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The KLSE stabilized last week after the 19 day correction, the longest since 2004. The KLSE bottomed with a 2 bar reversal at the 1600 level. With the election coming the authorities will defend the market from attacks by foreign funds. They have the means and the incentive to maintain stability.
This correction has uncovered opportunities to lock in high quality shares at better prices and lock in higher dividend yields.
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Below are some comments from David MacAlvaney, a gold dealer from Colorado. He describes the background as a result of Obama winning the US election. The background in a nutshell means more deficit spending, money printing, unlimited QE, increased socialism, bigger government, higher taxes, more regulations, higher unemployment and a hostile environment for business. Obama admires the European socialist model of borrow and spend, repress interest rates to near zero, high gas prices, increased welfare and big government.
This is the reason I favor investing in Malaysia/ Singapore. The socialist disease has not infected this part of the world.
“That said, any attempt to reduce the deficit through spending cuts or higher taxes would be bearish for the economy. Complicating matters further, any action that stood to increase the deficit could be equally bearish, as it may serve to raise long term interest rates – hence the quandary/political mess in Washington. It’s clear which direction President Obama wishes to take us. His budget plan, released Thursday, embraces the status quo (borrowing and spending). Phased in over the next decade, the plan includes a $1.6 trillion increase in taxes, an unlimited debt ceiling privilege, $50 billion in stimulus, with an extremely under-matched $400 billion in spending cuts. Likely, if passed, high interest rates would be expected to appear sooner rather than later – a dynamic the Fed will no doubt have the pressing need to control through additional QE. ” David MacAlvaney
Bottom line – have some exposure to precious metals and high quality dividend shares. This is a capital preservation + income strategy.
Daily KLSE with a classic 2 bar reversal on high volume. The down trend has been knocked sideways as often happens after exhaustion selling, negative news, uncertainty. and a 2 bar reversal.
Here is the premium section.