KLSE ~ drop below 1400 ~

Market has drop below 1400 now, approximately 13% drop since its highest 1,597.08 in July/Aug 2011.

Foregin Investors:

Overseas investors turned net sellers of Malaysian stocks in August for the first time in five months as the benchmark index posted its biggest monthly slump in almost three years.

Foreign funds unloaded RM3.8 billion (US$1.3 billion) of Malaysian shares in August, the most this year, after four consecutive months of inflows, according to data on the Kuala Lumpur stock exchange’s website.

Foreign ownership in Malaysian equities declined to below 22 percent at the end of last month from 22.1 percent in July, according to Maybank’s report.

Brokers Forecast:

Brokers have continued to downgrade their year-end target for KLSE on the back of poor second quarter earnings results and the global economy’s deteriorating outlook.

CIMB Research lowered its end-2011 KLCI target from 1,700 points to 1,580 points due to the disappointing second-quarter results.

“We also introduce our end-2012 KLCI target of 1,660 points, based on a PE target of 13.4 times, a 5% discount to the 3-year moving average PE to factor in heightened risks of a double-dip recession in the United States and the dent that the wild market swings of late are inflicting on market sentiment,” said CIMB Research head Terence Wong.

OSK Research head Chris Eng said that while he had yet to see indications confirming a recession, the earnings downgrades in the second quarter had led to to a cut in his earnings growth forecast by between 1% and 3% to 14.6% for 2011 and 11.4% for 2012.

He said the recent reporting season was the worst quarter since the first quarter of 2009, both in terms of matching expectations as well as the number of upgrades versus downgrades. This has led to his KLCI year-end target being trimmed from 1,557 points to 1,533 points, although he maintains the 2012 KLCI fair value of 1,466 points.

Eng, who expects to see risks in the third quarter 2011 earnings season given the global gloom and the potential of companies reporting provisions in times of market uncertainties, remains generally defensive in stock selections.

Affin Research head Andy Ong lowered his 2011 KLCI target to 1,530, based on a reduced 14 times 2012 earnings from 1630 points. The house also has a 2012 KLCI target of 1,700, premised on 15x PE (2013 earnings) and based on the asumption that the US economy would not fall into a double-dip recession and that the eurozone’s sovereign debt crisis would recede in the months ahead.

Ong remains hopeful of further stimulus measures in the United States, which he thinks will be a possible point of inflection to the prevailing negative market trend.

My View:

KLSE drop 13% still minor at the moment ~ still have room to drop more.

The current index is lower than what forecasted by CIMB Research, OSK Research & Affin Research. Wonder what they will say next??

It is time to move in now?

As mentioned in my previous blog, you should keep cash at the moment. Wait until shares drop at least 50% of their highest value before start considering to buy in....

http://awonginvestment.blogspot.com/2011/08/recently-big-drop-in-us-europeans.html

To me, I believe KLSE will drop below 1000, maybe after election next year (2012). The government will try their best to keep the economy steady ~ at least until the election is over???