KUALA LUMPUR STOCK MARKET OUTLOOK: Forecast for Friday, August 17, 2007: We would buy on any sell-off as market oversold. We expect KLCI to test 1160 level and rebound.



Technically speaking:

1. As at Thursday’s close at 1207.61 the KLCI was lower by 44.21 points or 3.53%. Losers overwhelmed gainers 1,066 to 41 and volume was relatively heavy at 1.52 billion shares.

2. The local bourse witnessed its second taste of panic selling yesterday, and a much larger sell-off, in reaction to a 167-point drop in the Dow.

3. It wasn’t a huge drop by the Dow but Asian markets triggered its most violent sell-off in a long while with all bourses bath in a sea of red and all chalking losses from 1% to 7%. Some sub indices, like the tech-heavy KOSDAQ, were even down to 10.2% and our Mesdaq down by 7.51%.

4. With Asian markets reeling under selling pressure from fears that the subprime crisis may result in a global recession by slowing down world economic growth, European bourses followed suit with the London Footsie losing 3.25%, the French CAC losing 2.72% and the German DAX losing 1.72% at time of writing at 10:46 pm last night. The Dow was lower by 0.84% or 107 points at time of writing.

5. This morning all eyes will be on the Dow’s performance last night. If the Dow closes in negative territory, Malaysian stocks will likely open lower. How much lower will depend on the Dow’s overnight weakness.

6. But if the Dow closes in positive territory, we would expect a bullish opening on Malaysian stocks.

7. In our view, any bullish close on the Dow is a “buy" signal on Malaysian stocks as we have fallen way to far down, and are grossly oversold. All we need is some positive leadership from the Dow to lure buyers back in.

8. Today we are looking at the following stocks:

9.

1.GAMUDA5.80 OL11.EQUINE1.62 OL

2IJM6.00 OL12.MAHSING1.50 OL

3.MRCB2.07OL/1.58OL11.MKLAND0.57 OL

4MUDAJAYA2.48 OL12.TEBRAU0.76 OL

5RANHILL1.70 OL13.HUBLINE0.22 OL

6TSRCAP1.70 OL14.KENCANA1.68 OL

7UEMBLDR1.16 OL15.KUB0.64 OL

8UEMWRLD2.60 OL16.SAPCRES-WA0.80 OL

9TIMECOM0.80 OL17TA-WB0.44 OL

10SCOMI1.16 OL18.BURSA8.50 OL

10. Note that the above stock prices may not be tested before they move higher. We leave it to your discretion as to what lower level these stocks will need to reach before you are willing to buy. But these are some of the “good" stocks that have fallen a lot and are due for a rebound if the market rebounds.

11. We are not saying that this downtrend has ended. We still feel that this subprime issue is still unravelling and can result in further declines. Taking this into consideration we have peg the KLCI to test 1090. But we feel there need to be a rebound after testing 1160 because our stocks and market is way oversold. We need a technical rebound.

12. If you do not feel comfortable buying for a technical rebound, then continue to stay out.

13. The Dow should rest after testing 12250, a 1.618 Fibonacci extension of wave “a" measure from top of wave “b".

14. Our targets for the KLCI is now at 1160 after which we expect a rebound before another test of 1090.

15. The ringgit lost a whopping 200 pips to 3.5050 from 3.4850!

CONCLUSION: We consider Prof Pruden’s target of 14,400 having been achieved. The Dow is now in the middle of the sell-off that we had forecast. Look for further weakness to test 12250. This in turn should negatively affect world equity markets. We are staying out.

Long-term Upside Targets: 1494 (Target amended on 15/6/07).

Immediate downside targets: 1348 (hit!)/1291(hit)/1222/1090