How long can Pakatan Harapan Last ?

A coalition of convenience to oppose BN.

It was a hard-won battle 

Pakatan Harapan won by a simple majority of 113, only 2 seats above the magical 111 figure. This is only the 4th week after GE14 but so many things has happened and some were dramatic. I was like sitting in front of my TV watching HBO. 

Tomorrow will feature our main actress, Rosmah Mansor's venture at the MACC.

As well as the Conference of Rulers to look into the appointment of Tommy Thomas as the new Attorney General.

Click 'Alamak-OutSyed The Box' for an interesting article.

Rais Yatim 'Beh Tahan'

Back to my earlier question, looking at all the events in the last three weeks, how long can PH last?

Is there any precedence in other countries where a dominant government that has been in control of the country for decades being overthrown by a coalition of opposition parties with diverse political ideology?

India (JP 1977)

The Indian National Congress (INC), India's dominant political party, that won 5 consecutive national elections after India's independence in 1947. They were in control of the central government of Indian for 30 years until 1977 when they lost the 6th national election to Janata Party (JP), which was an amalgamation of several Indian political parties with a common goal of overthrowing the INC. 

JP won a sweeping majority (330 out of 542 seats) in the Indian Parliament. But in the following 3 years, continuous in-fighting and ideological differences made the new JP government unable to effectively address national problems. They had two Prime Minister within three years(1977 to 1980). 

In the 1980 general election the INC took back the central government and continued to win all the election until 1996. JP had ceased to exist. 

Japan (DPJ 2009)

The Liberal Democratic Party (LDP) and its allies that had governed Japan since 1955 (except for a brief period in 1993) was defeated by the Democratic Party of Japan (DPJ) in 2009. 

DPJ, a coalition of four political parties, after winning the election in 2009, there were endless in-fighting within DPJ. They had three Prime Ministers in three years. On the third year, in 2012,  DPJ lost terribly to LDP in the general election. LDP continued to win the 2017 general election.

Malaysia (PH 2018)

Pakatan Harapan under the leadership of 93-year old Dr. Mahathir that has very little time to spare (considering his advanced age) has inherited a hot potato with Rm 1 trillion national debts, a most bloated civil service in the world, endless problems of race, religion, corruption,etc. etc. But the main challenge to the survival of PH is whether the four component parties can stay united without in-fighting and can effectively address the national problems as a true coalition. 

Don't forget Umno and Pas that have a combined Malay votes of more than 50% are ever ready to stir up racial and religious issues to their benefit. And don't forget the king at the palace.

How long can PH last? The next question is whether PH can win the 15th GE? It depends on whether the 4 component parties can stay united, trusting each other and work like how Dr. Mahathir 2.0 has been worked since he was appointed as the 7th PM.

We must stand behind the new government that we have voted in

I have been wondering why it has taken such a long time in appointing the rest of the cabinet? Then I saw the following

I thought this must be the reason until I read the latest article from Syed Akbar Ali. If what he said is true, we all must stand behind Tun Dr Mahathir to uphold the Federal Constitution and the Rule of Law.

Click 'Outsyed The Box' for the article.

At the end of his article he said,

" If such an event comes to pass, let us all stand behind our Prime Minister. 

Not just because our Prime Minister happens to be Tun Dr Mahathir Mohamed but more importantly because we must uphold the Federal Constitution and the Rule of Law in this country. 

If we do not stand up very firmly for our rights now,  then they are going to trample all over us again. And again".

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Bursa Malaysia - No other choice except Bear.

FBMKLCI (1,719)

KLCI dropped 56 points today (-3.19%) to confirm the arrival of the bear. At best, we still have a last rebound, the wave (v).

Or it may choose to go all the way to the south with some technical rebound along the way.

If the current correction is a mega wave (6) correction, it will either have a shorter duration sharp 45% pullback to 1050 level or a longer duration but not so deep, say about 25% pullback to form the mega wave (6).

If it is a super wave II correction then it will have to drop to at least the mega wave (4) level.

Industrial Index (3,052)

The Industrial Index dropped 102 points (-3.23%) today. The most likely wave count is an overlapping wave (i)-(ii)-(iii)-(iv)-(v) major wave 5 formation. Similarly it is either forming its mega wave (6) or it is forming its super wave II corrective wave.

Similar to KLCI, its mega wave (6) can either be a shorter duration but bigger magnitude 37.5% pullback or a longer duration complex wave with about 20% pullback.

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Some of the Mega Projects Committed or Proposed

The 'One Belt One Road Initiative' (OBOR) refers to 'The Silk Road Economic Belt and the 21st Century Maritime Silk Road', which is a development strategy rolled out by the Chinese government.

Peninsular Malaysia with Strait of Malacca that handles almost half of the world's total annual seaborne trade tonnage, has a crucial role in this China's initiative.

Ever since China rolled out its OBOR initiative, many countries have received billions of dollars (loans from China) towards infrastructure development more to serve China's objective under the pretext of trade. 

What will China do if a country is unable to service its loan? 

Sri Lanka under such a situation, hands over the strategic Hambantota port (refer to the OBOR map for its location) to China on a 99-year lease in December 2017 when she failed to pay her debt. (China has learnt her Macau's and Hong Kong's lessons from the western power). 

The Najib administration that loved mega projects, took the opportunity to borrow money from China to pay China to build infrastructures to serve mainly China's objectives as well as his objectives. 

Projects related to OBOR committed by Najib so far include the ECRL (Rm54 billion that may finally exceed Rm100 billion), the Melaka Gateway (Rm27 billion), Kuala Linggi Port (Rm11 billion), Penang Port (Rm 5.6 billion) and Kuantan Port (Rm700 million). Yet to be committed is a proposed Carey Island project (Rm100 billion) in a China-MMC joint venture.

Other China projects and investments that are not related to OBOR are the Forest City (US$100 billion), Robotic Future City, Johor (US$3.46), Samalaju Steel Complex (US$3 billion), Land Reclamation Penang (US$540 million), Green Technology Park, Pahang (US$470 million), Methanol Plant, Sarawak (US$190 million) and The Shore, Sabah (US$130 million).

With the Singapore government is the Kuala Lumpur-Singapore High Speed Rail (Rm110 billion) which the PM Dr. Mahathir has announced its cancellation in order to reduce the federal debt that has gone beyond Rm1 trillion.

Bursa Malaysia - My optimistic wave count may end within a day or two

Bursa Malaysia has another bad day. FBMKLCI dropped 21 points (-1.20%) to 1775 and Industrial Index ended the day at 3154, dropping 58 points (-1.82%). Further drop from their respective level may end my optimistic wave counts for both of them.

FBMKLCI (1,775)

My last optimistic wave count for KLCI is as shown below assuming that KLCI is forming its major wave 5 with hopes of moving into uncharted territory

With today's 21 points drop, KLCI has moved very close to the lower trend line.

With another sharp drop tomorrow, I have no other option except to accept the fact that major wave 5 has ended. Next to expect is either a mega wave (6) formation or a higher degree super wave II formation.

Industrial Index (3,154)

At crucial moment, I always like to refer to the Industrial index for confirmation of the major trend for the market. Industrial Index is the oldest index for Kuala Lumpur Stock Exchange, the former name of Bursa Malaysia. The index was known as the 'Straits Times Industrial Index' in the 60's and early 70's. In 1974 it was renamed the 'New Straits Times Industrial Index'.

My long term wave count for the Industrial Index is slightly different from that of the KLCI. My optimistic option for the Industrial Index is still quite inline with that of the KLCI.

At this moment I am assuming that the Industrial Index is at the wave (ii) of its major wave 5.

With today's 58 points drop, the Industrial Index is moving very close to the acceptable 100% retracement for its wave (ii), only 61 points away.

Once it drops below the 3093 level, I will have to abandon this optimistic wave count. Similar to KLCI, there is this 'double top' formation. Just pray hard that the Industrial Index can hold above the 3093 level.

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FBMKLCI - Be very careful, very very careful.

Dow (24,753)

Dow has started its major wave 9. Need no worry at this stage that the market will collapse until Dow has reached the tail end of this major wave 9.

FBMKLCI (1,797)

Until the market closed on Friday, KLCI managed to stay above the lower trend line. If it can start to move higher next week to form its sub-wave v, there may not be any major correction until the major wave 5 is completed.

After the completion of the major wave 5, a not so damaging scenario is a 17% major wave 6 pullback if the mega wave (5) has 9 waves.

But if the mega wave (5) has only 5 waves, then the higher degree mega wave (6) correction can be very damaging, it is going to be a 45% pullback.

Going back to the 5-year chart.

If KLCI instead of moving higher next week, for some reasons, it punches through the lower trend line and continues to move lower and lower breaking the 1,720 level, very likely the major wave 5 as well as the mega wave (5) have ended. The best outcome that it can have is a mega wave (6) correction with a 45% pullback.

It is a 'double-top' reversal. With major wave 5 at the same level as its major wave 3, it can not have a major wave 6 (-17%) correction.

FBMKLCI (1,775) - What's next

KLCI dropped another 28 points on Thursday and has punched through the 1792 level that I mentioned yesterday and it has another 5 points to go before dropping below the last line of defence, the lower trend line.

If it can hold above 1770 level, it is still possible that KLCI is on its sub-wave iv correction that I mentioned yesterday.

However if KLCI were to have another sharp drop tomorrow, I would say, major wave 5 as well as the mega wave (5) have ended.

Under this circumstances, the best that I can hope for is a mega wave (6) correction of around 45% to 1050 level.

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