Oct 2024 - Week 1 Analysis.

Good morning, friends.

In last night’s session, I shared in detail the current challenges faced by the United States and China. Starting this Tuesday, not only will China resume trading after the holiday, but the U.S. will also release the CPI, PPI, and the minutes of the Federal Reserve’s monetary policy meeting. Additionally, major banks like JPMorgan will announce their latest earnings, kicking off the earnings season. In particular, after the release of the U.S. NFP data, senior Federal Reserve officials mentioned that if inflation in the U.S. proves to still be inadequately controlled, the anticipated rate cuts might be put on hold. This has largely fueled the short term rise of the U.S. dollar index.

However, following the market’s opening today, both gold and Bitcoin prices continue to rise steadily. Gold is holding steady at $2,650, while Bitcoin has surged past $63,000. Under such divergent U.S. policies, there is a strong likelihood that these two assets will continue to rise this week.

In yesterday’s session, I also clearly informed everyone that, due to the U.S. aiming to boost the dollar and maintain its strong position, there is a high probability that the stock market will experience another round of rebound. Under these circumstances, our local stock market is also expected to see a notable rebound this week.

I believe you can already observe this since the market opened. Almost all blue chip stocks are on the rise, and even those that are declining are showing very limited losses. Therefore, patiently holding our stocks this week will undoubtedly result in higher returns for everyone.

In fact, even without any sudden news from the U.S. last week, I have been constantly emphasizing that the KLCI would be adjusting within the 1640-1680 range. However, after the extremely strong U.S. NFP data on Friday, this process is likely to accelerate. Although the short term decline in the stock market has been alleviated, we need to understand one thing: this round of rebound is essentially the most critical showdown in the ongoing financial battle between the U.S. and China. Whether the U.S. stock market or the Chinese stock market declines first, the consequences for us will be nearly the same our stock market will inevitably follow and decline as well.

So, for us, the current stock market is about seizing this last rebound as a selling opportunity. Based on the changes in the exchange rate, the rapid strengthening of the U.S. dollar index has already caused our currency to stop appreciating last week and enter a depreciation phase. It has depreciated from 4.1 to 1 USD to 4.26 to 1 USD, which is a devaluation of over 4%. This trend seems likely to accelerate further. Therefore, those holding USD assets should not rush to convert them back. In the coming period, our currency is expected to continue depreciating and remain around 4.50.

Of course, during the currency depreciation process, there will also be an increase in foreign investors selling off, which might put some bearish pressure on our stock market. However, overall, the market is still in a broad consolidation range, so there’s no need to worry too much. As long as we adjust our stocks properly during this period, within the next two weeks, we should be able to get a suitable selling price. But there’s one key point to be clear about. Last week, the biggest drop was actually in the semiconductor sector. Although the rebound in the U.S. stock market may help the semiconductor sector recover, this rebound won’t last long. If anyone is tempted to bottom-fish in semiconductors, it’s very likely they’ll end up stuck at a high level, just like what happened when people tried to catch the bottom two weeks ago.