Another Currency Crisis ?

Venezuela

It started with Venezuela, early this year the exchange rate of bolivar is around say 120 bolivar to 1 USD. Within 6 months the bolivar dropped to 248,000 bolivar to 1 USD. That is a 194,000% drop.

How can this happen, Venezuela ranked No. 1 in term of oil reserve. It has more oil than Saudi Arabia. A good example of mismanagement and corruption. Luckily we kick out BN.

Argentina

Then came Argentina. The peso started the year with 18.45 peso to 1 USD and now it is about 38.62 peso to 1 USD, that is about 110% drop.

Turkey

Now everybody is looking at Turkey's Lira. The lira started the year with about 3.72 lira to 1 USD and now it is about 6.62 lira to 1 USD, a 78% drop within 6 months since March 2018.

Is there a secret hand behind all these?

Will the crisis spread to Asia? Another Asian Currency Crisis on the way?

Lets look at the performance of major Asian currencies in 2018.

Chinese Renminbi dropped about 9%

Japanese Yen dropped 5.7% from its March high of 105.28 yen to 1 USD

Korean Won dropped 6.14%.

Singapore dollar dropped 5.5%

Philippines peso dropped 10%

Indonesia rupiah dropped 13%.

Thailand baht dropped only 5.6%, quite strong.

And our ringgit is weaker than Thai baht and Singapore dollars, it dropped 7.4%

The Australian dollars dropped more than the ringgit, it dropped 13% against USD.

Why USD is so strong despite the fact that the Federal Reserve had printed so much USD in its QE programs from 2008 to 2014. Altogether 3.6 trillion USD were printed. From the chart one can see how drastic is the Fed's action from 2008 to 2014.

China and Japan together they held a combined US$2.2 trillion of US treasury bonds

Looking at today's US's Federal Debt Clock, the figure is US$21.45 trillion

Based on US's 2017 GDP figure of US$19.48 trillion, the debt to GDP ratio is 110%.

Looking at the above my question now is whether the USD will collapse one day when the whole world decides to dump USD. That will be another crisis.

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MACC Shocked

Click 'MACC Shocked At Lim's Acquittal, But Never Shocked At Shahrizat's Cowgate Acquittal' for an interesting article from financetwitter.com.

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KLCI and Its OBV

All stock monitoring software compute the OBVs (on balance volume) of stocks and indices based on price movement. Whenever prices went up, the respective volumes were assigned as positive volumes and whenever prices dropped, the respective volumes were assigned as negative volumes. Summation of all these volumes for a particular stock or index is the OBV for the stock or the index.

For stocks, it is acceptable to me to compute the OBV based on price movement. But for index, I usually compute my own OBV based on market breadth (advance/decline) instead of price movement. The reason is simple, sometime the index can be positive but there are more losers than gainers. And sometime we can have more gainers than losers but the index can be negative. Basically market breadth is a better indicator than index to gauge the direction of the overall market.

From the above figure one can easily notice the obvious difference between the OBV based on closing price and that based on market breadth. 

The OBV based on market breadth has provided sign of distribution as early as end of 2016 and confirmed by August 2017 whereas the OBV based on closing price continued to move up and down together with the index. When KLCI moved very close to 1,900 level in mid-April 2018, the OBV that is based on market breadth has reached its temporary bottom at -100,000. 

The indication is that the 'smart money' has been selling since end of 2016.

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Weekly Update

Dow (25,964)

Dow managed to pull away with a small gap to form a minor wave iii on last Monday. Even though it was followed by 4 days of consolidation, but the pattern was more bias towards a yet to finish major wave 7.

FBMKLCI (1,819)

If KLCI can move in tandem with the Dow, it is expected to set more record highs in the coming months until next year in the course of completing its major wave 5.

But the problem with KLCI is when Dow plunged, KLCI would plunge together. But when Dow has a rally, KLCI may or may not follow, due to the many problems facing by the PH government. It is possible that KLCI can move in an opposite direction to the bullish Dow in the medium term to complete the wave C of its mega wave (6) until the new government has sorted out problems left behind by the BN government.

Inari Amertron Bhd (Rm 2.24)

If Inari can move higher from its current level, its current correction is likely to be the sub-wave ii of its major wave 9.

But if Inari starts to move lower and lower from its current level. It is highly possible that the major wave 9 has already been completed forming a 'double-top' reversal pattern.

Insas Bhd (Rm 0.845)

I am still keeping my fingers crossed waiting for Insas to complete its major wave 5.

By comparing the price movement of Inari and Insas, one can see that even though each Insas share has 0.95 Inari share, but it hardly moved in tandem with Inari.

Since 2013, Inari has gained 1,300% by 2018 whereas Insas has gained less than 100% from 2013 to 2018.

Both Inari and Insas have announced their respective quarterly result last week. Insas EPS is 1.04 sens with net assets at Rm 2.49 a share. Inari EPS is 1.80 sens and net assets at Rm 0.33 a share.

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Weekly Update

Dow (25,790)

If Dow can continue to move higher in the coming trading sessions, then it is on the sub-wave iii of its wave (vi) of its major wave 7.

But if it starts to move side way and lower, then it is more likely that Dow is at the tail-end of its major wave 8. Bearish.

My reading for FBMKLCI remains the same as what I have mentioned previously as I expect it to move in tandem with the Dow.

Dutaland Bhd (Rm0.56)

Duta will be announcing the quarterly result for its 4th quarter ending 30/6/2018 anytime next week before the Friday's National day. Its cumulative earnings for the first three quarters was a pathetic 0.22 sen a share.

Duta has sold 11,579.31 hectares of its oil palm plantation in Sabah to a subsidiary of Boustead Plantation Bhd for Rm750 million and it has received the 10% deposit amounting to Rm75 million by October 2017. Duta has completed the sale on 16th May and received the balance Rm675 million on the same day.

Based on its circular to shareholders dated 28th March 2018, Duta was expected to report an earning per share of 44.3 sens for its financial year ending 30/6/2018.

Computation was based on sale proceed of Rm750 million less the aggregate NBV of the plantation assets of Rm340.24 million and divided by 846 million shares. Net assets per share will increase from Rm1.11 to Rm1.54.

But net cash received in May 2018 was Rm703 million after deducting Rm47 million of expenses related to the land sale. Based on Duta's 3rd quarterly report, it has a net cash of Rm 21 millions. Together with the Rm703 million received, its current net cash per share is about 85 sens. But this will not guarantee that Duta will go to 85 sens. A good example is FACB that has a net cash per share of Rm1.94 but it closed at Rm1.32 last Friday.

Technically if Duta can moved up strongly next week because of the one-off earning of around 44 sens a share, it is possible that the run-up is the sub-wave v of its major wave 1 with a target of 73 sens.

But if it failed to run next week and instead it starts to move lower after releasing its 4th quarter result, then its side way movement since 2010 will continue forming a major ABC-X-ABC wave (2).

Nothing is for sure. That is the reason market can exist. That is why there is always buyers and sellers at the same time every good or bad moment.

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Is he relevant ?

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To right the wrong

My choice for the 8th PM

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