: (62-21) 573 9460Toll Free - HK: 800 938 000Toll Free - SIN: 800 621 1104Toll Free - US: 800 460 2581

Worst May Be Over for Stocks And US Economy

2009-04-14T00:19:00.000-07:00

Worst May Be Over for Stocks And US Economy, Cohen Says

The US stock market appears to have hit bottom and the nation's economy might see an upward shift in the latter half of the year, widely watched investment strategist Abby Joseph Cohen told CNBC.

"One thing to keep in mind is that we have undergone many months of very dramatic declines in earnings expectations, and also in revisions to the economic forecast by macro-forecasters," said Cohen, president of the Goldman Sachs Global Markets Institute. "And something has changed over the past month and that is that the consensus numbers aren´t being adjusted very much. I think that means that many investors now believe that the forecasts are finally as low as they need to be."

Goldman Sach is forecasting that the S&P 500, currently around 850, will hit 900 by the end of this year, Cohen said in a live interview.

Meanwhile, investors should be more trading-oriented than usual to take advantage of the market's volatility.

"What we´re suggesting to many of our clients is that they be somewhat more trading oriented than normal because the markets are more volatile," Cohen said. "Just last week, our analysts in the retail sector indicated that they were seeing some opportunities among some securities with a little higher beta. We´ve also had significant opportunities in some of the categories related to natural resources and industrials."

Cohen said the markets are more normal than they have been in the past few months, a reason investors can feel more comfortable.

"This applies not only to the equity market but also to the bond market," she said. "We´re beginning to see some better news appear, but let´s keep in mind that we have some bad news, particularly with regard to unemployment. The question for investors is whether or not that bad news is already incorporated in share prices."

Goldman 1Q earnings surpass Wall Street estimates

2009-04-13T23:31:00.000-07:00

Goldman Sachs earns $1.66B in 1st-quarter, surpassing Wall Street's estimates - by Sara Lepro, AP Business Writer

NEW YORK (AP) -- Goldman Sachs, in another sign that banks may be turning around, beat Wall Street's earnings expectations as it reported a profit of $1.66 billion for the first three months of this year. The bank also said it planned to raise $5 billion in stock to help it pay back government bailout funds.

The New York-based bank said it earned $3.39 per share, easily surpassing analysts' forecasts for profit of $1.64 per share. This compares with earnings of $1.47 billion, or $3.23 per share, in the quarter ended Feb. 29 of last year, and is a huge improvement over the $2.29 billion Goldman lost in the fourth quarter.

Goldman's news, released a day earlier than anticipated, came days after another top-performing bank, Wells Fargo & Co., said it expected to report record first-quarter earnings of $3 billion, well above Wall Street's estimates. That news fed a huge stock market rally Thursday, but with companies including Citigroup Inc. and Bank of America Corp. still to report their first-quarter results, it's too soon to say the banking industry is indeed finally recovering from the devastating losses caused by the credit crisis and the recession.

Investors showed some caution after Goldman's announcement, which followed the close of regular trading on Wall Street. Goldman shares initially rose in response to its report but then slipped 1.5 percent. Citigroup, which surged 25 percent during regular trading, rose a more modest 1 percent in after-hours activity while Bank of America rose 0.7 percent after jumping 15 percent during regular trading. Morgan Stanley fell 3.3 percent in late trading after jumping 6 percent during regular hours.

Morningstar Inc. equity analyst Michael Wong said Goldman benefited from the fact that it has more traditional investment banking and trading operations than more retail-focused banks like Citi and Bank of America.

"What allowed Goldman to outperform is solely tied to their brokerage operations," he said.

Still, Goldman's first-quarter performance put it in a strong enough position to plan the public stock offering of $5 billion which it said would be used, with additional resources, to pay back its government debt. Goldman received $10 billion in government funds during the downturn last fall as part of the U.S. Treasury Department's program to invest directly in hundreds of banks and try and help alleviate the nearly frozen credit markets.

Goldman executives have said for months that the company wanted to repay bailout funds this year, and last month, company spokesman Lucas Van Praag said the main reason Goldman wanted to return the money is that it doesn't need the funds.

Many banks have chafed under restrictions, including limits on executive compensation, imposed by the government as it dispensed the bailout money. The banks have also come under sharp criticism from lawmakers and the public for a variety of business practices.

Goldman said its first-quarter profit was bolstered by strong revenue growth in its fixed income and currency businesses. The Treasury market and the dollar were beneficiaries of investor uncertainty during the first two months of the year; in March, the stock market began a five-week rally that lifted the major indexes off 12-year lows.

Goldman's total revenue was $11.88 billion during the quarter, compared with $18.63 billion in the prior-year quarter. Analysts forecast revenue of $7.19 billion.

Goldman's fourth-quarter loss was its first since becoming a public company in 1999. The company, like other financial firms, was hurt by the plunging value of its investments as the credit crisis eroded the value of mortgage-backed securities, stocks and many other assets.

When Goldman became a bank holding company last fall amid the mushrooming credit crisis, it switched its reporting cycle so its fiscal quarters were in line with calendar quarters beginning Jan. 1. To adjust its reporting schedule, Goldman began fiscal 2009 on Jan. 1 instead of Dec. 1 of last year. The bank said for the month of December, which fell between the change in reporting cycles, it lost $1 billion, or $2.15 per share.

Shifting the start of its fiscal year certainly helped the bank's overall results, said Denise Valentine, senior analyst at Aite Group, a Boston-based research firm.

"It's a little bit of fancy footwork, but for the market as a whole it's good news and it was needed," she said. "When your star does well or does what is expected, you breathe a little easier."

Valentine was quick to note that other areas outside of Goldman's fixed income and currency businesses showed some pain during the quarter.

Investment banking revenue totaled $823 million, down 30 percent year-over-year as far fewer merger deals were done. Its asset management revenue declined 28 percent to $949 million.

Its earnings improvement lends support to what bank CEOs have been saying in recent weeks: That business conditions have started to stabilize.

Encouraging words from several big bank CEOs that they were having a better quarter than most expected have helped fuel hopes for an economic recovery -- and led the stock market to its best four-week performance in more than 75 years. Many hinge the end of the recession on the health of the nation's banking system.

Goldman also declared a dividend of 35 cents, down from 46.7 cents but still a healthier payout than many banks have been able to give shareholdeers.

Kim Eng Indonesia Equity Daily, 14 Apr 09

2009-04-13T21:29:00.000-07:00

Our Comment -by Katarina Setiawan

Bisnis Indonesia daily reported that Bakrie Sumatera Plantations has revised six accounts in its FY08 financial statements. Management claims the revision is due to some reclassifications and typos made by the company auditor. Biggest revisions are found in cash flow statements items. On income statements, the company omitted loss on written off plantation Rp1.5b in FY07. It seems that there is no impact on FY08 net profit.

We maintain SELL recommendation on the counter, mostly due to weak performance in FY08. Bakrie Sumatera is the weakest in the industry due to its high leverage and relatively high young age plantation portion resulting from acquisitions in the recent years..

Ramayana reported a 9.3% YoY sales decline in March. It seems that the layoffs (on domestic and migrant workers) and the declining commodity price have taken a toll on sales
The market rallied yesterday, supported by positive sentiment from the legislative election result. Rupiah also appreciated. Despite the recent rallies some stocks are still attractively valued.. Our picks include Bukit Asam, Gudang Garam, Indocement, Indofood, Indosat, Unilever, Wijaya Karya.

The US and regional markets were slightly down this morning after a strong rally yesterday.

Highlights

o Kalbe Farma (HOLD): To pay debt using internal cash

o Bakrie Sumatera (SELL): Revising FY08 financial statements

o Ramayana (UNDER REVIEW): Mar-09 sales down 9.3%

o CP Prima: Bapepam maintains quorum requirement From our chartist desk

o IDX: We see a high possibility of profit taking. But it will be only temporary, as we see a break in the IDX trend line and continuing appreciation of Rupiah (target is Rp10300/USD, from Rp11000/USD) . Today´s trading range is between 1384-1451-1495 (support) and 1562-1585-1651 (resistance) .

o BBCA: Middle line of Bollinger band, MA 12, MA 14 days are still intact in its upward momentum. We maintain target Rp3500. TRADING BUY

o TINS: Strong volume, supported by a reversal signal on stochastic. TRADING BUY

Money Management: Just Like Sex

2009-04-01T09:48:00.000-07:00

An interesting article:

So how much thought have you given to money management recently? Or are you still too preoccupied by all kinds of indicators or fundamental buy, sell and holds to focus on the subject?

Eventually, however, you've got to ask yourself the most important question of all: "how much?" right?

Getting a straight answer to that one may be tough. There's still a lot of confusion about risk or money management from so-called gurus. I recently saw the following comment regarding money management from a "guru":

"[We] use very simple money management: Trade one contract per trading signal in the markets … with no pyramiding."

This is NOT money management. When you hear someone describe money management like this trading guru, run don't walk the other direction as you are about to be conned.

So if money management isn't some set amount of shares or contracts picked out of thin air, what is it? Money management answers the question of "how much?" At all times, given the risk you are taking, the money you have, and the volatility of the market -- you must know the optimal number of shares or contracts to be long or short.

In my opinion money management or position sizing or bet sizing just doesn't get the attention it deserves. Gibbons Burke of MarketHistory. com observes:

"Money management is like sex. Everyone does it one way or another, but not many like to talk about it and some do it better than others. But there's a big difference: Sex sites on the Web proliferate, while sites devoted to the art and science of money management are somewhat difficult to find."

Money management is ultimately a defensive concept. It keeps you in the game. For example, money management tells you whether you have enough new money to trade additional positions. Trend followers all realize that you need to make small bets initially to simply stay alive and play another day. So, if you start at $100,000, and you're going to risk 2 percent, that will be $2,000. You say to yourself, "Why am I only risking $2,000. That's nothing compared to what I've got to bet." But that's not the point. First things first. You can't predict where the trend is going to go, so you can't afford to risk all of your capital out of the gate. Trend follower Craig Pauley points out:

"There are traders who are unwilling to risk more than 1% but I would find it surprising to hear of any trader who risks more than 5% of assets per trace. Bear in mind that risking too little doesn't give the market the opportunity to allow your profitable trade to occur."

Think about money management as you would about getting into physical shape. You can't lift weights six times a day for hours each day for 30 straight days without hurting yourself. There's an optimum amount of lifting you can do per day that gets you ahead without setting you back. You want to be at that optimal point just as you want to get to an optimal point with money management. Trend follower, Ed Seykota, author of The Trading Tribe book, describes this optimal point with his concept of "heat".

"Placing a trade with a predetermined stop-loss point can be compared to placing a bet. The more money risked, the larger the bet. Conservative betting produces conservative performance, while bold betting leads to spectacular ruin. A bold trader placing large bets feels pressure - or heat - from the volatility of the portfolio. A hot portfolio keeps more at risk than does a cold one. In portfolio management, we call the distributed bet size the heat of the portfolio."

Trading correctly is 90% money management, a fact that most people want to avoid or don't understand. However once you have money management down, your personal psychology will be 100% of your trading success. Once you have the rules, you still need to follow them!

Why then do traders have such trouble keeping their trading proportional? Why is it so hard for them to find that optimal point? Fear. Trend follower Tom Basso points out that traders usually begin trading small and then as they get more confident increase their trading size. Once they get to a certain comfort level of say, 1000 contracts, they often stay there, suddenly fearful that turning up the "heat", to use Seykota's term, will increase their risk. For trend followers like Basso, the goal is to keep things on constant leverage.

Few traders make the move to a proactive posture in which risks are actively managed for a more efficient use of capital. How do you avoid trading less instead of trading the optimal amount at whatever capital you have? You need to create an abstract money world. Don't think about what money can buy. Just look at the numbers like you would when playing a board game like monopoly or risk.

And since your capital is always changing, it's important to continually rebalance your portfolio. Trend follower Paul Mulvaney points out that, "Trend following is implicitly clear about dynamic re-balancing which is why I think successful traders appear to be fearless. Many hedge fund methodologies make risk management a separate endeavor. In Trend Following it is part of the internal logic of the investment process."

There it is: the key is a risk understanding. That's what money management is really all about. Managing risk.

CLSA INDO: Coal update

2009-03-26T06:15:00.000-07:00

The downside intensity of this bear market has been unprecedented.

It took less than 350 days for the S & P to decline by 50% (437 days in 73-74, 630 days in 2000-2002).

The extreme collapse has brought about extreme bearish sentiment. A powerful market rally is long overdue. However, i am convinced this is only a bear market rally as it is almost impossible to envision global growth to return anywhere near the previous peak.

Having said that, there is a lot of value in certain areas like commodities where I am happy to add on position on the way up. With Central Banks determined to fight deflation by printing trillions of dollars out of nowhere, they will ultimately prevail but the consequence will be horrible inflation down the line.

The initial phase of inflation will no doubt create a sense that conditions have stabilized. (note consumer prices have been rising in the US). I am afraid there is no free lunch. It is reported by Deloitte that China is looking to invest US$500b in resources outside of China. $22bn worth of deals has already been announced in the last month alone.

Premier Wen said China has decided to diversify its foreign exchange reserve holding (US govt bond yields have nowhere to go but Up, up and up). Sell dollar high and buy commodities low (a weaker dollar will eventually be required to reverse deflationary forces). Interesting to note the recovery of copper prices (highest in more than four months) at the same time stockpiles have slumped about 9 percent since Feb.

If China remains aggressively committed to acquiring commodities, it could signal a turnaround in the fortunes of global and material producers. As a resource rich economy with low debt to GDP, Indonesia will be very well positioned.

CPO prices have recovered 35% from Dec 08. This will translate to higher disposable income for farmers in the region. Note that the Rp has strengthened more than 5% in the last few days. I would take profit on Banks and Buyers of Antam, Inco, LSIP, SGRO and ITMG.

Trading wise, we are 2x net buyers for today.

Research Today:

Coal analyst Olie examines the latest PTT acquisition. Thai´s PTT (PTT TB) will take a 60% stake in Straits Bulk and Industrial (SBI), a wholly owned subsidiary of Strait Resources Limited (SRL). SBI in turn controls a 47.1% stake in Straits Asia Resoucres (SAR SP), coal asset inBrunei and Madagaskar.
Bottom line is that while on a PE basis, the transaction looks reasonably priced (in line with the average PE09 of Indonesian coal names), on the more important EV/reserves measure normally used M&A purposes, the transaction commands a hefty premium of almost 3-4x its Indonesian peers, making Indonesian coal stocks look very cheap.
Trading wise, I would switch out of Astra International and the banks and get into coal and base names.

Key points of the report:

· PTT plans to acquire 60% stake in SRL wholly owned subsidiary that controls SRL coal assets, including Straits Asia (SAR).

· Since SAR would be the only company generating earnings in the JV, the implied PE09 that PTT would be paying for SAR ranges between 3.9x to 5.1x, based on consensus forecasts, in line with average multiple of Indonesian coal companies though suggesting a 28% to 95% premium to pre-announcement price.

· Indonesian coal names look cheap on reserves basis as the deal valued SAR three to four times than those for Indonesian names.

· We do not expect M&A to happen soon to Indonesian coal majors, as some of the controlling shareholders of the listed Indonesian coal companies do not need to do capital raisings while government owned company is not available for sale due to its politically sensitive nature.

· Adaro could be the only one with M&A angle as 1) it is not controlled by a single majority, and 2) financial investors, controlling around 25% stakes, could be willing sellers after.

· We stick with quality names, ITM (ITMG IJ) and Bukit Asam (PTBA IJ) Aneka Tambang (ANTM IJ) FY08 audited results from Olie Slight difference from the unaudited one The company release its FY08 audited result, with net profit arrived at Rp1,368bn, down by 73% YoY, but around 4% higher than the unaudited figure.

The difference was a result of completion of acquisition of BHP 75% stakes in Gag Island nickel project, where from all assets this project have been fully consolidated into Aneka Tambang. Therefore, we are seeing higher than previously reported exploration expenses, amounting Rp354bn as compared to Rp130bn previously reported, and gain from debt write-off amounting Rp263bn. Note these are all non-cash items.

Wijaya Karya (WIKA IJ) 2008FY results slightly below expectation by Hadi Core profit matched our expectation but net profit below forecast. FY08 Revenue Rp6.6tn grew 53% YoY on the back of increasing infrastructure projects. FY08 Gross and operating margins were declined due to rising material cost which could not be fully passed-on to customers. FY08 Net profit Rp156bn (up 21% YoY) was 13% below our forecast. The main differences would be on higher allowance for doubtful expense.

Wijaya Karya made provision on aging receivables from a shopping mall project that is near completion. We believe these receivables should gradually collected when the project start operation this year. As of February 2009 Wijaya Karya has secured Rp15tn worth of order book for 2009-2011. We estimate Rp6tn will be converted to 2009 revenue which is already 76% of our forecast. Maintain BUY.News Headlines/Others: US$15bn China-Indonesia swap deal secured. The US$15bn currency swap is to provide short term foreign exchange liquidity and helpIndonesia improve tight liquidity.

The three year swap arrangement is on top of the multilateral swap agreementIndonesia secured under the Chiang Mai summit. According to local media,Indonesia ´s forex reserve stands at US$53.9bn in mid March 09. The Rp73.3tn stimulus starting to flow this week. The government announced that its Rp73.3tn (US$6.3bn) stimulus package to help the economy has started to flow.

About Rp56.3tb of the stimulus has been channeled in the form of tax incentives and about 13.3tn of the tax incentives is allocated to tax subsidies and import duties exemption for certain labor incentive industries. Total Oil Indonesia launching its first two retail gasoline stations. Total, the oil major from France intends to open a total of five gasoline stations in 2009 and targets to open a total of 200 gasoline stations in the next five years. The cost of a gas station is estimated at US$2m with 10,000 liter sales targeted each day.

Comment:

A number of other oil majors such as Malaysian Petronas, and Shell have enteredIndonesia since the industry deregulation took place in 2005. Financing for the 10,000MW fast track power plant project is still 30% short. The Finance Minister just came back from China and said that both countries had reached an agreement to continue the existing loan agreements for the 10,000MW project.

However there was no additional loan agreement announced for the remaining 30% financing required to complete the project. Previously reported that PLN (The State Electricity Company) is also negotiating with Middle East Investors and JBIC for financing alternatives. We estimate the project investment cost to reach USD10bn which USD7bn is already secured from PLN equity and loans from Chinese and local banks.

Indika Energy - Loan for Cirebon power project secured? It was reported in the newspapers that consortium of Bank of Tokyo Mitsubishi, ING, Mizuho, and Sumitomo Mitsui have agreed to finally provide US$525m financing to 660MW Cirebon Power project. Indika Energy that owns 20% equity in the project has yet to confirm the news though. Note that negotiation for financing has been on going for 18 months hence any loan agreement would be considered positive, though contribution of this project to total Indika estimated NAV is relatively small. Shipper Arpeni Pratama (APOL IJ) delays acquiring nine ships. APOL IJ has canceled the purchase of nine Panamax ships worth US$200m. APOL has a shipping fleet of 78 ships.

Comment:

The company is burdened by its heavy debt level as net debt to equity is 188% as of 3Q08. Indonesia´s LNG exports minimum requirement to be slashed. Indonesia will reduce Japan ,South Korea , andTaiwan ´s minimum in purchasing LNG by max 70% from the previous 15% stated in the contract. This was proposed to help these three consumers countries as the domestic demand in the countries slumped. This means they can reduce their purchases of LNG by 844k ton (total contracted 1.2mt).

Matahari (MPPA IJ) offers 16-17% interest on its bonds. The Rp500bn bond targeted for issuance in 3Q09 is estimated to have coupon rates of 16% and 17% for the 3 years and 5 years maturities. SuramaduBridge to be completed this year. The government targets this bridge to be completed in mid 2009. This 5.4km bridge progress, which is the longest bridge in Indonesia and will connectSurabaya and Madura has been 93% completed. The tariff is estimated to be Rp23k (one third of Ferry´s tariff of Rp70k)

Key Indicators:

JCI: 1,406.647 +45.758 (+3.36%), T/O US$225.2 mil Well ensconced in a "bear market raly", the index is set to post its 5th consecutive gain today. Volumes managed to double from daily averages y'day as both local and retail investors moved back in. Foreign institutions were focusing on the big cap names, so the telco's, banks, consumers outperformed As of this morning, book is 2.5x better buyers.

Chart of the Day:

Did You Know? That 2.6m babies are born every year inIndonesia ? Indonesia currently has a population of 230.6m. If the birth rate is not slowed down (now at 2.6 children per woman), the country could see a population of 261m by 2020. The government has targeted to cut the birth rate to 1.3m babies per annum by increasing birth control awareness. The birth control agency said it needs to add another 13,000 staff to its existing 22,000 employees.

Daniel Oen
CLSAIndonesia Institutional
SalesPhone: (62-21) 2554-8802
Toll free - HK: 800-938-000 Toll free - SIN: 800-621-1104
Toll free - US: 800-460-2581daniel.oen@clsa. com

Successfull Business School - Lesson 1

2009-03-21T02:55:00.000-07:00

Father: I want you to marry a girl of my choice.

Son: "I will choose my own bride!!! "

Father: "But the girl is Bill Gates's daughter.. "

Son: "Well, in that case... ok"

Next father approaches Bill Gates.

Father: "I have a husband for your daughter.... "

Bill Gates: "But my daughter is too young to marry!!!!! "

Father: "But this young man is a vice-president of the World Bank. "

Bill Gates: "Ah, in that case... ok"

Finally father goes to see the president of the World Bank.

Father: "I have a young man to be recommended as a vice-president. "

President: "But I already have more vice- presidents than I need! "

Father: "But this young man is Bill Gates's son-in-law. "

President: "Ah, in that case... ok"

And that my friends is how to success in business.

"Selling somthing you don't have and creating the demand for it !"

When economy bottoms out, how will we know ?

2009-03-08T23:53:00.000-07:00

By - ALAN ZIBEL, CHRISTOPHER LEONARD and TIM PARADIS

When will this wretched economy bottom out?

The recession is already in its15th month, making it longer than all but two downturns since World War II. For now, everything seems to be getting worse: The Dow is in free fall,jobs are vanishing every day, and one in eight American homeowners is in foreclosure or behind on payments. But the economy always recovers. It runs in cycles, and economists are watching an array of statistics, some of them buried deep beneath the headlines,to spot the turning point.

The Associated Press examined three markets— housing, jobs and stocks — and asked experts where things stand and how to know when they've hit bottom. None of them expects it to come anytime soon.

JOBSHOW BAD IS IT?
The U.S. unemployment rate hit 8.1 percent in February, a 25-year peak. The nation has lost 4.4 million jobs since the recession began in late 2007.The job cuts began early last year, as the housing and construction industries slowed down. The collapse of the financial industry in the fall battered white-collar workers. Soon, layoffs spread across industries and income levels.

HOWMUCH WORSE COULD IT GET?
The darkest days for the job market are almost certainly still ahead. With spending weak and credit markets stalled, experts think the economy will probably shed a total of 2.4 million jobs this year. That would mean an unemployment rate above 9 percent.That would easily surpass the 2001 and 1990-91 recessions but trail the 10.8 percent rate of December 1982. Those expectations could be optimistic :The government's "stress tests" to check the strength of banks' balance sheets assume a 10.3 percent rate.The jobmarket will probably be weak for years, even if the economy starts to turn around next year. The unemployment rate may not fall back to its pre-recession level of 5 percent until 2013, according to Moody's Economy.com.

WHERE'STHE BOTTOM?
Economist Sophia Koropeckyj, a managing director atMoody's Economy.com, is keeping an eye out for two signs — an inchingup in companies hiring temporary workers and a rise in the number of hours worked by those who have managed to keep their part-time and full-time jobs.When business conditions improve, employers hire temporary workers first, she said, and a pick up in permanent hiring wouldn't be far behind. Koropeckyj estimated that could come in mid-2010.

HOUSING HOW BAD IS IT?
The median price of a home sold in the United States fell to $170,300 in January, down 26 percent from a year and a half earlier,according to the National Association of Realtors. But that figure masks the complexity of the market. Price drops have been far steeper around Phoenix and Las Vegas, where new homes sprouted every where during the housing boom, than, say, in Detroit, where economic problems predate the recession. And even within a single metro area, price declines vary sharply. Far away sub urbs, where many buyers stretched to qualify for mortgages, havebeen hit harder than city centers.

This housing crash has spread pain more widely than any before it. Home prices fell about 30 percent during the Great Depression, according to calculations by Yale University economist Robert Shiller. But the nation was less concentrated in urban centers then. And a much smaller proportion of adults owned homes.Other housing down turns in recent decades have been regional. This one is truly national. Prices in the fourth quarter of 2008 fell in nearly 90 percent of the top 150 metro areas, according to the Realtors group.And 5.4 million home owners, about 12 percent, were in foreclosure or behind on mortgage payments at the end of last year.

HOW MUCH WORSE COULD IT GET?
The Federal Reserve estimates home prices could fall 18 to 29 percent more by the end of 2010.Declines will probably be less severe in cities with healthier economies that don't have a glut of unsold homes, like Tulsa, Okla.,and Wichita, Kan.The nation's overall economic health is vital to the health ofhousing. "History tells us that as long as we're losing jobs, that'snot good news for the housing market," said Nicolas Retsinas, directorof Harvard University's Joint Center for Housing Studies.

WHERE'S THE BOTTOM?
Susan Wachter, a professor of real estate at the University of Pennsylvania, is watching the backlog of unsoldhomes. At January's sales pace, it would take about 9 1/2 months to rid the market of all those properties. A more normal pace would be sixmonths.Once foreclosures level off and the backlog is cleared, Wachter says, the housing market can begin to recover. But even with the Obama administration directing $75 billion in bailout money to stave off foreclosures, most economists don't expect home prices to bottom outbefore the first quarter of 2010. And don't expect an explosiverebound: Price increases will probably be modest when they come.

STOCKSHOW BAD IS IT?
The Dow Jones industrial average and the Standard & Poor's 500 index have lost more than half their value since the stock market peaked in October 2007. It's the worstbear market since the after math of the crash of 1929, when the Dowplunged 89 percent and the S&P 500 index tumbled 86 percent.

HOW MUCH WORSE COULD IT GET?
Analysts generally think Wall Street has endured the worst of the bear market. But many of those same analysts never thought the market would fall this far.Jack Ablin, chief investment officer at Harris Private Bank in Chicago,said the Dow could fall to 6,000 if the economy slows much further and unemployment rises well past the current 8.1 percent. He pegs the likelihood of that at about 30 percent. Others are more pessimistic. Bill Strazzullo, chief market strategist for Bell Curve Trading,contends the Dow might fall to 5,000 and the S&P to 500.

WHEN WILL THE BOTTOM COME?
In downturns over the past 60 years, the S&P 500 has hit bottom an average of four months before a recession ended and about nine months before unemployment hit its peak.Investors will be looking for turnarounds in housing, lending and employment, plus signs that consumer spending has picked up. Then market players would be more likely to move their money from safe havens, such as gold, back into stocks.

Other investors may look to obscure indicators such as the Baltic Dry Index,which tracks the cost of shipping iron ore, grain and other materials.Rising rates can indicate demand for raw materials is increasing, which suggests a strengthening economy.But most of all, traders are waiting for a sudden spasm ofselling known as capitulation.

That wrings fearful investors out of themarket, and as they rush out, bargain-hunters rush in. Capitulation would trigger a huge plunge in prices and frenzied trading volume.Many market experts say the bottom of the stock market couldcome in the second or third quarter of this year. And the recovery,whenever it comes, could be as breathtaking as the fall: Since 1932,the S&P 500 has gained an average of 46 percent in the year afterstocks have hit a bottom.

US Bank will be survive

2009-03-08T22:31:00.000-07:00

By - Fandi Cendrawira

You asked some good questions there. To give you an awareness of how this crisis started is because of over-leverage. From fleas, dogs, people to companies in US are borrowing multiple times of their equities as collateral.

That is why overtime, companies are able to expand rapidly and generate massive profits and with people/society having too much money be able to push up share prices to epic ridiculous valuation. Thus everything is wayyy overvalued in 2007-2008. Even now at the current S&P level, company is just reasonably valued with sense with about 12-15x PER.

Would you buy something that will give you break even in over 10 years? I personally would not do so. Imagine yourself buying business or investment that give you back your total return in 12-15 years? Bah. Correct.

Stocks historically during the great depression is valued at 2-3x PER. Surprise? But of course the condition in 1928 is different from now. The world has advanced much in many terms(population, economically, standard of living, technology). People are much smarter now than last time and information from internet has dramatically shrank the world which give people edge in making timely decision or taking advantage. I do not make money by making a bet on the direction of the economy or hoping a screwed up company to overturn(This is extremely hard), but I love something that is really good, the best in it's industry, no problem with it's balance sheet, for discount sale in 20 years !!

Investment Bank in US is practically dead for now, I do not dare to touch an investment bank especially with derivatives because it is a giant ponzi scheme, nobody will be there especially in this economic climate is able to absorb the writedown/losses. I shudder at the thought of banks with derivatives product, it is what cause US financial system meltdown and AIG, Citigroup, Lehman brothers to go BUST. Retail, Commercial Banking will be the face of new US financial system. My money is on Wells Fargo. Some people like BK (Bank of New York Mellon) and USB (Us Bancorp), but I always like the cream of the good, pick the best horse and run to the finish with it.

Palm oil stockpiles may fall below 1.8m tonnes

2009-03-05T23:01:00.000-08:00

by - Kamarul Yunus

PALM oil stockpiles in Malaysia, the world's second largest grower, are expected to drop to below 1.8 million tonnes in February 2009, but palm oil prices remain stable, Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui said.

"Biologically, stockpiles of this commodity will decline in February as palm is producing less. Also, there is only 28 days in February," he told reporters after witnessing the signing of a licence and technical agreement between OCNED Water Technology Sdn Bhd and Japan's Sumitomo Heavy Industries Environment Co Ltd (SHI-EV) in Petaling Jaya yesterday.

Analysts are predicting that palm oil stockpiles may decline in February as production falls.

They said palm oil reserves may have dropped to as low as 1.7 million tonnes in February from 1.83 million tonnes in the previous month.Output will also likely fall by as much as 10 per cent from 1.3 million tonnes produced in January.

Nevertheless, planters would still gain handsome profit from the current price of RM1,800 per tonne, said Chin.

"If the current price is at RM1,800 to RM1,900 per tonne, those planters of a matured farm would still make money," he added.

IDX Technical Analysis , March 6 , 2009

2009-03-05T22:21:00.000-08:00

by - super technical analysis

IHSG.JK :
Can't break 1,302 (Whipsaw), Will consolidate at 1,270-1,300.

MEDC.JK :
Already hit our target at 2,150. Sell if tomorrow can't break 2,150.Support at 2,000.

INDF.JK :
Make a whipsaw breakout, Bullish trend. Buy if close above 880.

TLKM.JK :
Strong Stock, Bollinger band bcome narrow. Support at 6,200 andResistance at 6,550.

ANTM.JK :
Yup, Downtrend is begin. Support at 1,130. If tomorrow break 1,080,ANTM will go to 1,040 in short term. Gold price also down from record at $1,000 / Troyounce

ITMG.JK :
Correction but it doesn't mean downtrend. ITMG still uptrend. Buy ifbreak 9,850.

BLTA.JK :
Golden Cross SMA. Resistance at 500.

UNVR.JK :
Strong Buy if hit 7,850-7,900. Will up if market down, Target at8,200.

ASII.JK :
Still look uptrend, Target at 11,450 in short term and support at10,800.

BYAN.JK :
Haha, Our Stock has goes up to resistance at 1,350. Take profit ifhit 1,400 or if break 1,270.

BUMI.JK :
Can't close above 800, will test support at 730-740, Resistance at 800.

TINS.JK :
At support area, buy if hit 1,010-1,020. Oversold.

BBCA.JK :
Still look comfortable, Will test support at 2,525 tomorrow.

BMRI.JK :
Can't closed above 1,800. Will test support at 1,730-1,750.

BBRI.JK :
Can't break 4,000. Down to 3,875. Will test support at 3,800.

PTBA.JK :
Will test support at 6,950, if break will down to 6,750-6,800.

ELSA.JK :
Hmmmm, Are ELSA ready to break 143 again ?

AALI.JK :
Be careful with this stock, if break 13,200 will go to 13,500. But if break 12,450 will go to 11,850.

PGAS.JK :
Still uptrend, Buy if PGAS break and close above 1,920-1,930.

JPRS.JK :
Up with high volume, Will Test 200 in short term

Kim Eng Indonesia Equity Daily, 27 Feb 09

2009-02-26T20:45:00.000-08:00

Our Comment

Indosat announced 2008 net profit fell 7.8% YoY to Rp1 .88 trillion from Rp2.04 trillion a year earlier due mostly to losses in foreign exchange. Up to EBITDA, the result is in line with our expectation. EBITDA grew 7% YoY to Rp8,715b, while EBITDA margin shows at 50%, down from 52.9% in FY07. However, the share price has come up significantly since the end of tender offer period on 18 February 2009. We see that the stock has been oversold. At 3.8x 2010F EV/EBITDA, we see upside potentials for Indosat. Our 12-month target price is at Rp6,000 (40% potential upside), which pegs the stock at 5x 2010F EV/EBITDA. BUY.

Adhi Karya management indicated that FY08 net profit came in at Rp187b. This has included allocation for monorail project write-off amounted Rp21b. The core net profit (without one-off expense) was surprisingly well above management guidance, our expectation as well as market consensus. FY08 revenue came at Rp6.6t, also above expectations. The company currently manages four toll road projects with a total contract value of Rp2.5t. The land clearance progress of those projects has been going very well. Adhi currently have another four toll road projects totaling Rp1.7t in the pipe line, it could expect another Rp800b revenues flow from toll road projects this year. Maintain BUY, target price is Rp330 (22% potential upside).

Indonesia sold $3 billion of 5-year and 10-year dollar-denominated bonds, according to Barclays Plc, which along with UBS AG arranged the sale. It sold $1 billion of notes maturing May 2014 at a yield of 10.5% and $2 billion of debt maturing March 2019 at a yield of 11.75%. Debt fromIndonesia , which raised $4.2 billion from dollar-denominated bond sales last year, is rated BB- by Standard & Poor´s and Ba3 by Moody´s Investors Service. Both ratings are three levels below investment grade and on a par with Turkey .

The dollar-denominated bonds are part of the government fund raising to finance the budget deficit. Three days ago the government has issued first sukuk of Rp5.6t at 12%. We see that the government should issue dollar denominated debts sooner rather than later this year as so many other countries will flood the market by such issuance. Failure to raise sufficient amount of debt will put pressure on the budget and the domestic interest rates.
Katarina Setiawan

Highlights

o Adhi Karya (BUY): Better-than- expected result

o Indosat (BUY): FY08 EBITDA is in line, stock has been oversold

o Indo Tambangraya: FY08 above expectation

o Indocement (BUY): To settle of US$50m debt

o Timah : Propose to cut dividend pay out to 30%

o Inco: Propose US$0.036 DPS (yield= 20.8%)

o Indika Energy: To hold tender offer on Petrosea

o New IPO: Trikomsel Oke

o Astra Otoparts: FY08 results From our chartist desk

o IDX: Dow Jones touched 7182 two times. There is potential to go to lower level (6826). On IDX, technical rebound will continue, if 1270 level is reached today. Same direction from Bollinger band.
Today´s trading range is between 1230-1247-1270 (support) and 1302-1313-1335 (resistance) .

o INDY: Strong movement from weekly TD sequential buy set up 7th week. Our long trend line target is Rp2100. TRADING BUY

o AALI: Correction was very healthy yesterday. Daily TD sequential is still in buy set up 4th day. TRADING BUY

Technical Analysis, Studies, Indicators : Accumulation/ Distribution Line

2009-02-25T22:51:00.000-08:00

You may find the number of indicators in technical analysis to measure volume and the flow of money for an index or a particular security. The Accumulation/ Distribution Line is one of the mostpopular technical indicators to analyze volume. One of the technical analysis statements that "volume precedes price" implies that in many cases after decline and just before the reversal we may see increase in the volume (volume surge). Majority of the money flow (volume) indicators are developed to identify these volume surges in order to predict price trend reversals.

The Accumulation/ Distribution Line was developed by Marc Chaikin to measure the cumulative flow of money into and out of an index or security. The Accumulation/ Distribution Line could be compared to the OBV (On Balance Volume) which adds or subtracts volume depending on the close price. Marc Chaikin chooses different approach and instead of relying on the close price he used CLV (Close Location Value) that is calculated by the following formula:

CLV = (Close - Low) - (High -Close)
------------ --------- --------- --------- --------- --------- -
(High - Low)

or

CLV = 2 * Close - Low - High
------------ --------- --------- --------- --------- --------- -
High - Low

Basically the CLV formula defines where the close is in relation to the high and low:

If close = High (the bar close price is at the bar's high) then CLV = 1. The CLV = 1 reveals that the price advanced and it is at it's highest point;

If close = Low (the bar close price is at the bar's high) then CLV = -1 which reveals that the price declined and it is at it's lowest point;

When CLV = o , it tells us that we had price decline and price advance within the analyzed period, yet, at the end the price stuck in the middle: close = Low + (High - Low) / 2 or close = High - (High - Low) / 2;

The positive CLV shows that the price is closer to its High;

The negative CLV shows that the price is closer to its Low.

After defining CLV its value is multiplied by volume in the analyzed period and the cumulative total forms the Accumulation/ Distribution Line. Opposite to the OBV the Accumulation/ Distribution Line is considered more accurate.

For instance: the OBV will consider volume as positive money flow when price opens with swing up and then declines during the whole analyzed period, yet closes above the previous period close (thebar is up in relation to the previous bar close, yet it declined during the whole period). Because of the price decline during the analyzed period the Accumulation/ Distribution line in this example will consider volume as negative money flow. This situation could be very often seen on intraday charts at the market open.

The OBV is still a very accurate indicator on the daily chart, yet, on the intraday level the Accumulation/ Distribution line is considered as more precisely reflecting in and out money flow.The Accumulation/ Distribution Line could be used in similar to the OBV way: as confirmation indicator and to predict trend reversal.

If the Accumulation/ Distribution Line moves up and the price MA (Moving Average) rising then technical analysis tells that this indicator confirms the up-trend. When Accumulation/ Distribution Line declines during the price slide it confirms a down-trend. The divergence of the Accumulation/ Distribution Line movement and price trend could be used to anticipate possible changes in the market trend.

The declining Accumulation/ Distribution Line during the price advance may indicate possible developing of a new down-trend, while advancing Accumulation/ Distribution Line during the price decline could indicate a possibility of begging a new up-trend.Chart 1: S&P 500 index - Accumulation/ Distribution Line The same as with other volume based indicators the Accumulation/ Distribution Line provides best results when it is applied to analyze indexes (Nasdaq 100, S&P 500, DJI, NYSE and other).

The index analysis could be used to trade index derivatives, such as QQQQ, DIA and SPY, options on indexes, index e-mini futures, options on index derivatives as well as it could be used to trade stocks from the index basket that move along with their index.

Kim Eng Indonesia Equity Daily, 26 Feb 09

2009-02-25T20:44:00.000-08:00

Our Comment

Astra Agro posted net profit of Rp2.631b or up 33% YoY, driven by higher CPO price and gain from sale of its estates. In 4Q08 Astra Agro posted Rp1465b revenue and net profit of Rp502b, which at the surface looks like a strong figure. However, taking a closer look, the company booked Rp403b gain on sale of its estate in Kalimantan and forex gain of Rp78.3b in 4Q08. If we strip-off this one time gain (Rp336b after tax), we come up with net earnings of Rp2295b in FY08. Then, Astra Agro only posted net profit of Rp166b in 4Q08, or only 7.2% of total FY08 normalized profit. This certainly is below our expectation. We maintain SELL on the counter. Budget committee of the parliament approved stimulus package proposed by the government. The amount of stimulus is Rp73.3t, consisting of Rp56.3t fiscal stimulus and Rp17t government spending.

Budget for government spending was increased by Rp2t from Rp15t previously. The increase goes to spending for infrastructure, which becomes Rp12.2t from Rp10.2t. The government expects the spending for infrastructure to be absorbed starting March. The increased government spending is positive. Major beneficiary is Wijaya Karya. The company has healthy order book, diverse portfolio and is in net cash position which puts it in a better position to finance projects. Growth will also be supported from non-construction business line (building material, manufacturing of gas tanks and water heater, etc.) BUY, TP is Rp280 (27% potential upside), which pegs the stock at 10.4x 2009F PER.

Katarina Setiawan

Highlights

· Astra Agro Lestari (SELL): FY08 result below expectation

· Indotambang Raya: Obtains exploration license in protected forest

· Shipping: Banks are yet to lend aggressively

· Astra Graphia: FY08 results From our chartist desk

· IDX: Dow Jones closed at resistance level of trend line, and TD sequential sell countdown. It´s time to accumulate for IDX, still attractive with lower line of Bollinger band 20 day. Technical rebound will continue, with new target 1319. Today´s trading range is between 1230-1247-1270 (support) and 1311-1323-1334 (resistance)

. PTBA: Technical rebound will continue, referring to middle line of Bollinger band 20 day. Maintain target at Rp7900. TRADING BUY

Fibonacci Price Extension Levels

2009-02-22T21:03:00.000-08:00

by - Bill Poulos

In an uptrend, the general idea is to take profits on a long trade at a Fibonacci Price Extension Resistance Level. The Price Extension Levels can be applied to the price bar chart of any market by clicking on a significant Swing Low and dragging the cursor to the most recent Swing High. Then by clicking on the Swing High and back down to the retracement Swing Low and clicking there. This will display each of the Extension Levels showing both the ratio and corresponding price level. Let’s take a look at some examples of markets in an uptrend. The same points made by these examples are equally applicable to markets in a downtrend.

Example 5:
Here we plotted the Fibonacci Price Extension Levels by clicking on the Swing Low at about $38.20 and dragged the cursor to the Swing High at about $47.67 and then down to the retracement Swing Low. You can see the resultant levels plotted by the software. Now the expectation is that if the market continues higher it will find resistance at one of the Fibonacci Levels, because traders will be placing sell orders at these levels to take profits on there long trades.

Example 5.1:
Now let’s look at what actually happened after the retracement Swing Low occurred. The market rallied making new highs pausing at the 0.382 level and again at the 1.000 level after a retracement down it rallied again going right through the 1.382 and 1.618 levels. Taking profits at the 0.382 level would have been premature, but taking profits at the 1.000 level would have made a nice trade.

Example 6:
Again, the Fibonacci Price Extension Levels were plotted on the chart in the same manner as described in Example 5. Again, we are looking for the market to continue higher before finding resistance at the Fibonacci Levels.

Example 6.1:
Now let’s look at what actually happened. The market rallied, making new highs and pausing between the 0.382 level and the 0.618 level, and then continued higher. This up move could well continue up to at least the 1.000 level. Taking profits at the 0.382 level would have been premature and only time will tell if taking profits at the 0.618 level was the optimal place to exit the long trade.

Example 7:
Here’s another example. Will the market continue higher to one of the Fibonacci Price Extension Levels?

Example 7.1:
Well in this case the market found resistance at the 0.382 level which would have been the place to take profits on any long trades.

Example 8:
Here’s one more example.

Example 8.1:
Like the last example, the market found resistance at the 0.382 level which would have been the place to take profits on any long trades.

You can see from these examples that the market often finds at least temporary resistance at the Fibonacci Extension Levels - not always, but often. As in the examples of the Retracement Levels, it should be apparent that there are a few problems to deal with here as well. First, there is no way of knowing which level will provide resistance. The 0.382 level was a good level to cover any long trades in two of the examples, but in the other examples taking profits at that level would have been premature. Another problem is determining which Swing

Low to start from in creating the Fibonacci Extension Levels. One way is from the last Swing Low as we did in the examples; another is from the lowest Swing Low of the past 30 days. Again, the point is that there is no one right way to do it, and consequently it becomes a guessing game.
Alone, Fibonacci Levels will not make you rich. However, Fibonacci Levels are definitely useful as part of an effective trading method that includes other analysis and techniques. You see, the key to an effective trading system is to integrate a few indicators (not too many) that are applied in a way that is not obvious to most observers. All successful traders know it’s how you use and integrate the indicators (including Fibonacci) that makes the difference. The lesson learned here is that Fibonacci Levels can be a useful tool, but never enter or exit a trade based on Fibonacci Levels alone.

Good Trading,

Kim Eng Indonesia Equity Daily, 23 Feb 09

2009-02-22T20:43:00.000-08:00

Our Comment During a meeting of finance ministers in Phuket (Thailand), Japan, China, South Korea and 10 south east Asian nations (ASEAN +3) agreed to pool US$120b funds to prevent extreme currency depreciation and strengthen net reserve.

The above amount is 50% higher than that agreed on Chiang Mai Initiative in May 2008. The funds can be withdrawn by member countries through currency swap mechanism. Details will be further discussed in Bali in May 2009. Around 80% of the pooled funds is contributed by China , the remaining 20% is generated by other members. For Indonesia , available funds will be US$13.7b, up from US$8b previously. The above is positive for Indonesia and the region as it provides additional funds to prevent currency shock like the one in 1997-98 Asian crisis. Inco Reported lower-than expected net profit in 4Q08 on lower nickel prices and high energy prices. It booked net loss of US$9.8m in 4Q08 vs. net profit of US$200m in 4Q07. The net profit was well below our expectation, as well as market consensus, mainly due to lower nickel prices and high energy prices. Meanwhile, sales were in line with our estimates. The company recorded loss (other expenses) of US$18m in 4Q08. We reckon that aside from that loss, operationally Inco was still profitable in 4Q08. We reiterate our SELL recommendation on Inco. Our TP is Rp1,100. Bumi Resources Is considering holding an EGM to seek shareholders approval on acquisitions of 3 companies: Darma Henwa, Fajar Bumi Sakti, and Pendopo Energi Batubara. Previously, Chairman of Bapepam indicated that the transactions bear conflict of interests. The capital market regulatory body also plans to appoint a new appraiser to value the transactions. (by Katarina Setiawan)

Highlights
o Inco (SELL): Posted net loss of US$9.8m in 4Q08
o Bumi Resources: To hold EGM
o Truba Alam: Aims to book Rp2.5-2.7t revenue
o Bank Permata: FY08 results From our chartist desk

o IDX: Regional markets are in negative territory, in line with weakening Rupiah. Low target on IDX chart are 1230 and 1247, referring to Fibonacci retracement level 61,8% and 50%. But, Bollinger band 20 day in oversold zone. Today´s trading range is between 1230-1247-1270 (support) and 1314-1332-1361 (resistance) .

o UNVR: Minor correction will be healthy, with strong support level Rp7900, according to gap candlestick. BUY ON WEAKNESS

o LTLS: Daily TD sequential buy set up 6th day with strong buying volume. We set target price at Rp750. TRADING BUY

Fibonacci Retracement Levels

2009-02-22T04:54:00.000-08:00

In an uptrend, the general idea is to go long the market on a retracement to a Fibonacci support level. The price retracement levels can be applied to the price bar chart of any market by clicking on a significant Swing Low and dragging the cursor to the most recent potential Swing High and clicking there. This will display each of the Retracement Levels showing both the ratio and corresponding price level. Let’s take a look at some examples of markets in an uptrend. The same points made by these examples are equally applicable to markets in a downtrend.

Example 1:

Here we plotted the Fibonacci Retracement Levels by clicking on the Swing Low at about $71.31 and dragging the cursor to the Swing High at about $89.83. You can see the resultant levels plotted by the software. Now the expectation is that if the market retraces from this high it will find support at one of the Fibonacci Levels, because traders will be placing buy orders at these levels as the market pulls back.

Example 1.1:

Now let’s look at what actually happened after the Swing High occurred. The market pulled back right through the 0.236 level and continued the next day through the 0.382 level before finding support. After a few days, the market resumed its upward move. Clearly buying at the 0.382 level would have been a good short term trade.

Example 2:

Again, the Fibonacci Retracement Levels were plotted on the chart in the same manner as described in Example 1. Again, we are looking for the market to retrace from the Swing High and find support at one of the Fibonacci levels.

Example 2.1:

Now let’s look at what actually happened. The market again pulled back right through the 0.236 level and continued to pull back until it found temporary support at the 0.50 level (a lot of buyers at this level). However, once the buying power was exhausted, the market continued to retrace all the way down to the 0.764 level before resuming its upward trend. In this case, buying at the 0.764 level would have been a good short term trade.

Example 3:

Here’s another example. If the market retraces from the Swing High, where will it find support?

Example 3.1:

Well, in this case the market found support at the 0.50 level. Buying at this level would have been a great trade as the market gapped up a few days later.

Example 4:

Here’s one more example.

Example 4.1:

Whoops! The market gapped down through all levels of support and never looked back. A long trade here would have been a loser or at least an open lose position.

You can see from these examples that the market often finds at least temporary support at the Fibonacci Retracement Levels – not always, but often. It should be apparent that there are a few problems to deal with here. First, there is no way of knowing which level will provide support. The 0.236 level seems to provide the weakest support, while the other levels provide support with approximately the same frequency. Second, the market will not always resume its uptrend after finding temporary support, but instead continue to decline below the last Swing Low.

Thirdly, placement of stops is a challenge – it is probably best to place stops below the last Swing Low, but this requires accepting a high level of risk in proportion to the likely profit potential in the trade. Another problem is determining which Swing Low to start from in creating the Fibonacci Retracement Levels. One way is from the last Swing Low as we did in the examples. Another is from the lowest Swing Low of the past 30 days. The point is, there is no one right way to do it, and consequently it becomes a guessing game.

The Truth About FIBONACCI TRADING

2009-02-19T22:53:00.000-08:00

By - Bill Poulos

The truth about Fibonacci levels is that they are useful (like all trading indicators). They do not work as a standalone system of trading and they are certainly not the "holy grail", but can be a very effective component of your trading strategy.

But who is Fibonacci and how can he help you with your trading?

Leonardo Fibonacci was a great Italian mathematician who lived in the thirteenth century who first observed certain ratios of a number series that are regarded as describing the natural proportions of things in the universe, including price data. The ratios arise from the following number series: 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144 ……

This series of numbers is derived by starting with 1 followed by 2 and then adding 1 + 2 to get 3, the third number. Then, adding 2 + 3 to get 5, the fourth number, and so on.

The ratios are derived by dividing any number in the series by the next higher number, after 3 the ratio is always 0.625. After 89, it is always 0.618. If you divide any Fibonacci number by the preceding number, after 2 the number is always 1.6 and after 144 the number is always 1.618. These ratios are referred to as the "golden mean." Additional ratios were then derived to create ratio sets as follows:

Price Retracement Levels
0.236, 0.382, 0.500, 0.618, 0.764

Price Extensions Levels
0, 0.382, 0.618, 1.000, 1.382, 1.618

The first set of ratios is used as price retracement levels and is used in trading as possible support and resistance levels. The reason we have this expectation is that traders all over the world are watching these levels and placing buy and sell orders at these levels which becomes a self-fulfilling expectation.

The second set is used as price extension levels and is used in trading as possible profit taking levels. Again, traders all over the world are watching these levels and placing buy and sell orders to take profits at these levels which becomes a self-fulfilling expectation.

Most good trading software packages include both Fibonacci Retracement Levels and Price Extension Levels. In order to apply Fibonacci levels to price charts, it is necessary to identify Swing Highs and Swing Lows. A Swing High is a short term high bar with at least two lower highs on both the left and right of the high bar. A Swing Low is a short term low bar with at least two higher lows on both the left and right of the low bar.

To Be Continue...

Soros remarks depress euro ?

2009-02-04T02:08:00.000-08:00

The euro fell sharply after investor George Soros was quoted as saying that the shared currency may not survive unless the European Union presses for an international agreement on dealing with soured assets."One would need a type of agreement on lost capital, so that the burden is shared, and in which every country is part of, otherwise more countries will suffer," Mr. Soros said in an interview with Austria's Der Standard newspaper. "The EU should do this. If they don't do this then the euro may not survive the crisis."Reports that Jean-Claude Trichet, the president of the European Central Bank, said policy makers could lower the euro zone's benchmark interest rate, added to the pressure on the shared currency.The yen and the dollar gained as losses in stocks and gloomy reports about U.S. employment and orders for durable goods made investors more hesitant to take on risk. The yen and the dollar have tended to rise in recent months when the economic picture appeared to deteriorate, losing ground when upbeat news prompted investors to seek higher-yielding investments denominated in other currencies

Kim Eng Indonesia Equity Daily, 4 Feb 09

2009-02-04T01:46:00.000-08:00

Our Comment We met Bukit Asam yesterday and believe that outlook for the company in 2009 remains attractive. The company indicated net profit in FY08 to come in at Rp1.8t, in line with our expectation, on the back of Rp7.2t revenue. For 2009, it expects sales volume growth of 17% to 15m tons and production to grow by 16% to 12.5m tons, thanks to recent acquisition on coal company inKalimantan and improved railway transportation.

Bukit Asam aims to book revenue at Rp10-11t in 2009, or 39-53% higher than that in 2008. It remains optimistic with its new contract price of Rp884k/ton with Suralaya power plant, its biggest customer. We recommend BUY on the counter with target price Rp8500.

Media reported the Bakrie group has difficulties to meet payments of its repo obligation. Bakrie Capital Indonesia, an investment vehicle owned by Bakrie family, has failed to pay Rp700b debt on time, while Bakrie & Brothers has failed to pay Rp83b last month.

Bank of Indonesia will meet today to discuss BI rate. The consensus expects 50bps cut to 8.25%.

Ricardo Silaen

Weaker dollar to boost export earnings

2009-01-26T21:55:00.000-08:00

SINGAPORE — Singapore’s economy shrank the most on record in the last quarter of 2008 and the government forecast a 5% contraction this year and a possible fall in consumer prices, which may prompt a one-off currency devaluation.
A government declaration that the economy was suffering its worst ever recession and official forecasts of a continued slump suggested to analysts the central bank could push down the center of the trading band for the Singapore dollar, effectively devaluing it to help the key export sector.
The grim figures, largely a reflection of Singapore’s exposure to the slump in global trade, also pave the way for an expansionary budget on Thursday as the government scrambles to shelter the economy from the worst global financial crisis in decades.
"The Singapore economy is going through its sharpest, deepest and most protracted recession," the Trade Ministry’s Second Permanent Secretary Ravi Menon told journalists. http://www.bworldon line.com/ BW012209/ content.php? id=022 http://biz.thestar. com.my/news/ story.asp? file=/2009/ 1/22/business/ 3082802&sec=business

2009: A Much Better Year

2009-01-10T20:34:00.000-08:00

Jeremy Siegel, Ph.D. The Future for Investors2009: A Much Better Yearby Jeremy Siegel, Ph.D.

Ouch!! That's how I felt when I read my stock market prediction for 2008. Not only did I think that the market would do well last year, but I thought financial stocks would lead the way. Instead, 2008 turned into the worst year for the markets since the Great Depression, and financial stocks led the way down, not up.I did hit one nail right on the head. I warned that a major risk to my forecast was the price of oil, stating, "If oil surges past $100 a barrel, we will be in trouble. Three dollar gasoline did not prove to be the tipping point for the consumer in 2007. But with a weak housing market, I believe $4 gasoline would do considerable damage to consumers' pocketbooks in 2008. And $4 gas would happen if oil rose to $120 a barrel or higher." Indeed, oil soared past $147 a barrel and gas topped $4 a gallon in July, greatly accelerating the economic downturn. But I certainly didn't predict the depth of the subprime crisis. It is important to explain why I, like so many others, didn't believe the downturn in real estate would tank our major financial institutions -- and why this has relevance for the 2009 forecast.

The Path to the Crisis.

I certainly recognized that there was a bubble in real estate prices. And, yes, a good part of the increase in consumer spending over the past few years was fueled by easy borrowing against rising real estate prices. But if that was all there was, the popping of the real estate bubble would have caused, at most, a mild recession. What has made this slowdown particularly severe was the fact that these mortgages and mortgage-related securities were concentrated in investment and commercial banks. Banking firms leveraged these securities so highly that, when prices fell, their capital bases were decimated.I had wrongly assumed, as did Alan Greenspan and most regulators, that mortgage-related securities were widely distributed and diversified in portfolios throughout the world. The total value of subprime and Alt-A (slightly better) mortgages was about $3 trillion. This is a hefty sum, but even if all these securities went to zero, the capital markets could have absorbed such losses without undue economic stress. The popping of the Internet bubble in 2000 dropped the value of US equity markets by over $7 trillion, but even this decline caused only an extremely mild recession.

It Could Have Been AvoidedIronically, Wall Street firms could have easily taken measures to insulate themselves from this crisis. Think of the Internet craze of the late 1990s. Wall Street made a nifty bundle by selling new stock in Internet companies. But, by and large, they did not hold these stocks. "Take the Profit and Run" was the strategy, as Wall Street sold them before their prices tanked, letting investors absorb the losses.But Wall Street wasn't nearly as smart this time. After making a bundle by writing and securitizing these subprime loans, it held on to most of them, believing that it was getting a generous return for little, if any, risk. Greenspan said in Congressional testimony that he assumed Wall Street shed these risks by entering into credit default swaps and other risk-reducing arrangements. But he was wrong: He never examined the banks' balance sheets. If he had, he could have sounded the alarm. When the housing market turned, Wall Street firms were still holding on to these securities, believing that their prices had fallen too much to justify selling. By the time they realized how bad the situation was, it was too late. As prices fell, their losses overwhelmed their capital and the firms descended into bankruptcy.Economists will long debate whether the Fed should have bailed out Lehman Brothers. But after the firm failed in September, the credit markets panicked. Lending by the banks froze, and millions of borrowers either had their loans called or were under threat of such an action. Risk premiums soared to levels not seen since the Great Depression, and the economy went into a freefall.

Credit Crisis Aftermath.

There is no denying the severity of the current global economic downturn. Lax lending, inflated real estate prices, and, most important, expectations that the rapid economic growth of the past few years would continue far into the future led to over-lending and over-investment, and weakened banks' balance sheets.Although current economic indicators are bleak, there has been some improvement. Stocks are about 20 percent off their lows, and risk spreads have declined. The spread between the Libor rate, an all-important borrowing benchmark, and the Fed funds rate is down 122 basis points. Although this is considerably higher than before the Lehman demise, it is down significantly from the 364-point spread at the peak of the crisis last October.The financial crisis has been met by a massive governmental response. The Fed has de facto insured all deposits and money market funds and much interbank lending. Interest rates are at or near their lowest in history. Freddie Mac's 30-year conforming mortgage rate has recently dropped to near 5 percent, the lowest in the nearly 40-year history of these rates. On the fiscal side, the Obama Administration is preparing a massive stimulus that will likely produce not only new spending programs but also another tax rebate. The steep decline in energy prices is another important positive for the economy. As I wrote last summer, the doubling in oil prices from $65 a barrel to $130 shaved two percentage points off GDP growth. That means the fall to $40-$50 has not only reversed that drag but will probably boost real income and output.

Forecast.

All of this means that, although the first quarter of 2009 will see negative growth, GDP should stabilize in the second quarter, earlier than most economists now anticipate. In real terms, housing prices have already retraced most of their gains from 2000, and by midyear prices should stabilize in this low-interest- rate environment. Year-over-year inflation should sink to zero, especially in the first half of 2009. This year, as the economic slide abates and investors realize a catastrophe has been avoided, stock prices should enjoy a 20 percent or higher return. All equity sectors should recover. The financial stocks will still be burdened by bad loans and government obligations. Nevertheless, new lending will prove extremely profitable to the banks whose cost of funds is now essentially zero. The Fed might find that it will be forced to raise rates during the summer, earlier than planned. And I believe long-term Treasuries are in a giant bubble and their prices will fall to earth once the economy improves. Final WordAll of this doesn't mean there are no risks to stocks. The Fed must do more to encourage banks to lend to credit-worthy, non-delinquent customers. And the Obama administration must carefully structure its recovery plan so as not to bail out those that have been profligate and penalize those who have been thrifty. Still, just as 2008 disappointed us on the downside, 2009 might surprise with better numbers than most are expecting.

Buy American. I Am By Warren E. Buffett

2008-11-04T21:51:00.000-08:00

The financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be
scary.

So ... I've been buying American stocks. This is my personal account I'm talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy. ) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are
right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation's many sound companies make no sense. These businesses will
indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from
now.

Let me be clear on one point: I can't predict the short-term movements of the stock market. I haven't the faintest idea as to whether stocks will be higher or lower a month - or a year - from now. What is likely, however, is that the market will move higher, perhaps substantially so,
well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932 . Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In
short, bad news is an investor's best friend. It lets you buy a slice of America's future at a marked-down price.

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to
11,497.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Today people who hold cash equivalents feel comfortable. They shouldn't. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis
will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In
waiting for the comfort of good news, they are ignoring Wayne Gretzky's advice: "I skate to where the puck is going to be, not to where it has been."

I don't like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I'll follow the lead of a restaurant that opened in an empty bank building and then advertised: "Put your mouth where your money was."
Today my money and my mouth both say equities.

A version of this article appeared in print on October 17, 2008, on page A33 of the New York edition.

By Rita Pardede

StockCharts : The Three Stages of Primary Bull Markets and Bear Markets

2008-08-26T06:44:00.000-07:00

Bull Markets

Primary Bull Market - Stage 1 - Accumulation
In the first stage of a bull market, stocks begin to find a bottom andquietly firm up. When the market starts to rise, there is widespreaddisbelief that a bull market has begun.

Primary Bull Market - Stage 2 - Big Move
The second stage of a primary bull market is usually the longest, andsees the largest advance in prices. It is a period marked by improvingbusiness conditions and increased valuations in stocks. Earnings beginto rise again and confidence starts to mend. This is considered theeasiest stage to make money as participation is broad and the trendfollowers begin to participate.

Primary Bull Market - Stage 3 - Excess
The third stage of a primary bull market is marked by excessivespeculation and the appearance of inflationary pressures.

Bear Markets

Primary Bear Market - Stage 1 - Distribution
Just as accumulation is the hallmark of the first stage of a primarybull market, distribution marks the beginning of a bear market. As the"smart money" begins to realize that business conditions are not quiteas good as once thought, they start to sell stocks. The public isstill involved in the market at this stage and become willing buyers.There is little in the headlines to indicate a bear market is at handand general business conditions remain good. However, stocks begin tolose a bit of their luster and the decline begins to take hold.

Primary Bear Market - Stage 2 - Big Move
As with the primary bull market, stage two of a primary bear marketprovides the largest move. This is when the trend has been identifiedas down and business conditions begin to deteriorate. Earningsestimates are reduced, shortfalls occur, profit margins shrink andrevenues fall. As business conditions worsen, the sell-off continues.

Primary Bear Market - Stage 3 - Despair
At the top of a primary bull market, hope springs eternal and excessis the order of the day. By the final stage of a bear market, all hopeis lost and stocks are frowned upon. Valuations are low, but theselling continues as participants seek to sell no matter what. Thenews from corporate America is bad, the economic outlook bleak and nota buyer is to be found. The market will continue to decline until allthe bad news is fully priced into stocks.

Once stocks fully reflectthe worst possible outcome, the cycle begins again.

http://edwinkdrtrad ingstyle. blogspot. com/2008/ 01/stockcharts- three-stages- of-primary. html

Fun trading for Fund Cuan

2008-08-24T07:06:00.000-07:00

Russia Values Oil More Than WarMoscow obviously did not want to cause any additional anxiety amongEuropean consumers. Nor did it want to deal Tbilisi any unnecessarytrump cards for its blame game. From what is possible to deduce fromscarce information provided by official sources, Russia's restraint intargeting Georgia's highly vulnerable energy infrastructure wasconfirmed...Kazakhstan considers to divert oil export route from BTC to RussiaA high level Kazakh official told Turkish business daily Referans thatquestion marks now hang over the security of the BTC pipeline. "Wecould reconsider our decisions on sending Kazak oil to the worldmarket. Changing the (export) route is in our agenda now," the officialwas quoted as saying by Referans.Russia and Iran: crisis of the west, rise of the restBut it is in more than the military sphere that the image of aresurgent and powerful Russia is less grounded in reality than itsprojectors often allow. Russia's economic performance is crucially (anddysfunctionally in the longer run) dependent on its energy resources,and there is a critical need for heavy investment in the oil-and-gassector if current revenues are even to be maintained. The country alsohas great social problems (which are felt inside the military and havethe potential to damage its standards and performance) : among them adeclining and aging population, rampant alcoholism, and low malelife-expectancy for men (see Rebecca Kay, "'Being a man' incontemporary Russia", 7 March 2008). These factors must be part of anoverall judgment of the true face of Russian power today; and takentogether they suggest that Russia has far less capacity to undertake aunilateral drive to restore its great-power status than it might appear.Gazprom Falls as Analysts `Shocked' by Spending PlanWilliam Mauldin and Greg Walters, Bloomberg

OAO Gazprom,the world's biggest natural-gas producer, fell in Moscow trading afteranalysts said they were ``shocked'' by the company's plans to raise itsinvestment budget to more than $40 billion this year. ... Russia's natural-gas exporter may raise its investment budgetfor 2008 by about 25 percent, Interfax reported yesterday, citingDeputy Chief Executive Officer Valery Golubev. Gazprom last monthalready increased the budget for 2008 by 16 percent to a record 822billion rubles ($33.8 billion).

Asian Stocks Climb, Led by Commodity Producers; BHP Advances

2008-07-30T23:27:00.000-07:00

By Chua Kong Ho

July 31 (Bloomberg) -- Asian stocks rose for a second day, led by commodity producers after oil climbed more than $4 a barrel and prices of metals advanced.BHP Billiton Ltd., the world's largest mining company, and Woodside Petroleum Ltd., Australia's second-biggest oil producer, led gains. NTT DoCoMo Inc., Japan's No. 1 mobile-phone operator, advanced after saying first-quarter profit rose 41 percent.

NEC Electronics Corp., Japan's third-biggest chipmaker, climbed to a six-week high after swinging to a first-quarter operating profit.The MSCI Asia Pacific Index gained 0.6 percent to 132.88 as of 9:09 a.m. in Tokyo. About six stocks rose for each that declined. All 10 of the index's industry groups advanced, with raw-materials producers posting the biggest gain.Japan's Nikkei 225 Stock Average added 0.6 percent to 13,448.51.

Australia's S&P/ASX 200 Index rose 1.5 percent, and South Korea's Kospi Index gained 1.1 percent.In the U.S., the Standard & Poor's 500 Index rose 1.7 percent, led by the biggest gain in energy shares in six years as oil prices increased and a private report showed an unexpected rise in jobs.Crude oil rose $4.58, or 3.8 percent, to $126.77 a barrel yesterday, the highest close since July 22, after a U.S. Energy Department report showed gasoline inventories declined for the first time in five weeks.A measure of six metals traded on the London Metal Exchange advanced 0.8 percent. Copper rose 1.3 percent and nickel 3.9 percent.To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg. net

Understanding Risk

2008-07-26T01:14:00.000-07:00

Risk and Reward are Part of Investing
By Ken Little

“No pain, no gain.” How many times have you heard that cliché to describe something you really didn’t want to do? Unfortunately, investing carries a certain amount of risk and with that risk can come some pain, but also some gain.
You must weigh the potential reward against the risk of an investment to decide if the “pain is worth the potential gain.” Understanding the relationship between risk and reward is a key piece in building your personal investment philosophy.

Carry Risk

All investments carry some degree of risk. The rule of thumb is “the higher the risk, the higher the potential return,” but you need to consider an addition to the rule so that it states the relationship more clearly: “the higher the risk, the higher the potential return, and the less likely it will achieve the higher return.”
To understand this relationship completely, you must know where your comfort level is and be able to correctly gauge the relative risk of a particular stock or other investment.

Will I Lose Money?

Most people think of investment risk in one way: “How likely am I to lose money?” This statement describes only part of the picture, however. You should consider that risk and others when evaluating an investment:
Are my investments going to lose money? (Is safety of principal more important than growth?)
Will I achieve my investment goal? (Under-funding retirement, for example.)
Am I will to accept more risk to achieve higher returns? (Are my investments going to keep me awake at night with worry?)
Let’s look at these concerns about risk.

Am I Going to Lose Money?
The most common type of risk is the danger your investment will lose money. You can make investments that guarantee you won’t lose money, but you will give up most of the opportunity to earn a return in exchange.
For example, U.S. Treasury bonds and bills carry the full faith and credit of the United States behind them, which makes these issues the safest in the world. Bank certificates of deposit (CDs) with a federally insured bank are also very secure.
However, the price for this safety is a very low return on your investment. When you calculate the effects of inflation on your investment and the taxes you pay on the earnings, your investment may return very little in real growth.

Will I Achieve My Financial Goals?
The elements that determine whether you achieve your investment goals are:

Amount invested
Length of time invested
Rate of return or growth
Less fees, taxes, inflation, etc.

If you can’t accept much risk in your investments, then you will earn a lower return as noted in the previous section. To compensate for the lower anticipated return, you must increase the amount invested and the length of time invested.
Many investors find that a modest amount of risk in their portfolio is an acceptable way to increase the potential of achieving their financial goals. By diversifying their portfolio with investments of various degrees of risk, they hope to take advantage of a rising market and protect themselves from dramatic losses in a down market.

Am I Willing to Accept Higher Risk?
Every investor needs to find his or her comfort level with risk and construct an investment strategy around that level. A portfolio that carries a significant degree of risk may have the potential for outstanding returns, but it also may fail dramatically.
Your comfort level with risk should pass the “good night’s sleep” test, which means you should not worry about the amount of risk in your portfolio so much as to lose sleep over it.
There is no “right or wrong” amount of risk – it is a very personal decision for each investor. However, young investors can afford higher risk than older investors can because young investors have more time to recover if disaster strikes. If you are five years away from retirement, you probably don’t want to be taking extraordinary risks with your nest egg, because you will have little time left to recover from a significant loss.
Of course, a too conservative approach may mean you don’t achieve your financial goals.

Conclusion
Investors can control some of the risk in their portfolio through the proper mix of stocks and bonds. Most experts consider a portfolio more heavily weighted toward stocks riskier than a portfolio that favors bonds.
Risk is a natural part of investing. Investors need to find their comfort level and build their portfolios and expectations accordingly.

What is Investing?

2008-07-26T00:58:00.000-07:00

How Does Investing Differ from Saving?
By Ken Little

Investing is the proactive use of your money to make more money or, to say it another way, it is your money working for you.

Investing is different from saving. Saving is a passive activity, even though it uses the same principle of compounding. Saving is more focused on safety of principal (the amount you start out with) and less concerned with return.

Your focus in investing is on return and can run the spectrum from conservative to very aggressive in terms of risk. One way you measure results is by the expected return weighed against the anticipated risks. It is easy to slip into an unnecessarily complex discussion about whether a particular financial transaction was an investment or a savings deposit. However, it is important to understand that investing has some distinctive characteristics, which separate it from pure savings. Since we are discussing stocks, I’ll limit the characteristics to that type of investment:

Ownership

Upside Potential

Risk

Each of these characteristics sets investing in stocks apart from savings in several different ways.

Ownership

When you buy stock, you are buying a piece of a company – you become a part owner. This ownership gives you certain rights, including voting on important matters before the company and participating in the profits if the company distributes dividends.
Virtually no savings instruments give you ownership. You may own a bank CD, but you don’t own part of the bank. You may own a U.S. Treasury bond, but you don’t own the government.

Upside Potential

When you own stock, you participate in the growth of the company. As the value of the company increases, so does you investment. If profits increase, you may receive bigger dividend checks. The stock price may continue to rise for a long period. Many of the early employees of Microsoft are millionaires because their stock has gone up dramatically.
If you have a bank CD that pays 3%, it is unlikely the bank’s president is going to call you one day and say, ‘we’ve had a great year, so I’m raising your interest rate to 6%.’

Risk

Along with the potential for extraordinary gain is the potential for loss. These two go hand in hand. You can lose money investing in stocks.
If the thought of losing money makes your stomach knot up, stick to savings instruments. However, you should know that even the safest savings instrument carries unseen risks. Most savings instruments trade security for return, meaning they pay very little. When you factor in inflation and taxes, many so-called safe savings instruments return almost nothing and some can actually lose ground.

The Stock Market For Beginners: 7 Starter Tips

2008-07-26T00:33:00.000-07:00

Other pages in this 'Stock Market For Beginners' section of the site look at the kinds of things that a new investor should do to help themselves. However, these were written in essay format and so for some time it has been on the 'to do list' to make a list and simplify the stock market for beginners tips.

Here we go...

1. Investing is not a hobby. To big merchant banks, it is a very competitive business. Therefore, you should also treat it as a business. That means understanding your own profit and loss as well as the companies in which investments are made.

Once this thought pattern is established, it makes the whole process so much easier. Simply ask, "Will this investment / trade / software / subscription make or lose me money?" Once an answer has been established, a clear course of action will present itself.

2. Get some great investment management software. These days, a speedy internet connection and good money management and investment software costs virtually nothing. Why spend the time and effort trying to figure out the best ways to do things when solutions already exist.

Ideally, look to purchase two types of software. One will be for personal money management. This can be used for profit and loss and keeping track of the costs of subscriptions, stockbrokers and the like. The other will be used for tracking stock and fund prices, storing company news, technical and fundamental analysis and more.

3. Get an education. Warren Buffett has suggested in the past that every investor should be able to understand basic accountancy principles, an annual report and stock market history. You probably do not need to become an accountant, but being able to understand the scoring system of the game can only help.

4. Learn about money management. Every investor will have the occassional (at best) loser and it is vital that no individual holding can wipe out a portfolio. Understanding asset allocation is vital.

Years of talking to people about investments has taught me that there are fundamental differences between the way investors behave. New investors ask for 'a tip' and want to know, "What should I buy?".

In contrast, professionals do not want tips. They have dozens of good ideas of their own. They won't be sharing those ideas with you and they will not be expecting you to share yours. Instead, they ask about how you allocate money. "Which sectors and markets do you like and why?" The difference between these approaches is like night and day.

5. Read widely. Getting a wide ranging education in personal finance, corporate finance, taxation, economics and investment theories will help. However, finding areas of the world or business in which you can become relatively expert can help in the process of finding investments.

The reality is that in the modern world - especially with the power of the internet - there is very little information that is not in the public domain somewhere. However, the world now has information overload. Whilst the information might be available, few people now have the time to find or understand it. The people who know these things and can 'join the dots' have regular opportunities for stock market investment.

Once the basics have been covered and understood, it may be that just one or two hours of reading each week will be enough to keep knowledge up to date. But keeping up to date is vital.

6. Find a good investment service to subscribe to. Many of the suggestions above can now be covered by joining just one stock market service. These services now aim to pick stocks, offer trading and portfolio management software and educational services too. If things go well, then by investing in the stock market picks, the service can be paid for with profits.

Though these services are often not 'cheap' they are generally very valuable and can help to make an investor or trader profitable whilst learning the ropes. This is a great way to learn or experience the stock market for beginners.

7. Practice makes perfect. In the investment business, paper trading is how we all start. Pick a couple of companies, make a note of their price, the date, the reason why you want to buy them and then start following the stock.

As time passes, the hunch or assessment which made the stock such a great prospect will play out. Was it a good or bad decision? Would buying the stock 'for real' have made a profit or a loss?

This is an excellent learning experience and one that is vital to the long-term profitability of anyone in the stock market. To get the real experience, purchase some graph paper and chart the stock price movements each day by hand. Learn to compare this with the overall movements of the market and a whole new world of investment and money will begin to open up to you!

Trading Basics

2008-07-23T23:00:00.000-07:00

Basic Steps in How Stock Trading Works
By Ken Little

Trading stocks. You hear that phrase all the time, although it really is wrong – you don’t trade stocks like baseball cards (I’ll trade you 100 IBMs for 100 Intels).
Trade = Buy or Sell
To “trade” means to buy and sell in the jargon of the financial markets. How a system that can accommodate one billion shares trading in a single day works is a mystery to most people. No doubt, our financial markets are marvels of technological efficiency.
Yet, they still must handle your order for 100 shares of Acme Kumquats with the same care and documentation as my order of 100,000 shares of MegaCorp.

You don’t need to know all of the technical details of how you buy and sell stocks, however it is important to have a basic understanding of how the markets work. If you want to dig deeper, there are links to articles explaining the technical side of the markets.

Two Basic Methods
There are two basic ways exchanges execute a trade:

On the exchange floor
Electronically
There is a strong push to move more trading to the networks and off the trading floors, however this push is meeting with some resistance. Most markets, most notably the NASDAQ, trade stocks electronically. The futures’ markets trade in person on the floor of several exchanges, but that’s a different topic.

Exchange floor
Trading on the floor of the New York Stock Exchange (the NYSE) is the image most people have thanks to television and the movies of how the market works. When the market is open, you see hundreds of people rushing about shouting and gesturing to one another, talking on phones, watching monitors, and entering data into terminals. It could not look any more chaotic.

Yet, at the end of the day, the markets workout all the trades and get ready for the next day. Here is a step-by-step walk through the execution of a simple trade on the NYSE.

You tell your broker to buy 100 shares of Acme Kumquats at market.
Your broker’s order department sends the order to their floor clerk on the exchange.
The floor clerk alerts one of the firm’s floor traders who finds another floor trader willing to sell 100 shares of Acme Kumquats. This is easier than is sounds, because the floor trader knows which floor traders make markets in particular stocks.
The two agree on a price and complete the deal. The notification process goes back up the line and your broker calls you back with the final price. The process may take a few minutes or longer depending on the stock and the market. A few days later, you will receive the confirmation notice in the mail.
Of course, this example was a simple trade, complex trades and large blocks of stocks involve considerable more detail.

Electronically
In this fast moving world, some are wondering how long a human-based system like the NYSE can continue to provide the level of service necessary. The NYSE handles a small percentage of its volume electronically, while the rival NASDAQ is completely electronic.
The electronic markets use vast computer networks to match buyers and sellers, rather than human brokers. While this system lacks the romantic and exciting images of the NYSE floor, it is efficient and fast. Many large institutional traders, such as pension funds, mutual funds, and so forth, prefer this method of trading.

For the individual investor, you frequently can get almost instant confirmations on your trades, if that is important to you. It also facilitates further control of online investing by putting you one step closer to the market.

You still need a broker to handle your trades – individuals don’t have access to the electronic markets. Your broker accesses the exchange network and the system finds a buyer or seller depending on your order.

ConclusionWhat does this all mean to you? If the system works, and it does most of the time, all of this will be hidden from you, however if something goes wrong it’s important to have an idea of what’s going on behind the scenes.

Nickel Gains in London as Stockpiles Decline to Eight-Month Low

2008-07-23T21:55:00.000-07:00

By Chanyaporn Chanjaroen

July 21 (Bloomberg) -- Nickel rebounded from a two-year low in London as stockpiles of the metal used in stainless steel declined to the smallest in eight months, indicating supply is slowing.
Inventories tracked by the London Metal Exchange dropped 6 percent this month to 43,728 metric tons, the lowest since Nov. 23. BHP Billiton Ltd. this month shut its Kalgoorlie refinery in Western Australia through June 2009, cutting sales of the metal by 25,000 tons, or about 57 percent of existing LME stockpiles.
``You probably started to see the impact from supply disruption in Western Australia,'' Max Layton, an analyst at Macquarie Ltd. in London, said today by phone. ``It may be short- lived and overall we see a small surplus this year.''
Nickel for delivery in three months increased $150, or 0.7 percent, to $20,550 a ton as of 4:55 p.m. London time. The contract closed July 18 at $20,400 a ton, the lowest since June 28, 2006.
The metal is headed for a second consecutive annual drop, after last year's 21 percent decline as stainless-steel mills resorted to products containing less nickel. Prices may have to fall to about $15,000 a ton to lure back consumers, Charles Cooper, an analyst at Evolution Securities Ltd., said today.
Boliden AB, the second-largest producer of zinc in Europe, said production at the Tara zinc and lead mine in Ireland will decline ``slightly'' in the next six to nine months, extending a drop from the first half.
The mine produced an equivalent of 104,019 tons of zinc metal during January to June, down 7 percent from a year ago, the Stockholm-based company said today in an earnings statement. Lead output fell 11 percent to 13,765 tons.
Mine Closures
Zinc prices have slumped 22 percent this year and lead 20 percent, making mines unprofitable. Tech Cominco Ltd., owner of the world's largest zinc mine, said July 15 it would close its Lennard Shelf Pillara mine in Western Australia next month, earlier than planned.
Lead jumped $65, or 3.3 percent, to $2,035 a ton and zinc added $20, or 1.1 percent, to $1,840.
Stockpiles of copper monitored by the exchange have increased 5 percent this month to 128,725 tons, the highest since March 12. As inventories have been held by ``only a few market participants, '' availability is limited, Norddeutsche Affinerie AG, Europe's largest copper refiner, said today in an e-mailed newsletter.
Copper for immediate delivery traded at a premium of $241 a ton above the benchmark price on July 17, the highest since August 2005 and indicating a shortage of nearby futures contracts. The spread was $234 a ton today. Borrowing fees for futures for tomorrow delivery were $35 a ton a day.
Lost Output
Aluminum Corp. of China Ltd., the nation's biggest producer of the lightweight metal, said it may lose 30,000 tons of output after it trimmed some capacity at two ventures in Shanxi province because of a power shortage.
Shanxi Huaze Aluminum & Power Co. suspended 25 percent of its 280,000-ton annual capacity as of July 18, and Shanxi Huasheng Aluminum Co. stopped 22 percent of its 220,000-ton capacity, Chalco, as the company is known, said in a statement late that day.
Aluminum stockpiles on the LME added 4,975 tons, or 0.4 percent, to 1.12 million tons, the highest since May 12, 2004. The contract rose $7 to $3,040 a ton.
Tin increased $75 to $23,500.
To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@ bloomberg. net Last Updated: July 21, 2008 12:01 EDT

Elliott Wave Theory

2008-07-16T02:16:00.000-07:00

Who Was Ralph Elliott?

Ralph Elliott had the type of career that would be astounding even today...
He is remembered as the father of The Wave Principle, now known as the Elliott Wave Principle which is a number analysis system which can be used to predict many things in life, including market movements.
Elliott was born in Kansas in 1871. In his early career he worked for around 25 years as an accountant, often in executive positions. Many of these positions were held in Central America and Mexico. He learned skills of financial management and corporate reorganisation. In 1924 he became Chief Accountant for Nicaragua.
Later in life he was struck by illness and turned his attentions to analysis of the stock market. He was completing a goal that he had expressed in a book he had written about Latin America: "There is a reason for everything, and it is [one's] duty to try to discover it."
Investigating the possibility of form in the marketplace, Elliott examined yearly, monthly, weekly, daily, hourly and half-hourly charts of the various indexes covering 75 years of stock market behavior. In 1934 his observations began to form a set of principles about wave movement and the application to stock prices.
In 1946, his finest work was published, Nature's Law - The Secret Of The Universe. The first 1000 copies sold out quickly to financial analysts and the position in history of Ralph Elliott was set. His research is now used by thousands of fund and money managers around the world to assist their decision making.
In the modern financial world, the leading interpreter of wave priciples is Robert Prechter.

Education Relative Strength Index (RSI)

2008-07-14T07:03:00.000-07:00

Introduction
Developed by J. Welles Wilder and introduced in his 1978 book, New Concepts in Technical Trading Systems, the Relative Strength Index (RSI) is an extremely useful and popular momentum oscillator. The RSI compares the magnitude of a stock's recent gains to the magnitude of its recent losses and turns that information into a number that ranges from 0 to 100. It takes a single parameter, the number of time periods to use in the calculation. In his book, Wilder recommends using 14 periods.
The RSI's full name is actually rather unfortunate as it is easily confused with other forms of Relative Strength analysis such as John Murphy's "Relative Strength" charts and IBD's "Relative Strength" rankings. Most other kinds of "Relative Strength" stuff involve using more than one stock in the calculation. Like most true indicators, the RSI only needs one stock to be computed. In order to avoid confusion, many people avoid using the RSI's full name and just call it "the RSI."
Calculation
100
RSI = 100 - --------
1 + RS

RS = Average Gain / Average Loss

Average Gain = [(previous Average Gain) x 13 + current Gain] / 14
First Average Gain = Total of Gains during past 14 periods / 14

Average Loss = [(previous Average Loss) x 13 + current Loss] / 14
First Average Loss = Total of Losses during past 14 periods / 14

Note: "Losses" are reported as positive values.

To simplify our explanation of the formula, the RSI has been broken down into its basic components which are the RS, the Average Gain, and the Average Loss.
To calculate RSI values for a given dataset, first find the magnitude of all gains and losses for the 14 periods prior to the time where you wish to start the calculation. (Note: 14 is the standard number of periods used when calculating the RSI. If a different number is specified, just substitute that number in for "14" throughout this discussion.)
It is important to understand that the RSI is a "running" calculation and the accuracy of the calculation depends on how long ago the calculations started. The first RSI value is an estimate - subsequent values improve on that estimate. You should calculate at least 14 values prior to the start of any values that you will rely on - going back 28+ periods is even better.
To start the running calculation, the First Average Gain is calculated as the total of all gains during the past 14 periods divided by 14. Similarly, the First Average Loss is calculated as the total magnitude of all losses during the past 14 periods divided by 14. The next values for the "averages" are calculated by taking the previous value, multiplying it by 13, adding in the next Gain (or Loss), and then dividing by 14. This is Wilder's modified "smoothing" technique in action.
The RS value is simply the Average Gain divided by the Average Loss for each period.
Finally, the RSI is simply the RS converted into an oscillator that goes between zero and 100 using this formula: 100 - (100 / RS + 1).
Here's an Excel Spreadsheet that shows the start of an RSI calculation in action.
When the Average Gain is greater than the Average Loss, the RSI rises because RS will be greater than 1. Conversely, when the Average Loss is greater than the Average Gain, the RSI declines because RS will be less than 1. The last part of the formula ensures that the indicator oscillates between 0 and 100. Note: If the Average Loss ever becomes zero, RSI becomes 100 by definition.

Important Note: The more data points that are used to calculate the RSI, the more accurate the results. The smoothing factor is a continuous calculation that - in theory - takes into account all of the closing values in the data set. If you start an RSI calculation in the middle of an existing data set, your values will only approximate the true RSI value. SharpCharts uses at least 250 data points prior to the starting date of any chart (assuming that much data exists) when calculating its RSI values. To duplicate our RSI numbers, you'll need to use at least that much data also.
Use
Overbought/Oversold
Wilder recommended using 70 and 30 and overbought and oversold levels respectively. Generally, if the RSI rises above 30 it is considered bullish for the underlying stock. Conversely, if the RSI falls below 70, it is a bearish signal. Some traders identify the long-term trend and then use extreme readings for entry points. If the long-term trend is bullish, then oversold readings could mark potential entry points.
Divergences
Buy and sell signals can also be generated by looking for positive and negative divergences between the RSI and the underlying stock. For example, consider a falling stock whose RSI rises from a low point of (for example) 15 back up to say, 55. Because of how the RSI is constructed, the underlying stock will often reverse its direction soon after such a divergence. As in that example, divergences that occur after an overbought or oversold reading usually provide more reliable signals.
Centerline Crossover
The centerline for RSI is 50. Readings above and below can give the indicator a bullish or bearish tilt. On the whole, a reading above 50 indicates that average gains are higher than average losses and a reading below 50 indicates that losses are winning the battle. Some traders look for a move above 50 to confirm bullish signals or a move below 50 to confirm bearish signals.
Example

The DELL example shows a number of extreme readings as well as a negative divergence. In Oct-99, RSI reached oversold for a brief moment to mark the low around 38. The next extreme reading (overbought) occurred after a large advance that peaked in Dec-99. RSI reached overbought levels in late Dec-99 and moved below 50 by the second week of Jan-00. The next oversold reading occurred in Feb. for another brief moment and marked the low around 35. By the end of Feb-00, RSI moved back above 50 and into overbought territory in March. A negative divergence formed in March and marked the high in the upper fifties.
RSI and SharpCharts

RSI is available on our SharpCharts charting tool. In the example, RSI has been assigned 14, 20 and 30 periods. A swing trader might prefer 14-periods, while an investor may prefer 30-periods. Users are encouraged to test different RSI settings and judge for themselves which ones work best and suit their particular trading/investing style.
Click here to see a live example of RSI.
For more on oscillators, please read our ChartSchool article on how to use and interpret oscillators.

Education Moving Averages

2008-07-14T06:46:00.000-07:00

Moving Averages
Introduction
Moving averages are one of the most popular and easy to use tools available to the technical analyst. They smooth a data series and make it easier to spot trends, something that is especially helpful in volatile markets. They also form the building blocks for many other technical indicators and overlays.
The two most popular types of moving averages are the Simple Moving Average (SMA) and the Exponential Moving Average (EMA)। They are described in more detail below.

Simple Moving Average (SMA)

A simple moving average is formed by computing the average (mean) price of a security over a specified number of periods. While it is possible to create moving averages from the Open, the High, and the Low data points, most moving averages are created using the closing price. For example: a 5-day simple moving average is calculated by adding the closing prices for the last 5 days and dividing the total by 5.
10+ 11 + 12 + 13 + 14 = 60
(60 / 5) = 12
The calculation is repeated for each price bar on the chart. The averages are then joined to form a smooth curving line - the moving average line. Continuing our example, if the next closing price in the average is 15, then this new period would be added and the oldest day, which is 10, would be dropped. The new 5-day simple moving average would be calculated as follows:
11 + 12 + 13 + 14 +15 = 65
(65 / 5) = १३
Over the last 2 days, the SMA moved from 12 to 13. As new days are added, the old days will be subtracted and the moving average will continue to move over time.
In the example above, using closing prices from Eastman Kodak (EK), day 10 is the first day possible to calculate a 10-day simple moving average. As the calculation continues, the newest day is added and the oldest day is subtracted. The 10-day SMA for day 11 is calculated by adding the prices of day 2 through day 11 and dividing by 10. The averaging process then moves on to the next day where the 10-day SMA for day 12 is calculated by adding the prices of day 3 through day 12 and dividing by 10.
The chart above is a plot that contains the data sequence in the table. The simple moving average begins on day 10 and continues.
This simple illustration highlights the fact that all moving averages are lagging indicators and will always be "behind" the price। The price of EK is trending down, but the simple moving average, which is based on the previous 10 days of data, remains above the price. If the price were rising, the SMA would most likely be below. Because moving averages are lagging indicators, they fit in the category of trend following indicators. When prices are trending, moving averages work well. However, when prices are not trending, moving averages can give misleading signals.

Exponential Moving Average (EMA)

In order to reduce the lag in simple moving averages, technicians often use exponential moving averages (also called exponentially weighted moving averages). EMA's reduce the lag by applying more weight to recent prices relative to older prices. The weighting applied to the most recent price depends on the specified period of the moving average. The shorter the EMA's period, the more weight that will be applied to the most recent price. For example: a 10-period exponential moving average weighs the most recent price 18.18% while a 20-period EMA weighs the most recent price 9.52%. As we'll see, the calculating and EMA is much harder than calculating an SMA. The important thing to remember is that the exponential moving average puts more weight on recent prices. As such, it will react quicker to recent price changes than a simple moving average. Here's the calculation formula.
Exponential Moving Average Calculation
Exponential Moving Averages can be specified in two ways - as a percent-based EMA or as a period-based EMA. A percent-based EMA has a percentage as it's single parameter while a period-based EMA has a parameter that represents the duration of the EMA.
The formula for an exponential moving average is:
EMA(current) = ( (Price(current) - EMA(prev) ) x Multiplier) + EMA(prev)
For a percentage-based EMA, "Multiplier" is equal to the EMA's specified percentage. For a period-based EMA, "Multiplier" is equal to 2 / (1 + N) where N is the specified number of periods.
For example, a 10-period EMA's Multiplier is calculated like this:
(2 / (Time periods + 1) ) = (2 / (10 + 1) ) = 0.1818 (18.18%)
This means that a 10-period EMA is equivalent to an 18.18% EMA.
Note: StockCharts. com only support period-based EMA's.
Below is a table with the results of an exponential moving average calculation for Eastman Kodak. For the first period's exponential moving average, the simple moving average was used as the previous period's exponential moving average (yellow highlight for the 10th period). From period 11 onward, the previous period's EMA was used. The calculation in period 11 breaks down as follows:
(C - P) = (57.15 - 59.439) = -2.289
(C - P) x K = -2.289 x .181818 = -0.4162
( (C - P) x K) + P = -0.4162 + 59.439 = 59.023
*The 10-period simple moving average is used for the first calculation only। After that the previous period's EMA is used.

Note that, in theory, every previous closing price in the data set is used in the calculation of each EMA that makes up the EMA line. While the impact of older data points diminishes over time, it never fully disappears. This is true regardless of the EMA's specified period. The effects of older data diminish rapidly for shorter EMA's. than for longer ones but, again, they never completely disappear.
Simple Versus Exponential
From afar, it would appear that the difference between an exponential moving average and a simple moving average is minimal. For this example, which uses only 20 trading days, the difference is minimal, but a difference nonetheless. The exponential moving average is consistently closer to the actual price. On average, the EMA is 3/8 of a point closer to the actual price than the SMA.
From day 10 to day 20, the EMA was closer to the price than the SMA 8 out of 11 times. The average absolute difference between the exponential moving average and the current price was 1.52 and the simple moving average had an average absolute difference of 1.69. This means that on average, the exponential moving average was 1.52 point above or below the current price and the simple moving average was 1.69 points above or below the current price.
When Kodak stopped falling and started to trade flat, the SMA kept on declining. During this period, the SMA was closer to the actual price than the EMA. The EMA began to level out with the actual price, and remain further away. This was because the actual price started to level out. Because of its lag, the SMA continued to decline and nearly touched the actual price on 13-Dec.
A comparison of a 50-day EMA and a 50-day SMA for IBM also shows that the EMA picks up on the trend quicker than the SMA. The blue arrows mark points when the stock started a strong trend. By giving more weight to recent prices, the EMA reacted quicker than the SMA and remained closer to the actual price. The gray circle shows when the trend began to slow and a trading range developed. When the change from trend to trading began, the SMA was closer to the price. As the trading range continued into 2001, both moving averages converged. In early 2001, CPQ started to trend up and the EMA was quicker to pick up on the recent price change and remain closer to the price.
Which is better?
Which moving average you use will depend on your trading and investing style and preferences. The simple moving average obviously has a lag, but the exponential moving average may be prone to quicker breaks. Some traders prefer to use exponential moving averages for shorter time periods to capture changes quicker. Some investors prefer simple moving averages over long time periods to identify long-term trend changes. In addition, much will depend on the individual security in question. A 50-day SMA might work great for identifying support levels in the NASDAQ, but a 100-day EMA may work better for the Dow Transports. Moving average type and length of time will depend greatly on the individual security and how it has reacted in the past.
The initial thought for some is that greater sensitivity and quicker signals are bound to be beneficial. This is not always true and brings up a great dilemma for the technical analyst: the trade off between sensitivity and reliability. The more sensitive an indicator is, the more signals that will be given. These signals may prove timely, but with increased sensitivity comes an increase in false signals. The less sensitive an indicator is, the fewer signals that will be given. However, less sensitivity leads to fewer and more reliable signals. Sometimes these signals can be late as well.
For moving averages, the same dilemma applies। Shorter moving averages will be more sensitive and generate more signals. The EMA, which is generally more sensitive than the SMA, will also be likely to generate more signals. However, there will also be an increase in the number of false signals and whipsaws. Longer moving averages will move slower and generate fewer signals. These signals will likely prove more reliable, but they also may come late. Each investor or trader should experiment with different moving average lengths and types to examine the trade-off between sensitivity and signal reliability.

Trend-Following इन्दिकाटर Advertisement
Moving averages smooth out a data series and make it easier to identify the direction of the trend. Because past price data is used to form moving averages, they are considered lagging, or trend following, indicators. Moving averages will not predict a change in trend, but rather follow behind the current trend. Therefore, they are best suited for trend identification and trend following purposes, not for prediction.
When to Use
Because moving averages follow the trend, they work best when a security is trending and are ineffective when a security moves in a trading range. With this in mind, investors and traders should first identify securities that display some trending characteristics before attempting to analyze with moving averages. This process does not have to be a scientific examination. Usually, a simple visual assessment of the price chart can determine if a security exhibits characteristics of trend.
In its simplest form, a security's price can be doing only one of three things: trending up, trending down or trading in a range. An uptrend is established when a security forms a series of higher highs and higher lows. A downtrend is established when a security forms a series of lower lows and lower highs. A trading range is established if a security cannot establish an uptrend or downtrend. If a security is in a trading range, an uptrend is started when the upper boundary of the range is broken and a downtrend begins when the lower boundary is broken.
In the Ford (F) example, it is evident that a stock can go through both trending and trading phases. The red circles indicate trading range phases that are interspersed among trending periods. It is sometimes difficult to determine when a trend will stop and a trading range will begin or when a trading range will stop and a trend will begin. The basic rules for trends and trading ranges laid out above can be applied to Ford. Notice the trading range periods, the breakouts (both up and down) and the trending periods. The moving average worked well in times of trend, but faired poorly in times of trading. Also note how the moving average lags behind the trend: it is always under the price during an uptrend and above the price during a downtrend. A 50-day simple moving average was used for this example. However, the number of periods is optional and much will depend on the characteristics of the security as well as an individual's trading and इन्वेस्टिंग style।

If price movements are choppy and erratic over an extended period of time, then a moving average is probably not the best choice for analysis. The chart for Coca-Cola (KO) shows a security that moved from 60 to 40 in a couple months in 2001. Prior to this decline, the price gyrated above and below its moving average. After the decline, the stock continued its erratic behavior without developing much of a trend. Trying to analyze this security based on a moving average is likely to be a lesson in futility.
A quick look at the chart for Time Warner (TWX) shows a different picture. Over the same time period, Time Warner has shown the ability to trend. There are 3 distinct trends or price movements that extend for a number of months. Once the stock moves above or below the 70-day SMA, it usually continues in that direction for a little while longer. Coca-Cola, on the other hand, broke above and below its 70-day SMA numerous times and would have been prone to numerous whipsaws. A longer moving average might work better, but it is clear that the Time Warner chart had better trending characteristics.
Moving Average Settings
Once a security has been deemed to have enough characteristics of trend, the next task will be to select the number of moving average periods and type of moving average. The number of periods used in a moving average will vary according to the security's volatility, trendiness and personal preferences. The more volatility there is, the more smoothing that will be required and hence the longer the moving average. Stocks that do not exhibit strong characteristics of trend may also require longer moving averages. There is no one set length, but some of the more popular lengths include 21, 50, 89, 150 and 200 days as well as 10, 30 and 40 weeks. Short-term traders may look for evidence of 2-3 week trends with a 21-day moving average, while longer-term investors may look for evidence of 3-4 month trends with a 40-week moving average. Trial and error is usually the best means for finding the best length. Examine how the moving average fits with the price data.
If there are too many breaks, lengthen the moving average to decrease its sensitivity. If the moving average is slow to react, shorten the moving average to increase its sensitivity. In addition, you may want to try using both simple and exponential moving averages. Exponential moving averages are usually best for short-term situations that require a responsive moving average. Simple moving averages work well for longer-term situations that do not require a lot of sensitivity.
Uses for Moving Averages
There are many uses for moving averages, but three basic uses stand out:
* Trend identification/ confirmation
* Support and Resistance level identification/ confirmation
* Trading Systems
Trend Identification/ Confirmation
There are three ways to identify the direction of the trend with moving averages: direction, location and crossovers.
The first trend identification technique uses the direction of the moving average to determine the trend. If the moving average is rising, the trend is considered up. If the moving average is declining, the trend is considered down. The direction of a moving average can be determined simply by looking at a plot of the moving average or by applying an indicator to the moving average. In either case, we would not want to act on every subtle change, but rather look at general directional movement and changes.
In the case of Disney (DIS), a 100-day exponential moving average (EMA) has been used to determine the trend. We do not want to act on every little change in the moving average, but rather significant upturns and downturns. This is not a scientific study, but a number of significant turning points can be spotted just based on visual observation (red circles). A few good signals were rendered, but also a few whipsaws and late signals. Much of the performance would depend on your entry and exit points. The length of the moving average influences the number of signals and their timeliness. Moving averages are lagging indicators. Therefore, the longer the moving average is, the further behind the price movement it will be. For quicker signals, a 50-day EMA could have been used.
The second technique for trend identification is price location. The location of the price relative to the moving average can be used to determine the basic trend. If the price is above the moving average, the trend is considered up. If the price is below the moving average, the trend is considered down.
This example is pretty straightforward. The long-term for Cisco (CSCO) is determined by the location of the stock relative to its 100-day SMA. When CSCO is above its 100-day SMA, the trend is considered bullish. When the stock is below the 100-day SMA, the trend is considered bearish. Buy and sell signals are generated by crosses above and below the moving average. There was a brief sell signal generated in Aug-99 and a false buy signal in July-00. Both of these signals occurred when Cisco's trend began to weaken. For the most part though, this simple method would have kept an investor in throughout most of the bull move.
The third technique for trend identification is based on the location of the shorter moving average relative to the longer moving average. If the shorter moving average is above the longer moving average, the trend is considered up. If the shorter moving average is below the longer moving average, the trend is considered down.
For Inter-Tel (INTL), a 30/100 moving average crossover was used to determine the trend. When the 30-day moving average moves above the 100-day moving average, the trend is considered bullish. When the 30-day moving average declines below the 100-day moving average, the trend is considered bearish. A plot of the 30/100 differential is plotted below the price chart by using the Percentage Price Oscillator (PPO) set to (30,100,1). When the differential is positive the trend is considered up – when it is negative the trend is considered down. As with all trend-following systems, the signals work well when the stock develops a strong trend, but are ineffective when the stock is in a trading range. Also notice that the signals tend to be late and after the move has begun. Again, trend following indicators are best for identification and following, not predicting.
Support and Resistance Levels
Another use of moving averages is to identify support and resistance levels. This is usually accomplished with one moving average and is based on historical precedent. As with trend identification, support and resistance level identification through moving averages works best in trending markets.
After breaking out of a trading range, Sun Microsystems (SUNW) successfully tested moving average support in late July and early August. Also notice that the June resistance breakout near 18 turned into support. Therefore, the moving average acted as a confirmation of resistance-turned- support. After this first test, the 50-day moving average went on to 4 more successful support tests over the next several months. A break of support from the 50-day moving average would serve as a warning that the stock may move into a trading range or may be about to change the direction of the trend. Such a break occurred in Apr-00 and the 50-day SMA turned into resistance later that month. When the stock broke above the 50-day SMA in early Jun-00, it returned to a support level until the Oct-00 break. In Oct-00, the 50-day SMA became a resistance level and that held for many months.

The Stock Exchange For Beginners - Part 2

2008-07-12T01:48:00.000-07:00

In my previous message about the stock exchange for beginners, I tried to convey some of the realisations that a new investor needs to make to help him or her become successful.

This time, I am going to offer a few thoughts on what I believe helps me to be successful and a few examples of what can and may go wrong. As ever, I hope that this isn't below your level of either confidence or competence as I don't wish to insult. However, I have found that there seem to be far more people that want to understand finance 'a little better' than there are people who can lecture on the subject.

Firstly to an example. Back in the mid 90's I joined an Investment club in the UK. I knew a couple of the members from a local health club I was a member at. Knowing that I was (a) keenly interested in investment and (b) more knowledgeable than most of them, I was invited along.

Suffice to say that on the first evening, I realised that I had been invited along to do all the work! I enjoyed the work so that didn't actually bother me. I also could purchase some additional investment tools 'for the club' which I couldn't justify for myself.
The main work of analysis was carried out by myself and another member who is a long-time friend and no mug in the world of shares and investment himself. We were using as our template a theory offered by Jim Slater which centred around price / earnings growth ratios. In short, it was highly successful.

At the end of the first year, we were 'up' by around 80%. Admittedly, this was during the tech-boom bull and any idiot could get 30% pa without trouble or effort, but still we were very impressed. The second year started well too and within 6 months of year two, our small company growth share portfolio (the only portfolio) was up comfortably over 100%. Nice work if you can get it.

For those of you that haven't been a member of an investment club and don't know, they are a democracy. Every opinion counts equal in a vote to buy or sell, whether they understand investment - or not. Here was our trouble. If you can believe it, making an enormous profit was 'boring' and they needed 'excitement'. To me, making money as quickly as we did was not merely exciting - it was thrilling!! But, when we wanted to sell they wouldn't and when we offered rock solid buy predictions they disliked something and again, we wouldn't.

I think our lowest point was not buying shares in a UK pizza delivery firm (that was growing very quickly and would have turned into a great investment) because (and I kid you not) one of the founding members didn't like 'Italian food'. Who cares?
The club ended rather badly with arguments and falling outs. Several years later it still has a couple of holdings in shares that might 'one day turn around'. Fat chance!!!!
So here is the tip: why do you want to invest? This needs analysis.
My friend and I invested because we were willing to put in the effort, wanted to increase our holdings, make money and frankly, we like winning in a global market against the nation's smartest minds!!

Our other members however, were there to gamble. It was just fun. Who cares about the result? We all meet in a pub, have a meal, chat about shares and throw some money at the market. We wanted profits, they wanted a social group.
After being up by over 100% after 18 months, we closed the club at a loss of both money and friendship. Ridiculous.

What about you? Why do you want to invest? If you want to gamble, take up sports betting. You get to watch a game as well as be financially involved - that sounds much better.
Do you plan to follow the market? If you don't, best to keep away.

I'm not the world's greatest at tracking a market - I can admit it. Each day, I look at the shares in my portfolio, funds I advise clients about, prospective investments I am mulling over, general financial news and read a few posts by other advisers / analysts online. And yet, if I'm honest, I worry that don't pay enough time each day to the markets.

If you want to make serious decisions, with serious amounts of money and (hopefully) make serious amounts of profit, you need to be - SERIOUS!!!

Personally, I don't like the idea of gambling much. I consider myself to be either a speculator or an investor, not a gambler. When I first started investing, I didn't know the difference (though I started at 18 and had no-one to guide me). That meant that all my investments were gambles. Mostly, they weren't so hot.

These days, I assess and analyse much more. I avoid 'turnarounds', since I don't think they turn around too often. Greater life experience has taught me to recognise that most companies that need to turn, or might turn, are already dead - they just don't know it yet.
I also have learned my lesson with 'development' companies. You know the thing, one great idea that 'if' they get to market will make 'tens of millions'. I own shares in a couple that I bought years ago. Broadly, I was right to buy. Of all the development stocks I could have bought, these actually did develop and do make products. They just don't make profits yet - years after I bought.

One of my development picks actually dominates the bluetooth market. That's right, I invested in the company that developed much of the bluetooth technology we use today! How could it not make a bundle of money? Am I a genius or what? Years later, I am still down 65%.
Another has an amazing fuel saving device for gear boxes in cars, lorries and off-road vehicles. In this age, you'd think that fuel saving technology would be all the rage. Over the years, I have bought more shares in the lows and sold them in the highs to make some 'trading' profits. But still my initial investment (I think 8 years ago) is down.

Though I may not have realised it at the time, these were not investments, they were gambles. So is the stock exchange really a place for beginners?
An investment is in a company that has products, a defined market and notable market share, profits, a track record and much more. Remember that. Think about Warren Buffett - he makes investments, good ones at that.

I'm also quite traditional about investing. I have never spread bet, used an option or future or sold short. I don't use leverage. If I can't figure out what might go wrong, FOR CERTAIN, I'd rather not do it. I buy, I hold and I sell. That's it.
I have no doubt that these admissions mean that I miss out on all sorts of possible investment opportunities. There are all sorts of weird and wonderful investments out there, but I invest and I don't like to gamble.

If you think about it though, what I just said doesn't really hold me back. I own some coins, stamps, comics, unit funds, shares, books and art - I did mention that I speculate didn't I? And if the world suddenly has a crisis, it means that I own actual, physical assets as well as just share certificates.

So that brings me to another point ... can you focus?

Ideally, you need to know quite a lot about certain areas and use that knowledge for your investment benefit. The art and books I own are mostly related to cricket. I love cricket and know a lot about the game and it's history - which means that I know when I see something of value. If it has value now, it probably will have for some time to come. Whether I buy at a good price or not, value and scarcity count.

Who'd imagine ME telling you that the stock market isn't everything?
Investment risk is lowered by knowledge. Every time. If you are buying shares on the stock exchange, what does the seller know that you don't? What do you know that the seller does not? You can bet your life that the buyer or seller opposite you in any transaction has done some serious research. If you don't do yours, who do you think will win? You or the market?
So of all the things that I might have said about investing, I haven't really made it sound 'sexy' yet. Have I? The truth is, investing isn't really very sexy. Lap dances are sexy. Pop stars are sexy. Carmen Electra is sexy. Investing is graphs, moving averages, annual reports, company statements, calculators and work. Not so sexy. It's kind of like being an accountant but with marginally more life and a few graphs.

But the great thing about investment is that in the long run, you decide whether you'll be successful or not. The harder you work at it, the luckier you will be. If you are just starting out, think about YOU first, not the market or companies. Decide on what you want to specialise on, whether the stock market for beginners is a place to invest and how you will approach it.

It might help to find areas in which you have useful knowledge already. Either that or decide on an area and slowly become an expert. What do I mean? Well, if you worked in a bank for 10 years, you must know something about banking. When you read an annual report from a bank, do you laugh and see through the waffle or does it make real sense? If you can see through the waffle of some far off CEO and CFO, you can start to compare the relative prospects in the same market of competing firms. Hey - that could be an opportunity!

If you really know about banking, you can compare the product offerings and service as well as the annual reports. You might still know some bank staff that are happy to tell you honestly that they are being 'creamed' in the market or whatever. Before you know it, you have a picture building of a competitive market. Before long, you will REALLY understand the investment potential of several companies. That will put you far ahead of many other investors.
As I said earlier, investment risk is lowered by knowledge - EVERY TIME.
Would your profits improve with help from a great market advice service?

The Stock Exchange For Beginners Guide - Part 1

2008-07-12T01:33:00.000-07:00

As I start my guide, about the Stock Exchange For Beginners, where should a newbie really start?

Firstly, I believe, with a realisation.

The stock exchange is rarely a place where anyone 'gets rich quick'. Offhand, I don't know where anyone does that, but certainly not in investments. Sure, some occassional stocks and shares will rise quickly making their owners money, but rarely will you become rich. Bear in mind that if an investment doubles in one year (which is pretty rare) you needed to be already wealthy to make a lot of money. If you invested a thousand, you will have just 'made' a thousand. You aren't wealthy or rich yet.

There are ways for an investor to make enormous profits, but as ever, they involve enormous risks. Things like options and futures really are NOT for the beginner with limited resources. They are highly technical, involve the potential to lose all of your investment quickly and need constant monitoring. I know that I am quite traditional in this sense, but many options appear to me as if they are little more than a gamble. That is not how a prudent investor operates! Instead look for reliable and predictable companies, quoted on the stock exchange and suitable for beginners.

Second realisation is this ... It isn't easy for beginners to make money on the stock exchange . If everyone could become a billionaire by investing, Warren Buffett would not be famous. It takes time, study and effort and most importantly - independent thought. Not everyone has the will or stamina to carry that through. I know that mine wavers from time to time. Who doesn't suffer setbacks and confidence knocks?

Thirdly, though it may be a 'hobby', the stock exchange isn't 'fun'. The world of investment is dominated by investment banks and their bankers. They do all the big deals, float companies, issue bonds, trade stocks, bonds, currencies and commodities and make lots of money. They employ some of the world's brightest young MBA's to figure out new and improved profit making ventures. They do all this because it is a business, with real money and real profits.

Nobody is playing around.

If you want to be successful, you too need to view it as a business. Here is tip number one: if you are interested, go and do some reading about Benjamin Graham. Buy his books and digest. It will take a while, but it is the proper place to start. It was Ben Graham that first coined the idea successful investment is businesslike.

All that said, the little guy can still make money investing. I know, I do. Why can't you? Funds find it hard to invest in small companies, maybe that offers you an edge. Often, money managers are so busy working their 15 hour days that they miss wider discoveries in society. Just by going to the mall or supermarket, you might spot lines selling well and get a head start on the analysts. If that approach sounds good, you might like to grab a book by Peter Lynch - he offers guidance on how he finds winners, or as he puts it 'tenbaggers'.

If you really want to do well in investment on the stock exchange, then you need to approach it as if it were your own business. A part-time business perhaps, but still a business.
The stock exchange for beginners can be a daunting way to make a second income. Fear not, with time, you can learn the skills. But, I warn you again that it takes effort, independent thought and study to really do well.

Would you like to learn more about trading? You would?