Market Outlook by SJ Securities Sdn Bhd

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We view the rebound off the November 2007 Double Bottom level of 1338 as significant as it has raised the probability for the KLCI to retest the mid January 2008 high at 1524. This also places the key support at 1330. A violation of 1330--we think is unlikely--will shift our market to a weaker situation, with immediate downside at 1287.

While the US Fed has taken a significant step to address the growing likelihood of US zooming into recession, markets continue to remain wary citing that the credit markets meltdown is not over yet. Further it is difficult to fathom the extent of the damage. Now, the concern has shifted to a higher level where bond issuers and bond insurers may not have the resources to honour credit market defaults. The downgrading of credit rating on Security Capital Assurance reflects such concern.

Once again, to calm financial markets, insurance regulators and banks are now on talks to discuss raising capitals to the tune of USD 15 bn for bond issuers. Markets are also reacting positively to the news that the President Bush stimulus package is almost finalised. And appears agreeable on the measure of permitting more people to receive tax rebates of USD 600 to 1200.

It is likely that the rate cut by US Fed is part of a global concerned effort among central banks to tackle the credit market meltdown. On this basis, it can be expected that Bank of England will lower their interest rate currently at 5.5% on February 6.

Meanwhile, the recovery on the US markets continue on the news that the job market remains unscathed. Application for unemployment benefits were down 1000 to 301,000, lowest claims in 4 months. Dow gained 1% to 12,378. It looks like the market is making good on the Double Bottom at 11,634. Dow is likely to recover further to the October 2007 high of 12,930.