InThis how Vietnam manipulating the Dongs. The Dong and ringgit moved in tandem from 2014 to 2016 as against the USD. In 2017 ringgit (white line) appreciated but Vietnam Central Bank maintain the Dongs at same level..by early 2018 when USD strengthened, the ringgit and dongs moved down in tandem . By mid 2018, Trump has targeted Vietnam as currency manipulator and consequently the Viet let the Dongs float freely. By then you can see the Dongs has been undervalued than the ringgit.
iShares MSCI Malaysia ETF is an exchange-traded fund incorporated in the USA (NYSE symbol -EWM) . The EWM is to provide investment results that correspond to the performance of the Malaysian market, as measured by the MSCI Malaysia Index. Simply means it mimic the index.
The EWM invests in a representative sample of index stocks using a "portfolio sampling" technique.
ETF is an investment fund and traded just like buying and selling shares.
The MSCI Malaysia Index measure the performance of the large and mid cap segments of the Malaysian market and currently it has 44
constituents or Malaysian shares. (FBMKLCI has only 30 shares of big cap companies)
Who is MSCI. .
MSCI Inc. is a Global provider of equity, fixed income, hedge fund stock market indexes, and multi-asset portfolio analysis tools. It operates in similar to FTSE Ltd (partly owned by London Stock Exchange) and Standard & Poor's ( publisher of the SP500 and Dow Jones Industrial Index). MSCI was founded by Morgan Stanley, a US investment bank.
MSCI Malaysia Index is widely follow by foreign fund managers who invested shares in Bursa Malaysia. These fund managers basically buy and sell EWM for the need to be invested in Malaysian shares without holding any of those shares, and hedging. Some sort similar to Bursa derivative market (BDM) Kuala Lumpur Stock index future ie FKLI.
Hedging using EWM
Let say, a fund has subscribed to IPO of Malakoff Bhd at 1.70 in 2014. By the end of 2015, Malakoff price fall to RM1.40. When Malakoff price keep falling, the fund manager has 4 alternatives.
1. Cut loss ie sold the shares with a loss.
2. Hold the shares and by end of 2015 financial provide the impairment (TH screw up on this)
3. Average down ie buying further Malakoff shares to average down the cost of holding.
4. Hedging. This last alternative is not allowed for unit trust such as ASB but hedge fund and non unit trust investment managers can used this hedging mechanism.
The easiest hedging for holding Malakoff shares is buying a put option. A put option is the right to sell. Let see...Hold Malakoff shares at RM1.70 a shares. A put option was bought with a strike price of RM1. 70. We paid the premium for the put option and hang on. By end of 2015 when Malakoff fall to RM1.40 we settle the deal by delivering Malakoff shares at RM1.70 to the seller of put option. In reality Buying /Selling put and call option is more complex than above. Option trading is offer by Bursa Malaysia but never commercially take off since local investors are not that sophisticated.
Hedging using EWM or FKLI is simply taking the opposite direction. By holding (buying) Malakoff, the management will sell EWM. Theoretical, you sell EWN when Malakoff was at 1.70. As overall stock market fall and Malakoff price fall to 1.40..EWM which is based on Index also fall. So we buy back EWM at lower price than when we sell ie short selling. The profit from EWM will offset the loss for Malakoff. This is the basic mechanic of hedging using EWM or FKLI...on reality it is more complex and involve statistical and financial calculation.
So as we can see, as the market fall foreign fund managers have dump substantial shares earlier. Since they are hedging, they will continued dumping the balance of the shares to pull down the index and subsequently the EWM further to make more profit on the short selling of EWM. The net effect is that the profit from short selling EWM is greater than the loss of selling the shares.
This is the game of vultures ie the foreign fund managers.... and Bloomberg who livelihood depend on vultures subscribing to their network keep spewing news slanting in favour of the vultures.
Gold vs. the Dollar
Gold is an asset has it has intrinsic value ie similar to investment in a house or other property such your kebun durian or kelapa and shares.
As gold is mostly quoted in USD its value fluctuate over time, sometimes in a volatile fashion. As a rule, when the value of the dollar increases relative to other currencies around the world, the price of gold tends to fall in U.S. dollar terms. It is because gold becomes more expensive in other currencies. As the price of any commodity moves higher, there tend to be fewer buyers, in other words, demand recedes. Conversely, as the value of the U.S. dollar moves lower, gold tends to appreciate as it becomes cheaper in other currencies.
Simply means, demand tends to increase at lower prices and vice versa.
While the relationship between the value of the U.S. dollar and gold is important, the dollar is not the only factor that affects price of gold. Interest rates also affect the price of gold.
Gold does not yield interest in itself; therefore, it must compete with interest-bearing assets for demand.
When interest rates move higher, the price of gold tends to fall, since it costs more to carry the metal. In other words, other assets will command more demand because of their interest rate component.
Although this was a factor few years back but currently the relationship gold eith interest rate wad not that strong.
There is also a psychological factor attached to the value of gold. The price of gold is often sensitive to the overall perceived value of fiat or paper currencies in general terms. During times of fear or geopolitical turmoil, the price of the historic metal tends to rise as faith in governments falls. During times of calm, the price of gold tends to fall.
As perhaps the world's oldest and most storied currency, gold is an important barometer in terms of global economic and political well-being
So while rising interest rates may increase the U.S. dollar, pushing gold prices lower (gold prices are denominated in USD), factors such as equity prices and volatility coupled with general supply and demand are the real drivers of the price of gold. If you look at the chart, the blue line is DXY ie Dollar index. By September 2018 gold and DXY are positively correlated. This is basically due to demand of gold. It was reported in 4th quarter last year Central bankers of most countries have been buying the good.In fact last year, holding of gold by Central Bankers were the highest in 50 years.
Continuation on my April 23 pist on Gib retracement..this is on gold.
The AB rebounce moved passed not only 61.8 but also beyond 78.6 indicating a bullish that it is expected to penetrate the resistance at A. Currently prices are govern by the BC upthrust and the correction is st 38.2. As long as the correction did not ho beyond 61.8 uptrend in gold is still intact.
The chart clearly showed by Mid March the Dollar strength has no effect on weakness of ringgit. It is more of withdrawal of hot money ie foreign fund Managers from the list cal market. Currently most people are not that bullish of the Dollar ie waiting it turn diwnwards in near future.
One way to identify key price points in the market is when the market sentiment is likely to lead change in the market/stocks short term direction or an acceleration of its current momentum. By using these key inflection points we could read market sentiment and anticipate a market or stock’s next move.
Normally the first 5 minutes or 30 minutes or even rhe first hour of trading, traders or investors are reacting to any previous day or overnite news, This made such opening period emotionally charged and informationally rich. Therefore, there are a lot of potential reasons for the flurry of trading activity that occurs when the market opens. The initial flurry of activity will generally settle down by the end of 5 min to one hour.
I like to define the flurry activity as the opening range (OR) , and I refer the first 30 min as the OR. The OR is basically the price high and low for the day let say 9.am for Bursa Malaysia or at 9:30 am for FCPO. The OR is like a price discovery period. The battle between bulls and bears in the morning will often determine the significant price levels for the rest of the day
The most basic application of OR is when price trade above the OR’s high we are in bullish bias and if price below OR’s low we should have a bearish bias.
A h8gh current ratio for both countries indicate that both countries export morevthan import while local consumption is relatively low.
Let see the equation.
Nation Income Y
is Y=C+I+G+(X-M) which is equivalent to
Y-C-G-I=X-M
Consolidating C and G, therefore Income(Y) less Consumption and G is equal Saving (S)
S-I = X-M, X-M is the current account ignoring the less significant interest factor and transfer factor.
Note : Current Account is the sum of the balance of trade (exports minus imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid)
For this chart it is a daily chart of USDMYR. We used this chart for short term analysis from the resistance level of 50% in Nov to the present. The USDMYR went southward before retracing/rebounding on 20 March 2019. The subsequent rebounding was very steep without any meaningful correction. It went passed the 38.2 and 50.0 retracement effortlessly before meeting the deep retracement of 61.8 . That level coincide with the resistance point A.. ie the red horizontal line. Ringgit showed strength if it could avoid any break of the 61.8 retracement.
This is a weekly chart of USDMYR from the top on Oct 2016 to the bottom of April 2018.Current USDMYR is ruled by this range. On April 2018,USDMYR rebounce or retrace the downward moved from Oct 2016 High, eased through the 38.2 retracement before meeting the resistance at 50.0 retracement in Nov 2018. Following the script of Fib Retracement Theory.
Fibonacci or Fib Retracements are ratios used to identify potential reversal levels. These ratios are found in the Fibonacci sequence ie
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610……The sequence was credited to an Italian mathematician Leonardo Pisano but actually he learned it from Indian mathematician and the Indian got it from Tok Arab.
The most popular Fibonacci Retracements are 61.8% and 38.2%. And also 50%.
How do we get the 61.8 figures.
A number divided by the next highest number of the fib sequence approximates 0.6180 (13/21=.6190, 21/34=.6176, 34/55=.6181, 55/89=.6179 etc….). The approximation nears .6180
For 38.2:
A number divided by another two places higher approximates .3820 (13/34=.382, 21/55=.3818, 34/89=.3820, 55/=144=3819 etc….). The approximation nears .3820 as the numbers increase. Also, note that 1 - .618 = .382
….the proportion of .618034 to 1 is the mathematical basis for the shape of playing cards and the Parthenon, sunflowers and snail shells, Greek vases and the spiral galaxies of outer space. The Greeks based much of their art and architecture upon this proportion. They called it the golden mean.
The 50% retracement is not based on a Fib sequence. Instead, this number stems from Dow Theory's assertion that the Averages often retrace half their prior move. 50% is also on Gann Cycle retracement in quadrants ie 25, 50, 75 and 100.
There are two other ratios ie 78.6 and 23.6 which I ignored it... I prescribe to the method of KISS (Keep It Simple, Stupid)
Retracement levels alert traders or investors of a potential trend reversal, resistance area or support area. Retracements are based on the prior move. A bounce is expected to retrace a portion of the prior decline, while a correction is expected to retrace a portion of the prior advance. 38.2 retracement levels is considered a shallow retracement while 61.8 is a deep retracement... beyond a 61.8 is full retracement which subsequently a trend reversal. Ok let analyse the USDMYR chart based on Fib Retracement. Note... USDMYR is based on MYR or RM per one USD.. in other words if the chart moved upward or North means ringgit is weakening while the chart moved in reverse means ringgit is strengthening.
The small cap index and next 70 large cap index showed a very positive gain, while the enas index showed a small gain but it moves mirror to the KLCI.
The 30 blue chips are moving in reverse direction of the general market. KlLCI is bearish while other indexes are bullish.
The FTSE Bursa Malaysia KLCI, also known as the FBM KLCI, is a capitalisation-weighted stock market index, composed of the 30 largest companies on the Bursa Malaysia by market capitalisation that meet the eligibility requirementsof the FTSE Bursa Malaysia IndexGround Rules. The index is jointly operatedby FTSE and Bursa Malaysia.
