Property stocks hammered

I've been a bull on certain properties, but certainly not all. Here is Sunway and SP Setia. I don't necessarily recommend these companies as their property mix is weighted toward the high end.



If we should see Sunway and SP Setia start to stabilize, then counters like SPB will have a bit of the sector stigma lifted.

SPB develops housing with a much lower price point than its peers.


Be patient until the property sector as a whole stabilizes before buying select property counters.

Checking the EWMs once again

What we can gather from the EWMs and the market is most of the buying has been locally based. On the last 4 days, the market has opened higher while almost no buying has gone on during the US trading session.

Buying only occurring during Malaysian time

In fact, a lot of the US trading session has been about profit taking as indicated by the red lines.

US EWM traders have been selling down

Generally in a healthy market, we would want to see the international investors buy in through the EWMs as well as during the local hours. The selling makes me think the international investors have been early to the party and taking profits as local investors pile in the market.

The other possibility is that the international investors have been primarily out of the rally, but with the selling, it looks like they have taken part in the rally.

I'm not too encouraged by the technicals at this point.

Genting Party, MAS, Shell

Genting apparently blew out earnings in Singapore. Look for MAS tomorrow might drop a bit. Revenues were up 26%, but reported a net loss.

Might be a value trap. Look out.

MAS

Look to see how MAS performs tomorrow. This will prove to be a test whether MAS has truly bottomed or not.

On Shell Refining, I'm pleased to say that the stock didn't fare too bad in light of the loss on stocks. Revenue was up and that seemed key to what investors were looking for. They did very well in fact. A rally on a loss in EPS is really an odd sight.

Shell Refining

Buying, but not from typical international investors

Overnight Malaysian ETFs didn't produce the same positive jump in the FBMKLCI today. If you would have told me that the Malysian Index would closed up 10 points today, based on the previous nights' investor appetite, it's not a bet I would have taken.

Some money managers seem to be committing more money towards Malaysia through local brokers. Perhaps some of the emerging market hedge funds are receiving new inflows.

Lackluster price action on the Malaysian ETF based in US

Subsidy plays still has legs, Fed's message about monetization

Plus highways' rally on earnings upgrades means that the subsidy play areas still have room to run or at least will stay resilient if the market pulls back. After looking at the price action and news of various subsidy plays, the subsidy theme still seems quite strong.

World markets have been selling down on the news that the Fed will not liquidate the assets acquired during the financial crisis. This would keep liquidity in the system at the current level.

The market would rather hear the Fed acquire more assets, unfortunately they put out mixed signals. The Fed indicated that they would not give new money and that it is basically in the government's hands to fiscally stimulate the economy. At the same time, they said they stand ready to help out when needed.

The market is looking for more direct monetary action. An individual has to look no further than the effect on the markets when the fed started acquiring mortgage assets in 2009. Anything less seems to be a disappointment.

Revisiting AHB holdings and Shell

Looking at Shell's loss, especially after talking positively on the stock, I have to go back and take a look at what went wrong. I read that Shell Refining does most of its business in Malaysia. It has a massive industrial cracker which refines the oil. It has no stake in the retail ops, though I suspect that the Shell retail operations get most of their supply from Shell Refining.

Herein lies the issue. Prices are controlled at the pump and Pemandu pays out the petrol subsidies there. Shell Refining I don't think will get as much revenue upside as say the retail ops which will see an immediate upside in revenues as subsidies get lifted. Gasoline demand is ineleastic so a small price increase won't decrease consumption much.

So perhaps Shell isn't a great play on the subsidy lifting scheme but they are generally a well run company. They still pay dividends and make steady money. At any rate, subsidy lifting is a non event for the company.

ABH. Now this is stock for you risk takers out there! After a second look at the company, they do have a large number of receivables and land which probably could be securitized in the event of a liquidity crunch. If businesses are spending, which they are judging by the growth of business loans, this company should reap a massive windfall.

Current ratio is over 1.37 from the latest report. The directors costs are ridiculously high though, taking up half a million. Their employee wages run at 2.3 million.

The company has options in the receivables. It has not securitized those items. Inventories are higher year over year which means if revenue picks up, the company has the ammo to capitalize on increased business demand.

But the premise for buying ABH remains the same. If you are a company looking to spend some money on capital expenditure, and you don't want to fork over half a million for state of the art equipment. You would spend a much smaller sum on office furniture that would make your workers more efficient, or fit more workers in a smaller space, therefore making your office space more efficient.

Quiet time

While we have had a combination of risk on and risk adverse trades, I'm still undecided on the direction. If one were to look at the overall strength in government bonds and Japanese Yen, I would be tipped in the bearish direction. Equities are hanging around at this level not giving up much ground either.

USD/JPY with yen strengthening and usd weakening

Bonds still resilient the last few days

Note the charts are in a 30 minute and day intervals top and bottom respectively.

Something tells me money mangers have put their money back in not wanting to miss the boat. But we all know the majority of money managers don't beat the market. Regardless of money being put to work by managers, the market will go where it wants to go.

The USD/JPY weakness is probably the most concerning event at the moment as the Japanese Yen reaching new highs does not inspire confidence for risk assets. If you are a trader that believes once the yen breaks to new highs against the dollar, it will put continued upward pressure, then this is the next target trade now that the EUR/USD has already quite handily breached the 1.30 mark.

Malaysian business services sector

I'm not too hot on the Malaysian business services yet. Loan growth in the area is quite anemic but if you would like to play the business recovery, stay away from anything that requires massive amounts of capital spending.

Businesses won't be induced to spend a lot yet, but they will be wanting to do some small capital expenditures on items that are of good value. Companies still need services and may be induced to spend as products need replacement. I did come across an office supplier AHB holdings but I'm concerned about potential cash problems. They did an SPA sale and lease back for some of their land and this should allay their finances for a while.

Last quarter's revenue did double from the previous year. So it has revenue momentum.

The outlook is good if the company can solve its current liquidity problems, but the stock could very well be worth zero if it has no money to pay its creditors. Overall, though the environment is lacking for business services companies in Malaysia.