US keep rate unchanged sent Asian Market lower?

The US Federal Reserve decided to keep the interest rate unchanged at the meeting last night. The news sent DJIA to closed higher at 17779 (+198).

Hang Seng Index opened high in the morning but market further retraced. Cash market closed lower at 22819.94 (-136.63). For October futures, it closed at 22897 (-81) whereas November futures closed at 22770 (-206). Range for November futures traded between 22753-23070 (317). Looks like HSI cannot sustains above 23000 and 23000 becomes the resistant again.

In Malaysia, 1700 became the resistant for KLCI Index. Range for October futures traded between 1661-1696 (35), closed @ 1663 (-27); cash market closed at 1666.98 (-19.53). Tomorrow is the expiry for October futures. Depending on how US perform tonight, we see support for KLCI at 1640, resistant 1680.

We think the market and economy is in a challenging time. With the news of banks and companies restructuring, cutting staffs and lowering costs etc, seems like economy is not doing well. These in turn affects companies' earning and their share price...

We think it's time to spend frugally and invest wisely.

ANZ Bank

We like bank shares for one reason. While market is not doing well, the attractive dividend is a bonus to sail through the hard time. When the worst is over, the share price soar and it is time to pocket the profit.

Australian banks are among global banks that did quite well after GFC. They posted positive profit, high dividend payout to shareholders and most importantly, share price broke higher than pre GFC historical high.

We bought Australian & New Zealand Bank share (AU: ANZ). The company reported $7.2 billion profit for this year, paying $0.95 per share to shareholders. At today's closing price at $28.17, this translates to 3.37%. This is only one time payout. ANZ bank releases dividend twice a year, in July and December. In order words, full year dividend is around 6.3%, which is way better than leaving money in savings account.

ANZ Bank focus their business in Australia and New Zealand, as well as the Asia region. We believe slowing economy in Asia might affect ANZ business in near future. Moreover, the higher capital requirement might put ANZ into a challenging environment. Anyway, since the share price retraced from 52 weeks high, also record high at $37.25 to 52 weeks low $26.38, we think it is ok to hold some ANZ shares. Near resistant target at $30-$32. If the share price broke $26, downside support $22.

We'll add our holdings when the price is down. Conversely, reduce the holdings when share price soar.

Investing vs Trading

Sometimes we think we have split personality when we look at market. One side of our brain tells us to look at big picture of the market outlook, be patience and look for value buy stocks; ignore the noise, sit tight and wait patiently to see our result. As a result, we have an investment portfolio where our time frame is mid to long term.

On the other hand, the other side of our brain tells us; while there is potential upside or downside in the market, we shouldn't sit there without doing anything. We should take the opportunities to look for trading signal, make use of the volatility to make money on price fluctuation. Therefore, we came out with a portfolio of short term trading in indices and commodities.

Each of the strategy requires different mindset and execution. To make money successfully in investment; we need to find out what are the stocks that have potential upside base on current price and fundamental of the companies. We need to know about the dividend yield; just in case market is not doing well, we have dividend payout as bonus. Then, base on technical chart, this provides a check point for us to enter the market. When we are in the market, next thing to do is sit tight, ignore the noises and price fluctuation, enjoy the journey and wait patiently. For this strategy, the time frame we are talking about is mid to long term. It could be months or years to see the result.

In the fast trading world, it is a different kind of mindset and strategy. We need to identify are we able to take risk and cope with losses if the market is against us. If we are ok with it, then we can proceed to the game. If not, keep the capital and look for other option.

In trading, a trading plan is crucial to support us before we enter the market. We need to know where is our target price if we are right, in other words, we need to know where to exit the market to secure our profit. Meanwhile, if we are wrong, we need to have a cut loss point; to stop our losses in order to protect our capital.

It is easier to say than execute. This is because human tends to be emotional when in the market, be it making paper loss or paper profit. Therefore, discipline and risk management are important to help us in trading successfully.

Is there a chance we'll lose all our capital? There is a possibility if we are not discipline in following our trading plan. When it's time to take profit, but our greed kicks in and we cancel our order; is time to cut loss, but we refuse to do that in order to believe the market will favor us...These funny funny action will jeopardize our trading capital. 

We know it takes time to build our wealth; and it takes second to destroy it. Hence, J&M investment portfolio is a slow and steady race. Our trading portfolio, we believe with a good trading plan, combine with discipline and risk management, we can slowly increase our capital. The worst thing can happen is we lose all of our trading capital and we will not trade with margin lending. Just like when you go casino, you walk out from casino with your winning and a happy face; but never ever walk out with sad face plus borrow money if you lost all the capital.

HSI closed down 35 on China rate cut

HSI opened gap up in the morning. Market cheer on the news of interest rate cut & RRR reduced. The highest we saw was 23423.64 for cash market; futures highest 23415. However, profit taking came in and we started to see decline in HSI.

As we mentioned earlier, the market rebounded almost 3000 points since the first day of October. It is normal for investors to take profit and sellers came in to short sell the market. HSI dropped to lowest at 23036 in the afternoon, closed almost day low @ 23043 (-137) for October futures while cash market closed -35 @ 23116.

We sold half of our holding from Bank Of China, pocket some of the profit and will see how it goes. If the market further rally, we still have half of the holding and other Chinese Bank shares from ICBC and ABC. HSI need to go through correction in order to move higher. If correction come, we'll continue adding our portfolio according to market condition.

China Cut Interest Rate and RRR

The People's Bank of China (PBOC) announced yesterday to cut China's interest rate and to reduce bank's Reserve Ratio Requirement (RRR). This is the 6th time China reduced interest rate since November 2014 to stimulate economy.

When the news was released on Friday, DJIA futures rose more than 100 points before market opened and night market for Hang Seng Index futures surged up; closed at 23460 (+280). 

We think the news is positive for Chinese bank shares and we believe the top four Chinese banks listed in Hang Seng Index-- China Construction Bank (CCB), Industrial and Commercial Bank of China (ICBC), Bank Of China (BOC) and Bank of Communications will lead the surge on Monday. 

DJIA closed +157 on Friday while Hang Seng Index closed +306 @ 23151.94. We see Hang Seng Index will move higher on Monday because of this news and we see resistant at 23880. October futures closed at 23180 (+336); range of the week for October futures traded between 22710-23289 (579). Since next week is final week of October and it is rollover week for spot and next month futures contract, we see support for HSI at 22850. Further support 22450.

Budget Malaysia 2016

The 2016 Budget Malaysia is a defensive budget as the government need to allocate and spend our Ringgit wisely during this challenging time. It is hard to cheer everyone from the Budget; one thing for sure, cost of living will be higher from next year.

High income earner will be paying more income tax and low income citizens will have more financial subsidy compare to this year. No matter which income group we are in, it is important to save and invest for ourselves, rather than relying on government subsidy.

Minimum wage will be increased effectively from next year. As a result, labor cost will be higher and business owner will transfer the cost to consumers and hence, things will be more expensive. We believe the business in food and beverage, retail industry and service industry will be affected.

Because of this, we foresee there will be more vacancy in properties. Business owner will consider shift out from existing rental property or look for alternative as rental cost is one of the main expenditure in business. So, property owners, please do not raise rental and keep your tenant happy in order to keep your wallet happy!

A way to stay in business without paying rental is to work from home. Of course, not every business will have the advantage to do that. For this to happen, business owner need to rely on good internet connection to stay in touch with customers. We think it is an opportunity to invest in telecommunication shares, especially the blue chips- Maxis and Digi! 

For KLCI Index, we still see the resistant at 1730 and 1750. Support, 1680 and further down 1650. Do we have the chance to see 1800 by end of the year? We shall see.

Emperor Capital Group

Something interesting to share about Hong Kong market we noticed this year!

Hang Seng Index was ranging between 23000-24500 from January to April. After Easter holiday break, trading volume surged and a mini bull run began and brought the market to 28589. The uptrend in mid April last till end of June. As soon as after 1st of July holiday, the trend turned around. Buyers took profit; short sellers came in, a downtrend occurred and it lasted for months.

Then, came to 1st of October, National Day! Another public holiday for Hong Kong market! Hang Seng Index rebounded from 52 weeks low-20368 till this Tuesday- 23161, a day before Chung Yeung festival holiday!

There is no public holiday after yesterday for Hong Kong market until Christmas and New Year break where the trading activity is lowest for the year. What will the trend be from now till Christmas? The rebound continues? The rebound is done and here comes another downtrend? We are curious to find out! Seems like every holiday marks a new trend for Hang Seng Index! 

It is an exciting year for Hong Kong market. It had been a financially and mentally roller coaster ride for investors; the uptrend and downtrend provided trading opportunities for traders no matter is in stocks, futures or option market. If there is any particular stock we are interested, Hong Kong Stock Exchange (HK:388) is one of them. Volatile market presents making money opportunity which, this is good for HK Stock Exchange's business. Closed at $203.60, HKSE is 34% down from its historical price at $311.

Apart from HKEX, securities companies are the one that is benefited during busy market days. We bought Emperor Capital Group (HK:717), one of the leading financial broker house in Hong Kong. Trading at P/E ratio at 11, the share price went from $0.40 a year ago to $2.32 in April. Now, price at $0.69. 

We do not expect HK:717 goes back to $2.32 anytime soon. We think the share price will consolidate between $0.50-$0.75 for the time being. Hence, it is an opportunity to slowly collect the share before another uptrend begins.