KLCI support at 1700 but weaker RM continues

KLCI should find a strong support at 1700 as it has corrected closed to 10% from its recent high. Oil prices affecting confident level of our budget and economy will continue. However, as OPEC made statement that crude at USD 60 a barrel is their will. We don’t expect oil crisis will further dampen the market. In fact is a known issue where Malaysia is still biting the bullet during the change process of over dependant to oil prices.

However, we believe RM will continue to stay weak due to the room to raise rate may minimized by GST application starting in April. Slow retail confidence will cause BNM to reluctant adjusting its OPR. We may still see an interest rate increase to calm inflation and stabilizing RM. But we only expect 25 basis points in 2015 with a max of 50 basis points.

The sudden drop of KLCI due to oil prices tumbled is not within our expectation. Indeed, we still cautiously positive about the market especially our top picks. We will continue nibbling if market correct further. But due to RM exchange disadvantages, we will temp reduce investment in overseas especially HKD, SGD and USD related.

We will still buy AUD due to its weakness in parallel to RM but with slower momentum. We will buy more Gold at this level. Nothing to be too worry as our cycle investment again creating a rotating opportunity for our own self to continue buy cheap and potentially profit from it.

We started bargain hunting again at 1740 level

We don’t like KLCI component stocks as many oil related companies are over rated years back.

But we do like our top picks and we added Paramount & L&G.  But we think Gadang and ARREIT have been beaten down unfairly.  We have bought both and re entering Gadang due to its bargain valuation.

Crude Oil trading below USD 65 the culprint of KLCI tumbled

Probably the worry is the budget was base on higher oil price perhaps around USD 90 – 100. Dropping oil price means we may short of budget plus weakening RM may dampen surplus.

We believe logically there are certain impacts but also may come back with certain advantages. Businesses may grow further due to lowering cost contribute back to the pool of taxes. As long as crude oil trade above USD 60. We do not see any major issue but if continue to drop below USD 60 may trigger threats. But OPEC will also wont allow oil price to continue drop to below USD 50 which is a level unseen for many years.

We don’t foresee a huge issue but start to remain cautious on oil. But we may take opportunity to buy into our top picks or heavily beaten down stocks.

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