Little Movement Seen For Malaysia Bourse

The Malaysia stock market on Wednesday snapped the two-day winning streak in which it had risen just over 3 points. The Kuala Lumpur Composite Index now rests just beneath the 1,600-point plateau and it’s likely to remain rangebound again on Thursday.

The global forecast for the Asian markets suggests volatility after the Federal Reserve trimmed its benchmark lending rate by 25 basis points. The European and U.S. markets finally ended mixed and little changed but the Asian bourses probably will at least open lower.

The KLCI finished modestly lower on Wednesday as losses from the industrials were mitigated by support from the financials and a mixed picture from the plantations.

For the day, the index dipped 4.81 points or 0.30 percent to finish at 1,599.49 after trading between 1,594.09 and 1,599.57. Volume was 2.0 billion shares worth 1.6 billion ringgit. There were 480 decliners and 339 gainers.

Among the actives, Malaysia Airports Holdings surged 3.17 percent, while PPB Group plummeted 1.62 percent, Genting Malaysia plunged 1.27 percent, Digi.com soared 1.27 percent, RHB Capital spiked 1.17 percent, IHH Healthcare accelerated 1.05 percent, Petronas Chemicals tumbled 1.03 percent, Kuala Lumpur Kepong skidded 0.93 percent, Axiata climbed 0.70 percent, Genting dropped 0.68 percent, Maybank collected 0.58 percent, Sime Darby sank 0.43 percent, Sime Darby Plantations advanced 0.41 percent, AMMB Holdings and Petronas Gas both added 0.24 percent, Top Glove lost 0.21 percent, CIMB Group gained 0.20 percent, Tenaga Nasional fell 0.15 percent and Dialog Group, Public Bank, Hap Seng Consolidated, Press Metal and IOI Corporation were unchanged.

The lead from Wall Street suggests a wild ride following the Federal Reserve’s monetary policy announcement.

The Dow added 36.28 points or 0.13 percent to 27,147.08, while the NASDAQ fell 8.62 points or 0.11 percent to 8,177.39 and the S&P 500 rose 1.03 points or 0.03 percent to 3,006.73.

The volatility on Wall Street came after the Fed revealed its widely expected decision to cut rates by another 25 basis points, lowering the target range for the federal funds rate to 1.75 to 2 percent. The latest rate cut was again attributed to the implications of global developments for the economic outlook and muted inflation pressures.

The decision to cut rates was widely expected by economists but was not without dissent from members of the Federal Open Market Committee. The Fed’s economic projections suggest that the meeting participants are also divided about the outlook for interest rates.

Fed Chairman Jerome Powell said in his post-meeting press conference that the central bank is prepared for a more “extensive sequence of rate cuts” in the face of an economic downturn but noted that is not currently expected.

Crude oil prices drifted lower on Wednesday, extending losses to a second straight session after moving surging Monday amid an escalation in geopolitical tensions after the drone attacks on Saudi Arabia’s oil facilities. West Texas Intermediate Crude oil futures for October ended down $1.23 or 2.1 percent at $58.11 a barrel.

For comments and feedback contact: [email protected]

Ace investor Shankar Sharma's stance to remain underweight proven right

Returns can be made by asset allocation and not stockpicking, he says

Ashley Coutinho  |  Mumbai  Last Updated at September 19, 2019 03:00 IST

His India portfolio is not exactly in the pink of health, but veteran investor is exuberant as he takes the podium at the Morningstar Investment Conference in Mumbai.

That’s not surprising, considering his global portfolio is up 70 per cent this year. He owes this to the strategy of diversifying across countries and asset classes. His firm First Global, a global securities house, scouts for opportunities in developed economies such as the US and the UK as well as emerging such as Brazil and Russia.

While not exactly a doomsday advocate, Sharma has been perceived as a perennial bear with regard to his views on Indian equities. His decision to remain underweight on the country for many months now seems to have been proven right, though. India’s benchmark indices are up 1.3 per cent in the year-to-date, but have slid 7.4 per cent since July 5 in rupee terms.

“We have avoided the bullish noise coming out of India. Back in April, I had tweeted that this market, irrespective of the election results, was toast. There was adequate data to suggest you were heading for a serious downturn,” says Sharma.

For believers in India’s long-term growth potential, Sharma points to some sobering statistics. In the last 10 years, he says the compound annual growth rate of Dollex 30 (returns of BSE Sensex in dollar terms) is zero, while that for S&P 500 and Nasdaq Composite is 10.5 per cent and 9.7 per cent, respectively. MSCI World and Nikkei are up 6.6 per cent and 5.6 per cent, respectively, in the same period.

“India has been a long-term laggard. The gap in performance between India and others in the past few years has been widening even on a three-year and five-year basis,” says Sharma, adding, “There will be smart stockpickers in India, but I would consider them to be outliers.”

Sharma believes that the rupee is vastly overvalued at present, as the currency hasn’t budged much from the levels it was in 2013, when the taper tantrum hit home. According to him, the currency needs to slide to 80-85 against the dollar to make it fairly valued.

His advice: diversify smartly and tactically across asset classes and avoid single country exposure. “If you have a single country, single asset exposure, you are fated to lose sooner or later. One fine day you will lose it all, irrespective of what the government or fund managers tell you,” says Sharma, whose firm invests in debt, commodities, equities, and real estate investment trusts.

He buttresses his case by pointing to the Asian financial crisis which gripped much of East Asia in 1997, leading to a slump in currencies, slide in share prices, and precipitous rise in private debt, impacting countries such as Thailand, Indonesia, and South Korea.

“We saw East Asian tigers become basket cases almost overnight. Inflation spiked, banks went bust, and there was absolute mayhem in the market,” says Sharma, adding there is nothing stopping India from slipping into a similar crisis. “It is not about India or no India, but avoiding over-exposure to a single country.”

According to Sharma, 80-85 per cent of returns come from asset allocation decisions, and not smart bottom-up stockpicking. “ spend most of their time looking for stock winners and that, too, in a single market. It may make for great party talk, but that’s not where the big returns will come from,” he says.

First Published: Wed, September 18 2019. 19:51 IST

Why the Dow Jones Today Is Flat Ahead of the Fed's Rate Decision

The Dow Jones today will face downward pressure despite the likelihood of lower Fed rates. Details below.

Also: Facebook Inc. (NASDAQ: FB) just announced it’s working on augmented-reality glasses with the team behind Ray-Ban.

But first, here are the numbers from Tuesday for the Dow, S&P 500, and Nasdaq:

Index Previous Close Point Change Percentage Change
Dow Jones 27,110.80 +33.98 +0.13
S&P 500 3,005.70 +7.74 +0.26
Nasdaq 8,186.02 +32.47 +0.40

Now, here’s a closer look at today’s Money Morning insight, the most important market events, and stocks to watch.

The Top Stock Market Stories for Wednesday

  • Today is big day for Fed Chair Jerome Powell. It seems that no matter what the central bank does with rates on Wednesday, a large swath of people will criticize the decision. While a rate hike is expected, the central bank is unlikely to hint at any future moves on interest rates and policy. I fully expect a rate cut later today, but I think we’re setting up for uncertainty and volatility if the Fed doesn’t clue investors in a little more. Trade uncertainty still exists, and just because China and the United States plan to meet in October doesn’t mean that a deal will arrive before the 2020 election.
  • FedEx Corp. (NYSE: FDX) is leading the sell-off in the markets on Wednesday. The company’s earnings report flat-out bombed and raised new concerns about ongoing trade tensions between the United States and China. Shares of FDX stock are off 10.5% this morning. Of course, it’s not just the trade war that caused FedEx to cut its profit forecast. The company also said goodbye to its partnership with Amazon.com Inc. (NASDAQ: AMZN). This is another example of Amazon’s ongoing cannibalization of the U.S. economy. Given that Congress is currently engaging in antitrust debates, FedEx might suddenly become a major talking point for politicians who want to break up the e-commerce giant.

Live Now: Robert Herjavec is helping Americans find new ways of investing to create generational wealth. Click here to watch

  • Oil prices continue to retreat this morning as Saudi Arabia claims it will be able to restore its lost output by the end of the month. The oil producer saw a massive drone strike knock out about 5.7 million barrels per day over the weekend. The U.S. government has said it plans to unveil evidence that Iran was behind the attacks. However, U.S. President Donald Trump has said that he wishes to avoid military action against the country. The key thing to remember this morning is that Iran has said it will not meet with the United States during the General Assembly of the United Nations and suggested it is ready for war. This saber-rattling comes just a week after President Trump shook up his national security team and saw the departure of uber-hawk John Bolton. This morning, WTI crude oil is off 1.6%, while Brent crude fell 1.3%.

Stocks to Watch Today: MO, PM, FB, GIS

  • Shares of Altria Group Inc. (NYSE: MO) are facing additional pressure after Congress threatened to subpoena the e-cigarette maker Juul for failing to cooperate in a probe into marketing practices. An ongoing investigation into vaping practices has put a major target on the back of Altria, which just announced plans to merge again with Philip Morris International Inc. (NYSE: PM). Both firms have made a significant bet that vaping will help make up for the dwindling cigarette market in Western nations. But government intervention on vaping products (due to a national health scare) and the moral panic around marketing tobacco to teens could hammer both stocks in 2020 and beyond.
  • Out: Apple Glass. In: Facebook Orion. According to reports, Facebook Inc. (NASDAQ: FB) is working on augmented-reality glasses with Ray-Ban producer Luxottica. The company hopes that the smart glasses will arrive on shelves by 2023, 2024, or 2025. The company says that the new project – dubbed Orion – will allow users to connect to smartphones, share information on a small display screen, and live-stream their vantage points to social media followers and friends.
  • In earnings news, General Mills Inc. (NYSE: GIS) shares are off 2.7%. The food producer topped earnings per share estimates by $0.02 and reported $0.79. The company said it saw stronger gains in its retail sales. However, it saw a drop in revenue compared to forecasts and reported weaker sales in other global markets.
  • Look for an additional earnings report from Herman Miller Inc. (NASDAQ: MLHR).

America’s Favorite Angel Investor Shows How Easy It Is for Anyone to Invest in Ground-Floor Startups

You’ve probably seen stories about this person or that person making an absolute fortune from some unknown startup suddenly becoming a household name… like Uber, Airbnb, SpaceX, or Bird.

Now, it’s your turn.

Shark Tank‘s Robert Herjavec is showing how easy it is for anyone to turn as little as $50 into what can be life-changing windfalls… all from investing in startups.

Click here to learn more…

Follow Money Morning on Facebook and Twitter.

Join the conversation. Click here to jump to comments…

About the Author

Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation’s largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.

Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.

Read full bio

Why the Dow Jones Today Is Flat Ahead of the Fed's Rate Decision

The Dow Jones today will face downward pressure despite the likelihood of lower Fed rates. Details below.

Also: Facebook Inc. (NASDAQ: FB) just announced it’s working on augmented-reality glasses with the team behind Ray-Ban.

But first, here are the numbers from Tuesday for the Dow, S&P 500, and Nasdaq:

Index Previous Close Point Change Percentage Change
Dow Jones 27,110.80 +33.98 +0.13
S&P 500 3,005.70 +7.74 +0.26
Nasdaq 8,186.02 +32.47 +0.40

Now, here’s a closer look at today’s Money Morning insight, the most important market events, and stocks to watch.

The Top Stock Market Stories for Wednesday

  • Today is big day for Fed Chair Jerome Powell. It seems that no matter what the central bank does with rates on Wednesday, a large swath of people will criticize the decision. While a rate hike is expected, the central bank is unlikely to hint at any future moves on interest rates and policy. I fully expect a rate cut later today, but I think we’re setting up for uncertainty and volatility if the Fed doesn’t clue investors in a little more. Trade uncertainty still exists, and just because China and the United States plan to meet in October doesn’t mean that a deal will arrive before the 2020 election.
  • FedEx Corp. (NYSE: FDX) is leading the sell-off in the markets on Wednesday. The company’s earnings report flat-out bombed and raised new concerns about ongoing trade tensions between the United States and China. Shares of FDX stock are off 10.5% this morning. Of course, it’s not just the trade war that caused FedEx to cut its profit forecast. The company also said goodbye to its partnership with Amazon.com Inc. (NASDAQ: AMZN). This is another example of Amazon’s ongoing cannibalization of the U.S. economy. Given that Congress is currently engaging in antitrust debates, FedEx might suddenly become a major talking point for politicians who want to break up the e-commerce giant.

Live Now: Robert Herjavec is helping Americans find new ways of investing to create generational wealth. Click here to watch

  • Oil prices continue to retreat this morning as Saudi Arabia claims it will be able to restore its lost output by the end of the month. The oil producer saw a massive drone strike knock out about 5.7 million barrels per day over the weekend. The U.S. government has said it plans to unveil evidence that Iran was behind the attacks. However, U.S. President Donald Trump has said that he wishes to avoid military action against the country. The key thing to remember this morning is that Iran has said it will not meet with the United States during the General Assembly of the United Nations and suggested it is ready for war. This saber-rattling comes just a week after President Trump shook up his national security team and saw the departure of uber-hawk John Bolton. This morning, WTI crude oil is off 1.6%, while Brent crude fell 1.3%.

Stocks to Watch Today: MO, PM, FB, GIS

  • Shares of Altria Group Inc. (NYSE: MO) are facing additional pressure after Congress threatened to subpoena the e-cigarette maker Juul for failing to cooperate in a probe into marketing practices. An ongoing investigation into vaping practices has put a major target on the back of Altria, which just announced plans to merge again with Philip Morris International Inc. (NYSE: PM). Both firms have made a significant bet that vaping will help make up for the dwindling cigarette market in Western nations. But government intervention on vaping products (due to a national health scare) and the moral panic around marketing tobacco to teens could hammer both stocks in 2020 and beyond.
  • Out: Apple Glass. In: Facebook Orion. According to reports, Facebook Inc. (NASDAQ: FB) is working on augmented-reality glasses with Ray-Ban producer Luxottica. The company hopes that the smart glasses will arrive on shelves by 2023, 2024, or 2025. The company says that the new project – dubbed Orion – will allow users to connect to smartphones, share information on a small display screen, and live-stream their vantage points to social media followers and friends.
  • In earnings news, General Mills Inc. (NYSE: GIS) shares are off 2.7%. The food producer topped earnings per share estimates by $0.02 and reported $0.79. The company said it saw stronger gains in its retail sales. However, it saw a drop in revenue compared to forecasts and reported weaker sales in other global markets.
  • Look for an additional earnings report from Herman Miller Inc. (NASDAQ: MLHR).

America’s Favorite Angel Investor Shows How Easy It Is for Anyone to Invest in Ground-Floor Startups

You’ve probably seen stories about this person or that person making an absolute fortune from some unknown startup suddenly becoming a household name… like Uber, Airbnb, SpaceX, or Bird.

Now, it’s your turn.

Shark Tank‘s Robert Herjavec is showing how easy it is for anyone to turn as little as $50 into what can be life-changing windfalls… all from investing in startups.

Click here to learn more…

Follow Money Morning on Facebook and Twitter.

Join the conversation. Click here to jump to comments…

About the Author

Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation’s largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.

Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.

Read full bio

Travelers, Walgreens Boots share losses contribute to Dow's 75-point fall

Dragged down by negative returns for shares of Travelers and Walgreens Boots, the Dow Jones Industrial Average is down Wednesday morning. Shares of Travelers TRV, -0.68% and Walgreens Boots WBA, -0.75% have contributed to the index’s intraday decline, as the Dow DJIA, -0.27% was most recently trading 74 points lower (-0.3%). Travelers’s shares have fallen $1.88 (1.3%) while those of Walgreens Boots have fallen $0.56, or 1.0%, combining for an approximately 17-point drag on the Dow. Other components contributing significantly to the decline include Verizon Communications Inc. VZ, -0.02%, Dow Inc. DOW, -0.92%, and 3M MMM, -0.74%. A $1 move in any of the Dow’s 30 components equates to a 6.78-point swing.

Editor’s Note: This story was auto-generated by Automated Insights using data from Dow Jones and FactSet. See our market data terms of use.

More from MarketWatch

ocks Slip on Saudi Arabia Attack

The Dow Jones Industrial Average fell 73 points, or 0.3%, to 27,146, and the Nasdaq composite slipped 0.3%. Small stocks in the Russell 2000 index were better performers, and it climbed 0.3%.

ENERGY SPIKE: The attack in Saudi Arabia caused a big disruption to oil supplies, but only a temporary one. Other countries can release some of the oil supplies they’ve built up in reserves to make up for the loss, analysts said. The bigger threat is the worry about more attacks in the future.

“At a time when oil markets have been in the shadows of a weak global macroeconomic backdrop, the attack on critical Saudi oil infrastructure calls into question the reliability of supplies from not just one of the largest net exporters of crude oil and petroleum products but also the country that holds most of the world’s spare production capacity,” Barclays analyst Amarpreet Singh wrote in a report.

Benchmark U.S. crude jumped more than $5 to $60.11 per barrel. Brent crude, the international standard, rocketed up $6.22 to $66.44 per barrel.

That helped energy stocks in the S&P 500 surge 3.1%, the only sector among the 11 that make up the index to rise. Marathon Oil gained 9.2%, Devon Energy rose 8.1% and oilfield services provider Halliburton climbed 8%.

PAIN AT THE PUMP: Airlines have huge fuel bills, and any rise in the price of oil can hurt them. American Airlines Group, which spent $3.7 billion on fuel and taxes in the first half of the year, fell 5.6% for one of the biggest losses in the S&P 500.

United Airlines lost 2.9%, and Delta Air Lines lost 2.8%.

Cruise ships also burn lots of fuel, and Carnival lost 2.6%.

STRIKE ONE: General Motors sank 2.1% after more than 49,000 members of the United Auto Workers went on strike. The union and company have been locked in contract talks, and it wasn’t clear how long the walkout would last.

WEEK AHEAD: The week’s headline event is the Federal Reserve’s meeting on interest rates. Investors are confident the central bank will cut short-term rates by a quarter of a percentage point to a range of 1.75% to 2%. It would be the second such cut in two months, as the Fed tries to protect the economy from a global slowdown and the effects of the U.S.-China trade war.

MARKETS ABROAD: European markets mostly fell, and France’s CAC 40 was down 0.6%. Germany’s DAX lost 0.5%, and the FTSE 100 in London slipped 0.3%.

Trading in Asia was mixed. The Hang Seng in Hong Kong fell 0.8%, the Kospi in South Korea rose 0.6% and Chinese stocks in Shanghai were virtually flat.

(CZ)

Intratec Reveals Silicon Prices

Intratec Reveals Silicon Prices – Business News Today – EIN News

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Jump In Yields Didn't Derail Equity Rally While Sterling Rallies Ahead Of The Weekend On (Misplaced) Brexit Optimism

The most striking thing about last week’s price action was the surge in US yields. The 10-year yield jumped about 34 basis points, the most in three years and returned to levels not seen since August 2 (1.90%). A deluge of investment-grade corporate bonds and US Treasuries ($78 bln auctioned to lukewarm reception), coupled with an acceleration of core CPI (highest in 11 years), optimism on the trade front, and Mnuchin’s insistence on pushing forward with an extra-long bond (50, and possibly 100 year-maturities), though has been repeatedly advised against it by primary dealers, were among the potent drivers. There was a dramatic shift from fixed-income funds to equities funds according to some industry reports.

Part of the rise in the long-end can be attributed to swings in sentiment about the trajectory of overnight rates. The implied yield of the January 2020 Fed funds futures contract rose 14 bp last week. The market has assumed next week’s cut, which would be the second cut here in H2 19, and a third one. The issue had been the fourth one, and the market priced it out last week, and for the first time in over a month, the market has a small doubt about the follow-up one.

The US dollar had a mixed week. Sterling led the advancing currencies with almost a 1.8% gain. Full three-quarters of the rally took place in the last session ahead of the weekend amid some hopes that a work-around around the controversial backstop may be reached. We remain skeptical that the circle can be squared, which is to say the border between the EU and the UK cannot be between Northern Ireland and the UK. But if it is between the UK and Ireland, there must be a backstop to preserve the previous treaty commitments the UK made to an EU member (Ireland in the Good Friday Agreement).

The rise in yields and perhaps some optimism on the trade front weighed on the Japanese yen. It lost 1.1% against the dollar and nearly halved this year’s gain (to 1.4%). It was the biggest dollar rally in a week since January. The euro rose for the second consecutive week for the first time here in Q3. It rallied even after the ECB delivered a rate cut and an indefinite expansion of its balance sheet at a 20 bln euro clip a month.

Dollar Index: The net loss for the week was about 0.15%. The year’s high set on September 3, a little above 99.35, was approached in the knee-jerk reaction to the ECB’s decision on September 12, but it’s reversed lower and tested the 98.00 support area ahead of the weekend. This area corresponds to last week’s low and some lows/highs from late August as well as the (61.8%) retracement of the leg up that began on August 23. However, the downside momentum faded as it was approached. A break would allow another cent decline to stronger support and the 200-day moving average. The Slow Stochastics seemed to pick up the loss of momentum ahead of the weekend. Gains through 98.55 would raise a yellow flag to the new-found bears while a move through 98.70 may signal a resumption of the rally.

Euro: The euro drifted lower ahead of the ECB meeting when it initially sold off to test the 2.5-year low set on September 3 (~$1.0925). It reversed higher and made a new week high and closed above the previous session high. There was follow-through euro buying that lifted it to almost $1.1110 before the weekend. The buying seemed to dry up ahead of the hurdle we noted last week in the $1.1120-$1.1125 area. The MACDs and Slow Stochastics are moving higher. An important question is: How much of the gains does the euro pare before concluding the upside correction is over? As we head into next week, we would suggest a move below $1.1040 now would be an early sign.

Japanese Yen: The dollar has recorded higher lows against the Japanese yen for eight days running. It rose every session last week and seven of the previous eight sessions. It does not seem coincidental that the yen is weakening as US yields jumped. The yen and US Treasuries appeared to have been linked in numerous financial structures. The dollar bottomed in late August a little below JPY104.40 and last week closed above JPY108 for the first time since the end of July. The next big target is JPY109, but the August 1 high of JPY109.30 when the US dollar posted a key downside reversal. The 200-day moving average is a little above there (~JPY109.45). The dollar has been climbing up and fraying the upper Bollinger Band, and the MACDs and Slow Stochastics are stretched. The signal seems to be not to chase the dollar higher.

Sterling: The nearly 1.8% gain was sterling’s biggest weekly advance in four months. It closed above $1.25 for the first time since mid-July, breaking out of a little flag pattern with gusto ahead of the weekend. It has jumped roughly 5.5 cents since hitting a three-year low near $1.1960 on September 3. This dramatic rally has retraced (38.2%) off the decline since the year’s high set in mid-March a little above $1.33. We are skeptical of the news that was used to fuel the end of the week rally. We are cautious because sterling looks stretched technically. It is almost half a cent above its upper Bollinger Band. It has entered a key technical area ($1.2500-$1.2530) that includes past support and then resistance and a few retracement objectives. The technical indicators are stretched, and the Slow Stochastics are hinting of crossing lower.

Canadian Dollar: After falling almost 2% after the Bank of Canada defended its neutral stance a reasonably robust August employment report, the US dollar forged a base near CAD1.3140 early last week. It then recovered sharply with three-quarters of the week’s 0.6% gain coming ahead of the weekend ostensibly on the back of a report highlighting the indebtedness of Canadian households (debt-to-disposable income 177.1% from a peak of 178.3% in Q3 18). Debt servicing (principal and interest) rose to a record of 14.93% in Q2. Also, Prime Minister Trudeau formally began the campaign for next month’s election with a proposal to levy a tax on house ownership by foreign non-residents. The pre-weekend jump in the greenback took it to the (61.8%) retracement objective (~CAD1.3290) of the drop from the central bank’s meeting on September 3. The 200-day moving average begins the new week near CAD1.3310 and a move above it would likely be another run at CAD1.3355 area, which although frayed on intraday, it remained intact in August and early September.

Australian Dollar: The Australian dollar tumbled against the US dollar for seven consecutive weeks into the end of August. It advanced for the second consecutive week, rising in eight of the past 10 sessions. It has poked through the resistance we highlighted near $0.6880, but has not managed to settle above it, and the Slow Stochastics reflects the loss of momentum. Still, the pre-weekend close was the highest since July 29. A close below the five-day moving average (~$0.6865), which it has not done since September 2, may be the first indication that some short-term players may be giving up. The RBA minutes from the meeting at the start of September and the August employment report are the domestic highlights in the week ahead.

Mexican Peso: The JPMorgan Emerging Market Currency Index is up 2% so far this month, and the Mexican peso is up nearly 3.4% after depreciating about 4.6% in August. The peso rose 0.65% last week, the second successive weekly gain after dropping for seven weeks through the end of August. It reached its best level month ahead of the weekend, and the dollar has surpassed the (61.8%) retracement objective (~MXN19.45) of its rally from the end of July. The next immediate target is the (61.8%) retracement of the year’s rally (~MXN19.32) and then the 200-day moving average (~MXN19.2950). We see initial resistance in the MXN19.47-MXN19.50 area.

Chinese Yuan: The dollar fell for the second week in a row against the Chinese yuan. Over these two weeks, it has lost about 1.1%. Recall, the dollar peaked near CNY7.1850 on September 3. It recorded a low of about CNY7.0675 on September 12. Its markets were closed on September 13, but the dollar fell about 0.3% against the offshore yuan (CNH) then. The yuan’s rise came alongside the budding optimism of another trade truce, and a heavier dollar, as we have seen, more broadly. Given that the dollar has fallen below where the PBOC has steadily set the reference rate (~CNY7.0840), important signals may be given in the coming days of official desires. We had initially thought that the CNY7.10 area would be the bottom end of a new range. While there may be dollar demand around CNY7.05, a break below CNY7.0 would likely be seen as a greater gesture of goodwill that buying soy and pork given its domestic needs and the risks to the Brazilian soy crop.

Oil: The price of WTI for November delivery reached its highest level (~$58.65) since the end of July on September 10 before reversing lower amid speculation that with US National Security Advisor Bolton leaving the Trump Administration, a deal that would get some Iranian and Venezuelan oil to the market was more likely. We are skeptical are meaningful results, and the news has been used to reinforce the existing range. Over the past two months, most of the price action has taken place between roughly $54 and $56 with a wider range of $53-58. The 200-day moving average begins the new week a little below $57. However, the attack on Saudi Arabia’s key Abqaiq processing plant (processed half of the Saudi oil production in 2018) has reportedly crippled the facility. It is this supply shock that will be the initial driver.

The IEA warned last week of a supply glut. The attack changes the medium-term supply/demand considerations. It is difficult to project with any confidence the initial spike in oil prices, but we suspect a modest increase because of the extensive strategic reserves that can be tapped. That said, the extent of the damage and the duration of the disruption are not clear. Also, note that after posting early losses of more than 3%, the Saudi stock market (Tadawul) recovered to trade about 1% lower earlier today (Sept. 15). There are suspicions that government funds may have been deployed to support the market. Brent can be marked up after closing last week near $60.20. The 200-day moving average is $3 higher and the $65-area is important technically. Nov. WTI can move into the $58-60. Note that market-based inflation measures seem particularly sensitive to oil prices. Higher oil prices exert upward pressure on headline measures of inflation if sustained. Iran is the most likely source of the drone attack and geopolitical tensions may also lend gold support, which has fallen for three consecutive weeks for a cumulative $38 decline.

US Rates: The US 10-year yield has risen for eight consecutive sessions. It finished August, with a five-week decline in tow and offering a yield a little below 1.50%. It poked above 1.90% at the end of last week before closing just below. As we sketched at the top, we suggest an over-determined explanation rather than a single driver, and in terms of market positioning, many trend followers and momentum players were leaning the wrong way. There seems little to stand in the way of a test on 2.0%, though we suspect the move is excessive. The December note futures contract fell every session last week and settled often settled on or near session lows. It is beyond the lower Bollinger Band, which is set two standard deviations from the 20-day moving average. In fact, it approached three standard deviations (~128-12) ahead of the weekend. The MACDs and Slow Stochastics reflect the strong downward momentum.

S&P 500: The S&P 500 has continued to recover from last month’s decline in the face of the dramatic rise in yields. It rose nearly 1% to extend its advance for the third week and closed above 3,000 for the first time since late July. The record high set on July 26 was near 3,028, and last week, it approached 3,021 before consolidating ahead of the weekend. The MACDs have gone ballistic, but the Slow Stochastics are leveling off. The S&P 500 has been holding a steep uptrend line since late August that starts the week near 2,995. A retest of the breakout near 2,950 would be the initial target of correction. So far this month, the S&P 500 is lagging behind the other major indices we track. Its 2.75% gain this month trails Europe’s Dow Jones Stoxx 600, which is up 3.25%, and the MSCI Asia Pacific Index and its 4.4% gain.

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.

China Bourse May Find Support At 3,000 Points

The China stock market has finished lower in back-to-back sessions, surrendering more than 15 points or 0.5 percent along the way. The Shanghai Composite Index now rests just beneath the 3,010-point plateau although it may find traction on Thursday.

The global forecast for the Asian markets is positive on optimism for a resolution in the trade wat between the United States and China. The European and U.S. markets were up and the Asian bourses are predicted to follow that lead.

The SCI finished modestly lower on Wednesday as losses from the properties were mitigated by support from the financials and a mixed picture from the energy producers.

For the day, the index sank 12.39 points or 0.41 percent to finish at 3,008.81 after trading between 3,004.22 and 3,030.56. The Shenzhen Composite Index lost 15.77 points or 0.93 percent to end at 1,671.54.

Among the actives, Industrial and Commercial Bank of China advanced 0.91 percent, while Bank of China climbed 1.10 percent, China Construction Bank jumped 1.13 percent, China Merchants Bank collected 0.14 percent, China Life Insurance added 0.48 percent, Ping An Insurance rose 0.13 percent, PetroChina shed 0.47 percent, China Petroleum and Chemical (Sinopec) perked 0.77 percent, China Shenhua Energy eased 0.15 percent, Gemdale dipped 0.09 percent, Poly Developments lost 0.29 percent, China Vanke tumbled 1.21 percent and CITIC Securities gathered 0.79 percent.

The lead from Wall Street is firm as stocks opened higher on Wednesday and continued to rise as the day progressed, sending the major averages to their best closing levels in a month.

The Dow added 227.61 points or 0.85 percent to 27,137.04, while the NASDAQ spiked 85.52 points or 1.06 percent to 8,169.68 and the S&P 500 rose 21.54 points or 0.72 percent to 3,000.93.

The strength on Wall Street came following news that China is granting tariff exemptions for 16 types of American-made products as a sign of goodwill ahead of the next round of trade talks.

Stocks also benefited from optimism about new global stimulus ahead of the European Central Bank’s monetary policy decision later today as well as next week’s Federal Reserve meeting.

Crude oil prices declined sharply Wednesday on a downward revision in OPEC’s oil demand forecast and speculation that the U.S. may ease sanctions on Iran. West Texas Intermediate Crude oil futures for October ended down $1.65 or 2.9 percent at $55.75 a barrel, the lowest settlement since September 3.

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Zscaler: Time to Be a Contrarian?

Shares of IT security company Zscaler Inc. (NASDAQ:ZS) plunged nearly 20% after reporting fourth-quarter and fiscal year 2019 financial results on Tuesday. 

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While the company beat analysts’ expectations for both revenue and earnings, its guidance for the first quarter and full fiscal 2020 were below the consensus forecasts.

Zscaler is a global provider of cloud security services. It operates through two main business verticals: internet access solutions and private access solutions.

The internet access solutions unit connects users to externally managed applications, including software-as-a-service applications and internet destinations. The private access solutions division provides access to internally managed applications and private or public clouds.

It serves clients in several industries, including consumer goods, retail, financial services, technology and communication services, among others.

The company is reportedly facing increased competition. At a recent investor conference,  Kathy Bonanno, the chief financial officer of rival company Palo Alto Networks Inc. (NYSE:PANW), told investors that the Santa Clara, California-based cybersecurity company had taken clients form Zscaler, Symantec Corp. (NASDAQ:SYMC) and CrowdStrike Holdings Inc. (NASDAQ:CRWD).

During the earnings call, Zscaler CEO Jay Chaudhry was asked about the potential impact of competition from Palo Alto Networks and others. He said the customers the company loses to rivals are a distinct minority, adding that it wins almost every deal it competes for out in the market.

Quarterly financial highlights

Chaudhry’s response to analysts would appear to be correct based on the company’s most recent quarterly results. In the fourth quarter, revenue grew 53% year over year to $86.1 million. There was also a significant improvement in the bottom line as the GAAP net loss was $5.3 million, up from a $7 million loss in the same period last year.

Zscaler’s gross billings also impressed with 32% growth to $125.8 million, while non-GAAP net income of $9.1 million improved from a loss of $1.4 million last year.

However, after delivering a market-beating earnings report, Zscaler issued guidance for first-quarter earnings of 0 cents to 1 cent per share. Analysts surveyed by FactSet had a consensus estimate of 2 cents per share. The company’s full-year 2020 earnings forecast also fell short at 12 cents to 16 cents per share, compared to expectations of 19 cents.

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Zscaler’s top line is expected to continue to experience steady growth through 2021 as the company expands its addressable market by adding more industries to its portfolio of customers.

The cloud security services market will continue to experience increasing demand in the coming years, with new markets like cloud mining and other blockchain and cryptocurrency-related services driving growth. Some of the traditional computing software and service providers like Adobe Inc. (NASDAQ:ADBE), Kaspersky and McAfee, among others, have also switched to subscription-based business models.

These companies now offer their services via the cloud rather than off-the-shelf software in storage devices. This is creating accretive business opportunities for companies like Zscaler because enhanced cloud and cybersecurity services will be required.

From a valuation perspective, shares of Zscaler trade at a forward price-earning ratio of 155. This looks very expensive, but when you factor in the company’s growth prospects for the next five years, the valuation becomes more compelling to growth investors. The current price-earnings to growth ratio (five-year expected) stands at just 1.53, which implies there are exciting times ahead.

In summary, given the stock’s decline and the expected revenue and earnings growth in the coming years, buying now could prove to be profitable. Therefore, it could be time to be a contrarian on Zscaler.

Disclosure: No position in the stocks mentioned.

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About the author:

Nicholas Kitonyi

Nicholas is the founder of CAGR Value. He is a financial analyst with extensive experience in investment research and stock market analysis. His analysis has been featured on several research sites.

Nicholas has solid knowledge of both U.S. and European markets. His investment style is focused on undervalued plays and growth stocks. Nicholas classifies himself as a swing trader and likes to trade GBP/USD, gold and FTSE 100, among other liquid instruments.

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