Has anything really changed?

I do read a lot of local blog postings and one of the local blog I like is simply called TradingMalaysia.com

Reason I am highlighting this blog is because DirtyDog has penned another wonderful article, called the The waiting game...

• It is just so amusing to hear all the research reports coming out now touting shares again, when 3 or 4 weeks ago we did not hear so much as a pip out of them. What has changed between now and then? Absolutely nothing. Except that prices seem to have stopped going down. If you feel that your analyst or broker has just started to make recommendations again only because prices are more stable, then be careful because if they had any conviction in their recommendations they should have advised you to buy when the prices were on their way down, not on their way up.

Although the article was written more than a week ago, I do agree very much with what's said.

And my oh my, how the market has rallied recently.

• It’s important to take a step back sometimes and not get sucked into bear rallies thinking that we have reached a bottom and I am just not sure whether we have or not.

How?

As DirtyDog said, let's take a step back.

The main concerns that drove the markets down still remain a concern, yes? Has anything really changed?

On Saturday, Star Bizweek featured an article called Time to Buy? (I added some comments in blue italics)

• Saturday April 19, 2008
  Time to buy?
  By TEE LIN SAY
  
  THE economic decoupling between the US and the rest of the world is becoming all the more glaring. That the US is slowing, but the rest of the world is growing is becoming increasingly apparent if one were to pay attention to the release of economic data.
  
  Nonetheless, caution still drapes its sombre veil and following the herd mentality, the world continues to focus on the downside. With that, it's been a rocky road for financial markets with scorched investors sitting pretty on their dwindling cash holdings and the occasional write off by a large institution providing the almost mandatory amount of cardiac arrest for the market.
  
  But are things really all that bad? China, despite the frightful winter weather and the global credit turmoil, posted a strong economic growth of 10.6% for the first quarter of 2008. This lends credence to the comforting notion that China will make up for the slack of the slowing US economy. That being the case, has the Malaysian market reached a bottom?
  
  Some investing experts are beginning to believe so.
  
  Mid-week, Citigroup's equity research unit shot out a note that the market is indeed bottoming out and therefore suggests, one start buying. Setting out a year-end index target of 1,449 points, its research head Choon Wai Kee, says a lot of bad news (such as the global equities meltdown and the general election results) is already in the price. “In an illiquid market like Malaysia, we urge investors to start positioning ... as the index can't fall much more,” the report added.
  
  “Some local institutions are seeing their cash levels rising to over 20%. We see buying activities picking up imminently. The upcoming 2009 budget could stir buying interest as investors expect an expansionary budget to shore consumer confidence,” says Choong, adding that valuations wise, Malaysia is also trading at discounts relative to the region and its historical valuation benchmarks.
  
  Crisis near end?
  
  In a Bloomberg Television interview Thursday, Templeton's emerging market guru Mark Mobius says that the global credit-market crisis that has caused billions of dollars in losses at banks and brokerages worldwide is near the end. (What Irony! I had just posted Mobuis comments on the previous day: Some Rather Bullish Comments On the Malaysian Markets )
  
  Mobius says he has been buying shares of banks including Bank of China Ltd and Industrial & Commercial Bank of China Ltd because their valuations have fallen.
  
  “Most of the bad news is already in the market ... Malaysian equities are also becoming more and more attractive while the dollar is not going to revive anytime soon,” he says during the interview.
  
  Mobius says energy stocks are his biggest investment because of rising oil prices.
  
  “We like the general developments in Malaysia and the political debate that, hopefully, will result in a more vibrant economy,” says Mobius, in an email query to BizWeek.
  
  Meanwhile, data released worldwide is relatively encouraging.
  
  In the US, the latest March ISM (Institute for Supply Management) rose to 48.6 compared with February's reading of 48.3. This indicates that the manufacturing sector is still contracting but at a very gradual pace.
  
  Capital Dynamics Asset Management managing director Tan Teng Boo says that for the overall economy to contract, the ISM index has plunge to the 41 - 42 level, which is not the case.
  
  “So even as the global financial turbulence continued into the month of March, the world economy led by China, has continued expanding and benefiting the US economy. This trend is expected to persist throughout 2008,” says Tan.
  
  “Exports from Korea jumped in March. Business sentiment in France and Germany in March had unexpectedly improved. West Germany's unemployment continued to fall, even as late as March.... Even the US, the mother of all sub primes, was able to generate decently reassuring economic numbers for March as evidenced by the ISM index,” he says.
  
  “The biggest market is the global economy. The biggest market is still consuming and expanding. This is why exports from almost every country are growing. If the global economy is not expanding strongly, how can every country be reporting good exporting numbers even as late as February and March?” asks Tan. (Yes, but how much of this global expansion is inflated due to the insane bull run in the commodity markets?)
  
  More an internal issue
  
  CMS Asset Management Sdn Bhd chief investment officer Scott Lim says Malaysia is now facing its own set of internal problems due to the uncertain political scenario.
  
  “I don't see any breakthrough until a political decision is made. What I would watch out would be whether the regional markets get re-rated. Foreigners may consider Malaysia part of the region, and hence, we get pulled up along with the region.” (Yes, has anything really changed?)
  
  Lim says the aggressive monetary policy announced by the Federal Reserve in the US will take at least 6 months before effects start showing.
  
  “I think the big money will be watching how the second quarter unfolds. If there are expectations that the economy has bottomed, then the market will run ahead of expectations. This will be an indication of a better third quarter.”
  
  “If however the market doesn't bottom in the second quarter, we may see the true bottom in the second half,” says Lim.
  
  Still adopting a cautious outlook is Alliance Investment Bank director and head of equity capital markets Sherilyn Foong. However, she says, strategy wise, long-term investors may want to accumulate quality high-yielding stocks such as the blue chips at reasonably lower entry prices.
  
  She adds that Malaysia's unique comparative advantages include the oil & gas and plantation sectors, which can be viewed as both defensive yet blessed with growth attributes. She too agrees that Bursa Malaysia's present valuation levels are comparable to its regional peers. (Yes, the incredible commodity bull run has brought immense fortunes especially to our planters. However, take the planters, the CPO is now way off from the highs already. And considering the fact that the current prices are still insane, who's to say that perhaps we might see more correction in the CPO? Having said that, since we are still in an incredible bull run for the CPO, I would not discount the return of the bull either!)
  
  “This type of volatile market that is characterised by shrinking volumes and heightened risk is not for the faint-hearted, short-term traders nor momentum players. In a bear market, stock-picking is key to out perform,” she says. (Stock picking is forever important. Not only in a bear market! )
  
  In Malaysia, Lim says it is more important to look at companies that are tied to global trends. As the global economy is more integrated than ever, whatever happens outside of Malaysia will eventually unfold domestically.
  
  On this note, Lim says many construction stocks have bombed out.
  
  “Companies like IJM Corp Bhd and Zelan Bhd have half their order books coming from the overseas market and are extremely well managed. I wouldn't look at Malaysian companies that rely only on the domestic market. Political risks have multiplied the risk of investing in these companies. Companies have to either play offensive or die as a defensive player,” says Lim. (Oh yes, political risks and also rising material costs is a also a massive risk for the builders!)
  
  Choong's strategy is to add beta and be less defensive. The high beta stocks would include SP Setia Bhd, KLCC Property Bhd and UEM World Bhd. Citigroup further reiterates its bullish view on SapuraCrest Bhd and TA Enterprise Bhd.
  
  Schroders Head of Retail Sales Josephine Lip says that despite the challenging market environment, there can still be pockets of opportunities out there for eagle-eyed investors.
  
  “An asset class that tends to do well in periods of rising inflation and uncertainty is commodities. Many commodities performed strongly when the sub-prime mortgage market woes were at their peak last year. As the period of heightened volatility is likely to extend over the near term, this strengthens the positive outlook on commodities,” she says. (Yes, commodities are the key performers. Hey, it's a bull, yes? Having said that, isn't it perhaps too late to go gung-ho on commodities, now? Isn't it a bit too late for the party? On a side note, I was amazed to see folks like CIMB launching commodity funds now, CIMB unit launches 2 Islamic commodity funds . )