■ We hosted three speakers at our 2018 Technical, Currency and Feng Shui Day.
■ Our technical chartist indicate that the KLCI uptrend remains intact and could test the
1,900-1,950 level.
■ Our treasury team recently upgraded its end-2018 ringgit forecast to 3.85/US$.
■ Fengshui master said the 3 rd and 10 th lunar months are good for the stock market
■ We maintain our end-2018 KLCI target of 1,880 pts (based on 15.9x P/E).
Technical, currency and feng shui outlook for 2018F
We hosted a half-day conference today, featuring (1) Ray Choy, Head Treasury Strategist, CIMB; (2) Master Bo Xu, a feng shui consultant; and (3) Nigel Foo, our very own regional technical chartist. Their views on technical, currency and fengshui outlook point to a volatile equity and currency markets in 2018F.
Technical: KLCI uptrend still intact
Nigel Foo, our technical chartist, is of the view that the KLCI is currently on an uptrend and could test the 1,900-1,950 level over the next few months. He sees the recent decline in the KLCI as just a correction and that once the local bourse stabilises, the KLCI index should continue its uptrend. Smallcap index could outperform the KLCI index in 2018F. After trading sideways over the past two years, the Bloomberg Dollar Index could bottom soon from a technical chart point of view, Nigel predicts.
FX: Fundamentals intact but brace for near-term volatility
Ray Choy, Head Treasury Strategist at CIMB, believes the fundamental outlook for EM Asia FX remains constructive for 2018F. CIMB Treasury Research recently upgraded its end-2018 ringgit forecast to 3.85/US$, citing macro improvements and spillovers from increased trade and investment inflows. However, Choy warns that the recent market volatility and excessive short positioning in the US$ may precipitate a short-term technical correction in the ringgit, given the extended rally last year.
Feng shui: A more volatile year for the stock market
2018 is the year of the “Earth Dog”. Fengshui consultant Master Bo Xu predicts that the economy will stagnant or slowdown in 2018 and that the stock market would be more volatile vs. 2017. He believes the Malaysian economy will do better if it enters into alliances with other countries. He thinks the good months for the market are the 3rd (16 Apr-14 May 2018) and 10 th (8 Nov-6 Dec 2018) lunar months while negative months are the 1 st (16 Feb-16 Mar 2018) and 7 th (11 Aug-9 Sep 2018) lunar months.
Feng shui: Prospects of various sectors in 2018
From a fengshui perspective, Master Bo Xu revealed that gold element businesses such as banks, insurance and finance industry will do well. However, wood (furniture, timber, and education), earth (real estate, mining and direct selling) and water (hotel, hospital and shipping) element businesses will not do so well. Businesses in the fire element (palm oil, oil & gas, chemical and shopping mall) will see a lot more activities, he predicts.
Technical KLCI view more positive than fundamental analysis
Our technical view that the KLCI could potentially touch 1,900 to 1,950 is more bullish than our fundamental view that the market would end the year at 1,880 points. Our treasury team is more positive on the long-term ringgit outlook compared to our technical chartist. We have identified auto, airlines and F&B players as the biggest winners should the ringgit continue to strengthen, due to their lower operating costs. Our top picks for the stronger ringgit theme are AirAsia, Berjaya Food and DRB Hicom.
Recap of last year’s event
How our expert speakers’ predictions fared in 2017?
Technical charts view for 2017
In our 2017 Technical, Currency and Fengshui event in Feb 2017, Nigel Foo presented his view that the KLCI was then on a rebound rather than in a bullish phase. He expected the market to weaken and potentially bottom sometime in 3Q before rebounding in late- 2017. He predicted that the ringgit will appreciate against the US$ in 2H17 and that this could help kickstart a sustainable medium-term uptrend for the local bourse in the later part of the year.
Nigel also mentioned that since the KLCI's inception, there appeared to be a 10.5-year or
126-month cycle for the local bourse, with the KLCI finding a significant low close to the
end of each of this major cycle (+/– 3 months). Basically, in the first half of the cycle, the
wind seems to be behind the bull’s sail while the second half tends to favour the bears.
The 1,896 high for the KLCI in Jun 2014 was four months after the mid-point of the
current 126-month cycle. If this cycle continues to play out, then the next major low for the
KLCI can be expected in mid-2019F, he had said.
Feng shui master’s view in 2017
Feng shui consultant Master Bo Xu said 2017, being the year of the “Fire Rooster”, should be good for long-term investors with a 3- to 5-year investment horizon. Wood element businesses such as furniture, pulp and paper, textile, timber and education should flourish while fire element businesses (oil & gas, and restaurant) will not do so well, he said. Stock market wise, the good months for the market would be in 4 th (26 Apr- 25 May), 10 th and 11 th (18 Nov 2017-16 Jan 2018) lunar months.
KLCI’s performance in 2017
The market has panned out broadly in line with Nigel’s expectation for 2017 as the market corrected towards the end of 3Q17 before rebounding in late-2017. The ringgit also appreciated against the US$ in 2H17. Our cycle prediction has yet to play out. Master Boxu’s predictions on the good months for the market were broadly in line with KLCI’s performances as well.
source: CMB Research 05/02/2018
