Trading volume was disappointing as it only increased slightly in this last week when the market rallies after the rebound. The average daily trading volume last week was 750 million shares and the previous week’s average was 662 million. Average daily trading volume below 1billion shares are considered weak. The market was slightly bullish because of positive leads locally and internationally. Locally, industrial production and export numbers were growing on-month and jobless rate fell. World Bank confidence about having a positive GDP in year 2010 and increasing foreign participation in the local equity market boost confidence further.

Internationally, governments in developed nations are confident that the global economy is improving and Australia is the first G-20 nation to raise key interest rates since the start of the global financial crisis more than a year ago as the government believes that the emergency low rates are no longer needed. In the world’s largest economy, manufacturing increases and jobless claim declines.

Daily FBMKLCI Chart

The US Dollar continues to slide against major currencies, continuing its down trend. This again has pressured prices of commodities to increase. Price of Gold in COMEX continues to make historical highs and is currently at US$1,050 an ounce, increasing 5% in a month. Crude Oil in NYMEX continues to stay around US$70 a barrel. Rubber futures in TOCOM slightly rose month-to­-month but it jumps about 6% last week to JPY$214.80 a kg. However, Crude Palm Oil futures in Europe Store Exchange declined from EUR 2,200 per metric ton a month ago to EUR 2,030.

The FBMKLCI is well supported by the short term trend. The benchmark index continues to stay above the short to long term 30 to 90-day moving averages despite several pullbacks from the uptrend that started in April. A major correction is yet to be seen in this 6 months bullish trend. Momentum indicators are about to turn bullish again after mixed signals in the past few weeks.

The RSI and Momentum indicators are starting to move away from the middle level and the MACD indicator is about to cross above its trigger line or 9-day moving average. ADX indicator has just started to increase again, showing good strength in momentum last week.

The Bollinger Bands started to expand again with the FBMKLCI penetrating the top bands after testing the middle band two weeks ago. The same situation (the expansion) happened exactly a month ago and the FBMKLCI made new highs for the year. Therefore, we may expect the same to happen again and this time the projection is 1,280 points before it finds the next resistance. The average daily trading range is the same as the previous week.

Price Map - Direction Forecast

The immediate support and resistance levels are still at 1,196 points and 1,230 points respectively. The FBMKLCI is currently testing this resistance level for the second time in a month. The market is set to test newer highs because of the strong bullish reversal and breakout. The next resistance level is between 1,280 and 1,300 points. However, if the market fails to make new highs and the FBMKLI falls below the 1,196 points support level, then the next support level it is going to test is at 1,150 points.

Looking ahead, the leading Ichimoku Cloud indicator continues to contract last week and this indicates that the support for the uptrend is getting thinner. Being a leading technical indicator, a major trend reversal is not expected until the cloud bands cross. Therefore, there is still a chance for the market to maintain its uptrend at least for another month.

The market sentiment is still bullish and the FBMKLCI is expected to rise in the short term to the next resistance level between 1,280 and 1,300 points. This is only valid if the benchmark index stays above the immediate 1,196 points support level. In the longer term, a major correction is expected to take place once the index moves into the next resistance level. My price map/direction forecast chart for FBMKLCI remains the same as last month.

Therefore, current opportunity is only good for short term traders who trades short term profits because the market is expected to test new highs but with a limited upside. However, accumulating shares for the long term (3 to 5 years) may be too risky at current levels as prices are way above the long term average. Opportunity for long term accumulation only exists when the market pulls back to its long term average or below it (a 200-day moving average can be used as a benchmark).

So, longer term investors have to patiently wait for a major correction to happen. My longer term

forecast (1 year) for the FBMKLCI when it goes into a major correction is still at 900 points and therefore accumulating shares when the index moves to this level or slightly above provide a better low risk opportunity for longer term investors.

Malaysia Export and Imports Chart

We previously warned that whilst there will be some sporadic spurts of stronger exports, they may not signal a meaningful recovery yet. Our view is that exports may not recover to levels seen in mid-2008 for another 2-3 years.

The YoY fall in Aug-09 exports computed continued to be led by a collapse of manufactured goods exports, weakness in commodity prices and a lower volume of commodity exports.

US workers facing record periods of unemployment, negative personal income growth in 4 of the last 6 quarters, and a sharp fall in wealth, will cut spending on the so many discretionary spending items that have formed the core of Asian exports, cannot anchor a global recovery. Restocking by businesses and

public sector spending can only provide a temporary bounce in output that must be rejoined by a consumer spending revival. A revival with conviction of investment spending by businesses is also out of the picture at this juncture with low capacity utilization globally at this juncture.

Weakening of exports accelerated in major markets. ASEAN exports accounting for 25.7% of total, fell a steeper 24.4%YoY (Jul-09: -20.1%YoY) on lower exports of electronics products, refined petroleum products and transport equipment.

Asia Export Growth League Table

Exports to China rose +0.9% YoY (Jul-09: -16.9% MoM), the first increase YoY in 10 months on gains in exports of electronics and crude oil. Exports to China were also 10.3% higher MoM. The positive YoY growth was due to a lower statistical base in Aug-08, the month when severe drops in exports to China began to be recorded in 2008. Exports to the US dropped (-26.7% YoY vs -29.0%YoY in Jul-09), also falling 7.8%MoM on lower electronics exports. The pace of drop in exports to Japan slowed (-25.0% YoY in Aug-09 vs -32.7% YoY in Jul-09) on gains in LNG and crude oil exports. The pace of drop for exports to the EU at -25.9% YoY was however, steeper compared to Jul-09′s -23.9%YoY due to palm oil as well as chemicals and chemical products exports letting up as the recession in major Euro zone economies particularly Germany.

Exports of Electronics were a shade lower MoM at RM20.57b in Aug-09 after rising for the 6th month in a row to RM20.63b in Jul-09 from RM18.6b in Jun-09 and constituted 43% (Jul-09: 42.2%) of exports although still down -13.1%YoY vs -15.6% YoY in Jul-09. Palm Oil exports making up 6.2% of exports (Jul-09: 8.1%) were down a sharper -35.3%YoY (Jun-09: -33.5% YoY) after a major MoM drop. Oil and Gas exports making up 12.5% of exports (Jun-1 09: 12.0%) fell 50% YoY, still amongst the most affected of export categories.

Chemicals and Chemical Products which contributed 6.1% of exports (Jul-09: 6.2%) fell -19.0%YoY (Jul-09: -26.3% YoY). Machinery and Appliances which made up 3.1% of exports (Jul-09: 3.6%) fell at a faster clip of -12.3%YoY (Jul-09: 10.2%YoY) and Timber Products adding up to 2.6% of exports(Jul-09:2.6%) fell

15.1%YoY(Jun-09:-16.0% YoY).

Imports at RM38.26b (Ju-09: RM40.98b) dropped by 6.6%MoM and were sharply off by 18.6%YoY (Jul-09: -16.0%YoY). Jan-09′s -30.4%YoY remains the fastest pace of annual contractions ever on record. Imports of intermediate goods made up 69.4% (Jul-09: 68.7%) of imports, and its fall on a percentage change YoY basis dampens somewhat hopes of a strong recovery, thus continuing the strong trend in preceding months that reflect the recovery in imports of raw material needs for goods to be processed for re-export. On the other hand, capital goods imported amounted to 14.3% (Jun-09: 14.8%) of imports, reflecting weaker capacity-boosting investment plans by domestic corporations that support future growth. Consumption goods made up 7.1% of imports (Jul-09: 7.2%), reflecting lower consumer spending. Consumption accounted for 65.3% of Malaysia’s real GDP in 2Q-09.

The Trade Surplus expanded again to RM9.58b (Jul-09: RM7.8b), a 22.2% jump MoM despite the MoM drop in exports. The widening of the trade gap left Aug-09′s surplus at exactly the mean YTD monthly surplus of RM9.58b. whilst it is still sharply off a peak at RM15.5b achieved in Jun-08 it is a healthy level. Whilst the trade balance dropped in Jul-09, it was read as a sign of some strength rather than weakness.

The Aug-09 data thankfully continues to hint at a V-shaped rebound after the exports slump hit a trough (see charts below). The current scenario does not yet rule out an L-shaped recovery for Malaysia although the possibility of a W-shaped recovery or a double-dip recession in the West appears small. The anchor for Malaysia’s export recovery appears to be China, but the sustainability of this source of exports recovery is thought unreliable whilst it is rising under conditions of a massive stimulus. The global economic turmoil may continue to drive further deterioration in the domestic environment.

Domestic sources of demand remain the key and steady implementation of the Stimulus Spending package is key. Our chief worry is the possibility the economy will fail to respond in a sustained manner and dismal private sector growth is observed way past the phase of aggressive public sector stimulus spending at a time when US consumers appear to be veering towards permanent frugality and Asian consumers are not ready to fill the void.

The meltdown resulted in the collapse of several large banking and financial institutions in the United States and Europe due to weakness originating from the mortgage and mortgage backed securities markets.

However in Asia, many were not too worried about the property market due to the regulated control of the banking system by their country National Bank and the well-established and matured property developers.

As a result of planned developments and sale of property, the Asian property market has remained healthy, despite the country’s Gross Domestic Product (GDP) contraction of 6.2 % in the first quarter of 2009.

As an indication of the strength of the property sector, the National Property Information Centre (NAPIC) recorded higher transaction volume of some 4.0% compared with a decline of 17.8 percent in 4th quarter of 2008.

In its study, NAPIC also recorded 79,149 transactions valued at USD 4.701 billion in 1H 2009 with the Residential property sub-sector being the most dominant. Total transaction volumes were 63.8% while total transaction value was 55.1%.

The development of residential property remained promising with upward trends in the completion and starts category but dwindling numbers in new building plan approvals.

Currently, by 1H 2009, the residential property sector recorded an existing supply of 4,230,328 units with and incoming supply of 544,926 units. Planned residential supply is recorded at 669,554 units.

In the demand scenario for the residential sales performances there were lesser units that were launched into the market in the past quarters. However, sales performances during the nine months were between 70% and 85% since the first quarter of 2007.

There were also signs that the Asian property market was affected by global economic and financial crisis but the market has remained healthy overall.

This is an opportune time for business owners to seriously consider investing in commercial properties, most notably shop houses, office lots and factories, as a means of expanding their operations, utilizing surplus funds or simply to diversify their investment portfolios. Investment in private real estate such as houses for rent may also help positively diversify investment portfolios.

Commercial properties are a good buy at this juncture because business owners can capitalize on the significant drop in mortgage rates which was preceded by some national bank’s cutting of the overnight policy rate to an all-time low of 2% per- annum in February 2009. Borrowers will be able to enjoy the prevailing low rates and save substantially on interest payments by leveraging on the low mortgage rates and lock in at this level for the tenure of their loan.

For risk conscious investors, current alternative investment instruments may prove to be beyond their risk profile in this bearish environment. To mitigate risk, investors should balance their portfolio with a selection of differing investments. As such, some banker and investor believe that commercial properties offer a more stable rental yield. As the latest property induces have shown, demand for commercial spaces has remained relatively constant and unabated compared to other investment vehicles. Properties continue to be excellent assets to hedge against inflation when prices start to rise on the heels of an economic rebound.

While it is ideal for investors to buy at the right time, the right place, and at the right price, most of the time it is all about striking a balance. An estimated 3 million square feet of office space as well as another 3 million square feet of retail space will be added to the Kuala Lumpur landscape this year as a result of launches from the past couple of years. Investors will have ample opportunity to select from diverse locations and types of spaces, and also reap the benefit of numerous freebies offered by developers ranging from free legal costs to discounts in prices. They will also be privy to an array of financing schemes.

Business Mortgage One Account (BMOA) is specifically designed for SMEs and business owners who in the course of their operations will have periods of surplus funds. The BMOA provides a very smart solution for business owners to enjoy savings by using cash in their current account to shorten their loan principal amount, with the added benefit of redrawing with no penalties charges from their surplus payments.

In situations where the SME wishes to ensure his funds are fully optimized for the operating cycle of his business, our SMI One Account is the perfect business mortgage solution because he gets the best of both worlds — funds in his operating account can generate interest credits for the benefit of his business mortgage outstanding.

While we are mindful that property purchases are long-term investments and being fixed assets, are not as liquid as investments in equity; the return on property investment may not be lower than equity investments.

The local official acknowledged that because the local medium income social stratum accommodation basic solution, possibly withdraws from the stage center after the suitable room. Expert had reflected that Shijiazhuang promotes this year first batch after the suitable room, over a thousand sets of bitter experiences abandon buy. Expert pointed out that surpasses the national stipulation after the suitable room profit 3%, causes the fixed price super elevation.

The local related department responds said that although development enterprise for its subordinate enterprise, but this batch after suitable room price sensibly, also has not discovered the false report phenomenon, therefore is impossible to reduce prices. This year first batch meets coldly after suitable Shijiazhuang promotes this year first batch after the suitable room, suffers abandons buys the crisis.

According to expert introduced that this city first batch after the suitable branch is two estates, respectively be peaceful park two issue and Nanling plot, located at this city urban district most side on. Others said that beginning the peaceful park two issues and the Nanling plot, the altogether more than 3000 sets of housing, Shanghai buys already the dew weak sign.

Two plot even prices decide as 2680 Yuan/square meters, part of estates have even amounted to 2800 Yuan/square meters, only compared to neighbor ordinary commercial housing low 200 Yuan to 400 Yuan, the peaceful park two issues supply 2389 anterooms publicly, only then 1070 household Shanghai bought, arranges the number to elect Fang Zheyou to be short 333 households. Nanling plot Shen Gouzhe reflected that also has abandons buys.

This batch are referred to after the suitable room profit exceeding the allowed figure pointed out that “Shi Jiazhai Character (2009) Economy is suitable home price instrument of ratification” according to the Shijiazhuang Price Bureau, the peaceful park two issue of volume fractions are 2.5, the soil-rent value according to 1,500,000/Chinese acres, the financial cost according to 6% annual interest rate computation, the government charge part calculated according to 100 Yuan/square meters, its item cost approximately is: Land cost 900 Yuan/square meters, Jianan cost 1000 Yuan/square meters, in addition expenses and so on earlier period design, reconnaissance, project total cost approximately 2280 Yuan/square meters.

But present’s selling price is 2680 Yuan/square meters, the project profit margin is 17.5%. Stipulated according to the country, developer when development after suitable room, the profit do not surpass 3%. Except the last year building materials price high factor, the present profit was still a suspect to exceed the allowed figure.

But in May, this city real estate department’s data demonstrated that multi-layered commercial housing even price 3117 Yuan, after suitable room even price 2116 Yuan. Contrasts the above price, expert believed that the Department concerned is in “hits after the suitable room advertisement, sells the commercial housing the price.” expert disclosed that peaceful park two phase of development enterprise – Shijiazhuang lives in contentment the property development management limited company, is this city housing safeguard and the real estate administrative bureau subordinate enterprise, such “the fathers and sons relations” possibly pushed the high house price.

Expert said that buying homes contract provision: The vendee is suitable the room to this set of economies to have the limited property right, do not carry on the hiring management. Such suitable room price has been too economical to the developer. Although, Nanling plot developer by no means housing administration bureau subordinate enterprise, but because the price is too high, this plot Shen Gouzhe and peaceful park two issue of Shen Gouzhe the abatement claim, and requests to be clear about the property right question.

The Pricing department calls the price superior commercial housing. However, the local related department believed that above after the suitable room fixed price, the ratio is close to the commercial housing to have the price superiority. Shijiazhuang Price Bureau management charge place Department Head provides on July 25 the refresh data demonstrated that is apart from the peaceful park two contract 300 meter estate prices respectively is: Bright sun blue city present room 3700 Yuan/square meters, Phoenix forward delivery housing 4200 Yuan/square meters. Sun Kexin said that when the Pricing department initially fixed a price, the reference constructing housing cost is a standard, but non-peripheral commercial housing price.

The Shijiazhuang Price Bureau cost investigation team shows An Yuan two issue of constructing housing cost audit report showed that the peaceful park plot B area housing cost (including tax) is not each square meter 2348.59 Yuan, the C area housing cost (does not contain tax) is each square meter 2473.77 Yuan. Shen Gouzhe believed that if by this computation, the B area and the C area housing profit also surpasses 13%.

The real estate management department acknowledged that the fixed price is high According to the local media reported that in June, this city commercial housing even price 3300 Yuan, but reporter not yet obtains this menstruation suitable Fang Junjia. Regarding this, the Shijiazhuang housing safeguard and real estate administrative bureau Assistant Commissioner Xiao Xiangbao acknowledged that this time promoted was formerly higher than after the suitable room fixed price, “the volume fraction was low, the building materials cost rise, was the fixed price high principal factor”.

Expert acknowledged that the peaceful park two phase of development enterprises are firmly in the bureau the subordinate enterprise, “, but I may say responsible, this project has implemented the public tender, if has the evidence to demonstrate that some people increase the cost intentionally, we will pursue the responsibility severely.”

Moreover, regarding the limited property right view, expert explained that Shijiazhuang rented the housing and the economy inexpensively is suitable the housing administrative center to explain said that limited property right i.e., if after obtaining the house property right, might transfer immediately, only want passed through the government price department to handle jointly with the real estate management department fixed price, sold for tallies after the suitable room purchase condition family.

Expert said that after 2007, Shijiazhuang fulfils exactly these stipulations, the contract has not indicated the house-owner to have the right of inheritance, has the negligence truly. On July 27, the Shijiazhuang Audit bureau manages in the construction mouth to indicate specially appointed that the Hebei Province audit hall is reexamining this batch after the suitable room construction cost, “the result has not come out”.