Market Outlook as at May 23, 2011

FBM-KLCI dropped 11 points to 1530 as at 3.55pm today. The index is now at the uptrend line (SS) support of 1530. A break below this support could lead to more correction ahead. In January, when the FBM-KLCI broke below the then-prevailing uptrend line (S-S1), the market corrected for nearly 2 months.


Chart: FBM-KLCI's daily chart as at May 23, 2011_3.55pm (Source: Quickcharts)

The correction in our market mirrors similar sharp selldown throughout the Asia today. Similar decline was also witnessed among the European markets. The decline could be due to potential deterioration of the sovereign debts problem in Europe. Fitch Ratings has just downgraded Greece’s rating from BB+ to B+, which shifts the country from the “non-investment grade speculative” bracket to a “highly speculative” one. In addition, the Norwegians may decide not to release their share of a new rescue package of €25m to Greece. The Global Financial Crisis of 2008 started with the collapse of Lehman Brothers. A default by Greece (if it happened) could be equivalent to the collapse of Lehman Brothers. For the latest on the Greece's sovereign debts problem, check out this article in FT Alphaville.

For a hilarious take on the Greece's debts problem, check out the Saturday Night Live's Amazing Strauss-Kahn Eurozone Crisis Opener (here).