Waiting for improved sentiments

Hi Readers,

Some of you have been asking to post more articles or trading stocks over the last few weeks. My response was that the market breadth is still weak and its better to stay sideline while waiting for the for improved sentiments. I am in the opinion that we can start to pay attention to the market now. Looking at the KLCI performance in Image 1, it is currently on a sideway consolidation (shaded in blue). On 30th Aug, it attempted a breakout from downward trendline and only to see it going back into sideway consolidation on 3rd Sep. This was due to MPC decision to maintain the OPR rate after 25 basis points cut in May'19. Hence, still waiting for KLCI index to break above 1611 at the back of improve global sentiments.

Image 1: FBMKLCI Performance on Sideway Consolidation

Additionally, central banks worldwide are announcing rate cuts as well in order to boost respective local economies due to the uncertainties of global slowdown, escalating trade wars and possible a messy Brexit. Below are some of the rate cuts by central banks recently:

• European Central Bank (ECB) announced rate cuts and quantitative easing for eurozone on 12th Sep; interest rates reduced by 10 basis points
• Turkey and Denmark announced rate cuts on the same day as ECB rate cuts
• US Fed announced rate cuts of 25 basis points on 18th Sep
• China lowered its lending reference rate to 4.25 per cent from the one-year official benchmark of 4.35 per cent
• At the point of writing, there are more than 30 central banks around the world have cut interest rates this year in the effort to boost up local economies

The impact of the rate cuts will take effects gradually while central banks continues to monitor the risk of external headwinds mentioned above. While rate cuts is intended to boost local economies, it may have an impact to the currencies as well. A cheaper currencies will be good for exporter but resulting in more expensive imports and thus bringing inflation into the picture. If there is no growth, there is no inflation as the saying goes.

Having said that, its good to start observing the market especially on undervalued counters that got beaten up. An improved sentiments in coming months will definitely help it recover towards its fair value. 

Good luck and all the best!!!

Disclosure: The information above is for sharing purposes without any understanding of investment targets and needs of readers. References to the price movements is informational based on my analysis and data obtained from sources believed to be reliable at the point of writing. Please do your own due diligence as this article is not a recommendation to buy/sell.