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Friday, November 11, 2016

The Trump Risk Premium

In times of uncertainty, you avoid risky assets and embrace risk-free or low risk assets. Tuesday election of Mr. Trump to the White House is an enormous risk factor. The markets do not know what to expect. He has very little policy positions because his entire policy team resigned in September because they were not paid. Whatever policies he has articulated were vague or half-baked that analysts couldn't rely on them. On top of that, he has the unchanging habit of changing his mind every week or depending on the last person he spoke to. Not convinced, just check how Chris Christie was almost made a running mate.

In the forex market, MYR is deemed to be a risky currency. When a Trump victory looked imminent in the morning of November 9, MYR struggled to hang onto the 4.25 level. Next day, that level broke. Since then, USD has gained 230 basis point or 2.3% against our MYR.
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Chart 1: USD-MYR's 60-min chart as at Nov 11, 2016_10.00am (Source:investing.com)

USD-MYR is  now pressing against the October 2015 high of 4.45. I believe this level should cap the immediate rally for a while. The Trump risk will wreck havoc to many markets until we have a clear picture of what to expect. If Trump leads America the way he led his campaign - I don't believe otherwise - we will be in for a rough ride for the next 4 years. God save America and God save all of us!


Chart 2: USD-MYR's daily chart as at Nov 11, 2016_10.00am (Source:investing.com)

Update: USD-MYR spiked to a high of 4.73 at 10.15am. It pulled back to 4.47-4.48 as at 10.45am.

For comparison, I appended below the performance of two other Asian currencies vis-a-vis USD.


Chart 3: USD-SGD, USD-JPY & USD-MYR's daily chart as at Nov 11, 2016_10.40am (Source:investing.com)

Update Again:

The mystery of the sharp spike in USD-MYR was due to the news which was finally on Malaysiakini at 4.06pm. It announced that “Malaysian authorities (have decided) not to cooperate with (Switzerland's Office of the Attorney-General’s) probe into 1MDB”. The reason given is that any cooperation “will not impact its ongoing criminal investigation into the state investment fund”. For more, go here. You may get the free Malay version here. (Or, English version here)

Never in the history of our nation was so much owed by one man to so many. If he truly loves this nation and her people, he should do the right thing: Step down!!

3 comments:

Chun Mun said...

Hi Alex,
Can you comment on LBALUM and Opensys?

Beza said...

Agree.

Alex Lu said...

Hi Chun Mun

LBALUM's earning was quite strong for the past 3 quarters. However it broke below its uptrend line at RM0.62-0.62 in October. If you feel that the earning will remain strong at RM5-6 million a quarter, then LBAlum may recover back above the uptrend line again or set a course for a more gradual uptrend line. Recommend a HOLD.


Opensys's earning could have peaked in FY2015. However its share price is almost at the August high of RM0.42. If it can't break above this level, correction will set in. I'm inclined to TAKE PROFIT for half the position for this stock now.

Good luck!