Confession

** It's true, I have failed to keep readers fully up to date with my actions. Apologies, but here it goes. I have bought into Thai property stocks a couple of days ago on the basis of two things...One...the overall market hit a technical support as mentioned before...the 660 level is the number I look at. And two...property company results will be released in the next week or so and they are universally going to be fantastic. Does this mean I have forgotton about the numerous problems still surrounding Thailand and the market?...no...it's just that I see a short term trading opportunity for a week or so.
** Don't worry...the Bear in me still rules. The RBS and Lloyds refinancing issue in the UK these last few days is a case in point. Otherwise known as YOU and I have NOT stopped (as tax payers) financing the banking system. And do you know why everything looks better now than six months ago?...because the bankers and brokers are making great money...and the TV networks report that stuff. As a broker (not a banker, thank g*d) I understand the mentality...short term gain and screw the rest!! Unfortunately, that (in the present environment) is the path to financial ruin.....for the mere mortals on the street that is. Let me know if you find a broker or banker who would be prepared to admit that...with the notable exception of Kirby Daley from NewEdge. It's NOT the done thing. Well, screw everybody else and let's talk the truth.... The rebound in markets and therefore sentiment is a confidence trick (in both senses of the word). To create a better economic environment the Powers require US (yep, you and me!) to spend more....and why would we do that?....because reported profits are higher and therefore everything is getting better. Bull!!!
** Reality is a weird thing. The good news these days is that a lot more people are NOT prepared to take verbatim the C**P that is fed to us by politicians and their ilk. Rock on!! My call?....trade when opportunities are there...and when they are not ask me for advice on where to park that cash for a safe haven. Otherwise known as...don't believe all that you read. Oops!...well, there goes my USP!!
** Comments on this post would be particularly appreciated. I would guess most readers feel as aggrieved as I am....let's debate!!!

SET Approaching Short Term Support

** Clear divergence in the market over the last few days. This was particularly highlighted on Friday as the initial strength (after Wall Street gains Thursday night) quickly evaporated and the market closed at the day low. Foreign investors increasingly becoming a little more risk averse and offloaded a net USD30 mln of stock on Friday. As mentioned previously, the weak USD and strong risk assets trade has probably run it's course for the short term which does not bode well for emerging markets such as Thailand.
** This morning the SET has started out weak again and has clearly broken the uptrend line from April this year. The large gap down during the "rumour" filled days of a couple of weeks ago was a clear turning point and as i pointed out at the time if an investor is uncertain about what is happening it is better to be in cash. The quick bounce back at the time was a trading opportunity for the stale bulls to exit the arena for a while. At current levels the SET has reached the intra day low of that period although I doubt this level will hold in coming weeks. Support levels should be seen at the 650-660 mark and then 600 from a psychological point of view and then 560 below that. Again, the 560 level may seem highly unlikely but I would not be surprised to see a blowout to the downside globally in coming weeks and a "5" handle, if not a "56" handle, is by no means out of the question. A confirmation of the recent rumours will also lead to a similar market level. From a short term perspective the SET is trading at a RSI of 34 which is close to an oversold level...therefore the initial target of 660 seems like a reasonable short term stop and rebound area....for the nimble footed players amongst us. Recent falls have taken the index back to early September levels.
** The fire at one of PTTEP wells in the Timor Sea has sent the stock plummeting this morning. The oil leak at this rig has been a drag on the stock for weeks already and the announcement of the fire today has increased concerns. Apparently, the rig is fully insured but undoubtedly production estimates will be impacted if the structure collapses in the next few days....which appears possible.

USD on the Move

** USD the main player in all markets at the moment. A noticeable shift in sentiment last night in the US as the dollar started appreciating and the market started depreciating! There is no doubt in my mind that the USD is on a long, long downward trajectory. The massive debt which will continue to grow for years to come can only lead to a declining dollar value. However, from a short term perspective it is certainly possible to have period of dollar strength as recent movements have taken the currency down too fast. In recent months the trade to be in has been a "borrow in USD...buy in whatever risk asset you like". The USD is the new carry trade...and the rise in global asset prices from markets, commodities and gold has been a function of this USD weakness. A reversal upwards for the greenback....even for only a few months...would reverse the risk asset buying and lead to a sell off globally. I believe this is coming to a market near you very soon. The longer term call would be to wait for a time when the dollar has appreciated to such an extent (and global markets have fallen) and then buy back into the Asian growth story trade...Thailand included.
** Definite cautiousness coming into the SET in recent days....with yesterday's market volume the lowest for some time. Partly due to the reasons stated above but also due to the nasty freefall the SET experienced a week last Thursday. Traders and investors will not forget the speed and ferocity of that sell-off very quickly....hence, the cautious trading in recent days. The sell-off was a wake up call to all those who were believing that Thailand's day has come again....it may well do so but some serious political and social problems have not necessarily been resolved. They could bite overly optimistic punters on their exposed moonie investment positions within the blink of an eye....or a clasp of the cheeks!.
** So, what would be a good entry point? Below 700 for the very nimble players would be the first call. For the more relaxed observers amongst us I would suggest a 640-660 level although this could easily be a support range too high if a global switch into the USD takes hold. Personally would be much more comfortable with a 560 entry which seems very unlikely at the time of writing....however, stranger things have happened in double quick time. Still like looking at the cash in the bank for the moment....there will always be another trading opportunity if the cash is still sitting there and waiting.

Hun Sen and Thaksin get Chummy

** The SET noticeably weak last Thursday before the public holiday on Friday. With Wall Street's subsequent gain on Thursday night...and loss on Friday...we can expect a rather subdued start to trade this week. Psychological support should remain at 700 with upside over the short term capped at 740. It does appear the fallout from the sharp sell-off ten days ago will be a more cautious approach from investors.
** Q3 reporting season will be upon us soon enough. Likely to see some good numbers from a cross section of the market....particularly sectors focused on domestic demand. Property stocks likely to show some excellent results although should be aware the reductions on transfer taxes should expire next March...and lead to a surge of buying in coming months and then a more sober market. Property plays probably have a little further to run in the short term.
** Want to highlight an excellent report by PFP Wealth Management. www.thepriceofeverything.typepad.com/files/rage-against-the-machine.pdf
This issue highlights the hoodwinking of society with regards to the bailout of the global banking sector....and mainstream's media lack of "balls" in reporting what is actually happening. Reports of outstanding profits by the likes of Wall Street firms in the last two quarters has been hailed as great news for the global economic recovery when in fact it is a reflection of the transfer of tax dollars from the public to the investment banks. No-one seems to be complaining! Wake up!
** The weekend meeting of ASEAN passed off without incident in Hua Hin. The red shirts were kept at bay whilst the meeting produced a great deal of what ASEAN meetings normally produce...nothing. A violence free event was the main positive. Unfortunately there are a couple of worrying events for PM Abhisit to be concerned about. A recent survey has found that ex PM Thaksin is more popular than the incumbent PM....a clear reason to NOT forget the pains that Thailand has been through in recent years. Old Square Face is not out of the picture yet....and is very likely to be a disrupting influence on investor confidence for sometime to come. The second issue is that Thaksin is now encamped across the border in Cambodia as Hun Sen's financial adviser.....now why would he want to be that close to his homeland at this time i wonder?!

Same, Same

** The SET lost a touch of confidence yesterday after starting in the green....closed 0.8% lower. US falls overnight would normally be a decent indicator of direction this morning but it has to be said the SET has taken on a life of it's own in recent weeks. Recent highs of 740-750 will prove a difficult hurdle to jump in my view.
** Same, Same. Getting pretty repetitive on the news front over the last few months. Markets trending higher as massive stimulus liquidity keeps looking for a better home than a bank deposit account. Earnings reports continue to beat analysts estimates....with the vast majority doing so by dramatic cost cutting measures and not by actual top line growth. Those earnings estimates yet again highlight the mediocre quality of much of Wall Street's so-called experts....consistently bodged forecasts to the upside last year and have taken the overly cautious route this year. Pretty much a waste of time looking at most of those estimates....and definitely try to ignore the "earnings beat estimates" headlines coming through over the last two quarters.
** And Thailand? Same, same probably sums the situation up aswell. Asia, including Thailand, taking the lion's share of global equity risk flows as consensus now in place that Asia will be the only decent growth story around for the next couple of years. Thailand's politics has probably surprised positively over the last few months with PM Abhisit's Democrat led Government just about keeping the pro Thaksin opposition at bay. That has been a pleasant surprise which has helped local sentiment considerably. We were looking increasingly like a civil war story created in slo-mo earlier this year...maybe we still are! However, the main driver of the SET has been the consistently low interest rates offered by local banks with abundant liquidity. The cheap loan invested into a newly built condo has been the trade of the last six months....with any additional cash lying around going into the SET for the generous dividends on offer.
** And where now? I guess more of the same until the unexpected derails all the nice positive stories that global policymakers are hanging their hats on. How about a second round of bank failures?...with the survivors desperately trying to raise cash to prop up their balance sheets? How about the global consumer sitting on their hands and refusing to play the fall guy yet again by bailing out the economy with credit cards, mortgages to the hilt et al...? Who knows? The point being times are still extremely fragile and no-one really has an idea how economies will perform in coming quarters/years....even the markets!

Caution the Watchword

** Friday's 3.5% bounce in the SET will settle some highly strung nerves this week. However, the damage has already been done as many investors will be far more aware of the potential losses a dose of bad news could create. The SET tumbled 8% at one point on Thursday. A degree of caution should prevail from now on.
** A rally by the red-shirt Thaksin supporters at Government House at the weekend failed to set the world alight. The main objective of these ongoing protest rallies is to keep ex PM Thaksin in the news. His greatest fear is for his people to forget him. However, I would suspect a significant majority of the population would just like for all protests to stop. Incidentally, if the rumours in the market last week were based on fact one positive benefit would be a cessation of protest for a reasonable length of time.
** A weak close on Wall Street last Friday should keep investors on their guard this morning. Wobbly earnings reports from GE in particular spooked investors who are now looking for all those fabled green shoots to start growing.
** Land and Houses CEO Anant is still bullish on prospects for the large developers (such as LH). The difficulty of finding credit has forced many smaller players to halt projects and has left the field open to large capitalised groups. The problem with LH is that it trades at a very significant premium to the sector which is unwarranted based on earnings outlook. Better value can be found in the 2nd line property stocks although liquidity constraints are an issue. QH is probably the best compromise between decent valuations and ok liquidity.

Uncertainty - Why Take the Risk?

** Today's ongoing sell-off is relatively easy to explain...irregardless of whether the rumours circulating around the market are true or not. What is the point, especially in these volatile times, of risking investments into a market when uncertainty is the key ingredient? None, basically.
** Therefore, foreigners are selling aggressively as the opportunities are still available elsewhere in the region. Thailand has had a discounted valuation for god-knows how many years...it still has for some very sound reasons. The last two days has highlighted one of them.
** Index off around 4% at the time of writing. Do prices look tempting? Sure...except when looking back to see how far they have actually fallen. Basically, prices are back to levels only seen a couple of weeks ago...is that really such a bargain? No.
** If in doubt. Sell.

Rollercoaster Day Raises Risk Profile of SET

** Walking (writing) on eggshells this morning. Yesterday's dramatic movements in the SET were certainly a wake up call for anyone who has gone fully long in recent weeks. For those who missed the rollercoaster it went something like this: SET starts off on strong footing in line with regional markets. Selling starts kicking in mid morning and index closes down by the lunchtime session. Market plunges after lunch break and is 4% lower 15 minutes before the close of the day. Massive last few minute rally brings the closing numbers to only a 2% loss but with a cool Bt47 bln in turnover....USD1.4 bln in Mickey Mouse money. Numerous red flags rise due to these strange movements...highlighted perfectly by the fact Thailand was the only market in the region behaving this way....everyone else had a nice solid day.
** SET chief said that NO special developments had occured that would lead the market in this way and investors should ignore rumours circulating. Obviously, a lot of foreign investors do listen to the rumours and net sold a hefty USD120 mln....all of it scooped up by domestic retail punters. As to whether the rumours have any basis in fact no-one can tell. However, what it has done is highlighted the fragility of the market and the possible reaction to negative news that would occur during times of difficulty. I would suggest that yesterday's movements will give foreign investors a pause for thought before committing significant new monies to the market at the present time. Uncertainty is the key word here....everyone hates it, especially the SET. Overall Thai market fundamentals do remain good in comparison to developed markets but the astounding rise in recent months does provide the opportunity to book those profits and get out whilst all is still rosy. Wouldn't be fun being part of the rush to the exits.
** DOW breaks 10,000 last night on solid fundamental news!...only kidding...it was JP Morgan's profit report that spurred the surge. Nothing fundamental about that in relation to the US economy. Goldman Sachs report tonight...embarrassment of riches expected. Get the sick bucket ready.
** Crude settled above $75 a barrel overnight...the year's high. Hmmm...markets at year high's and crude at the same point....doesn't really equate to a good long term healthy economic recovery does it!? That's ok though because fundamentals are not really the issue at the moment....it's liquidity and momentum combined.....an explosive combination on occasions.