EDUCATION MATTERS

TRADING SKILL: FUNDAMENTAL ANALYSIS

 DISCLAIMER
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ZULKIFLI ABDUL RAZAK

FULL TIME INVESTOR

MORE THAN 20 YEARS

EXPERIENCE IN RETAIL
TRADING

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MARKET OUTLOOK

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 FOMC JANUARY 29, 2019
STATEMENT
MARCH 20, 2019
MAY 1, 2019
JUNE 19, 2019
JULY 31, 2019
SEPTEMBER 18, 2019
OCTOBER 30, 2019
DECEMBER 11, 2019
QUARTERLY
EARNINGS
EARLY-MID JANUARY
EARLY-MID APRIL
EARLY-MID JULY
EARLY-MID OCTOBER
FUNDAMENTAL ANALYSIS:
THE INTRINSIC VALUE

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DEMAND

SUPPLY
 SUPPLY DEMAND

SIZE &
BALANCE OF PAYMENTS COMPETITIVENESS OF
ECONOMY

POLITICAL
DEVELOPMENTS, FISCAL BUSINESS CYCLES
POLICIES

INFLATIONARY FINANCIAL MARKET

EXPECTATIONS NEWS

INTEREST RATE MONETARY

DIFFERENTIALS POLICIES

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GROWTH

SENTIMENT
POLITIC
ECONOMIC
POLICY
INFLATION
PRICE

SUPPLY &
DEMAND
 TRUE EXCHANGE RATE

FUNDAMENTAL BEHAVIOURAL
PURCHASING POWER
EQUILIBRIUM EQUILIBRIUM
PARITY
EXCHANGE RATE (FEER) EXCHANGE RATE
• AMOUNT OF • CURRENT ACCOUNT • INVARIANCE OF CAUSE
CURRENCY NEEDED BALANCE SURPLUS OR & EFFECT
TO PURCHASE A DEFICIT / INTERNAL • INFLUENCE OF
SPECIFIED BASKET OF BALANCE ECONOMIC VARIABLES
GOODS SHOULD BE • NEED TO FACTOR IN IN THE PAST
EQUAL INTEREST RATE & • NEED TO SEE IMPACT
• BIG MAC INDEX INTERVENTION OF OTHER VARIABLES

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 CENTRAL
GOVERNMENT CITIZENS
BANK
• FISCAL POLICY • MONETARY • EMOTIONAL
• DISTRIBUTION POLICY IMMATURITY
OF WEALTH • SUPPLY OF • PRODUCTIVITY
• CONFIDENCE CREDIT • CREATOR OF
• STABILITY WEALTH

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ECONOMIC POLICY

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BUSINESS CYCLE

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 ECONOMY POLICY DECISION

• GOVERNMENT & CENTRAL BANK LOOK

AT ECONOMIC INDICATORS

• POLITICAL DEVELOPMENT & SOCIAL

PRESSURES EFFECT

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LEADING COINCIDENT LAGGING

CONFIDENCE
BASED SURVEYS CAPACITY
UTILIZATION

HOUSING STARTS,
CAR SALES GDP
SHARES PRICE, EMPLOYMENT
INTEREST RATE

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 POLICY MAKERS

FISCAL & MONETARY POLICY ECONOMIC PROJECTION

MARKET PARTICIPATION

QUANTITATIVE STUDY QUALITATIVE STUDY

TRADING OPPORTUNITY
ANTICIPATION REACTION

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MONETARY POLICY

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 MONETARY POLICY TOOLS
TOOLS EASING TIGHTENING

INTEREST RATE CUT HIKE

OPEN MARKET
PURCHASE SECURITIES SELL SECURITIES
OPERATION

RESERVE REQUIREMENT DECREASE INCREASE

QUANTITATIVE EASING INCREASE TAPERING

LANGUAGE DOVISH HAWKISH

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 PROJECTION DATA

MARCH JUNE SEPTEMBER DECEMBER

• FEDERAL RESERVES: PROJECTION MATERIALS

• EUROPEAN CENTRAL BANK: MACROECONOMIC
PROJECTIONS
• SWISS NATIONAL BANK: QUARTERLY BULLETIN
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 PROJECTION DATA

FEBRUARY MAY AUGUST NOVEMBER

• BANK OF ENGLAND: INFLATION REPORT

• RESERVES BANK OF AUSTRALIA: STATEMENT ON
MONETARY POLICY
• RESERVES BANK OF NEW ZEALAND: MONETARY
POLICY STATEMENT

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 PROJECTION DATA

JANUARY APRIL JULY OCTOBER

• BANK OF CANADA: MONETARY POLICY REPORT

• BOJ: OUTLOOK FOR ECONOMIC ACTIVITY &
PRICES

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A NOTE ON FISCAL POLICY

TOOLS EXPANSIONARY CONTRACTIONARY

TAX DECREASE INCREASE

SPENDING INCREASE DECREASE

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PUBLIC COMPANIES’
QUARTERLY REPORT

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 QUARTERLY REPORTS
• KEY ACCOUNTING & FINANCIAL DATA
- GROSS REVENUE, NET PROFIT, OPERATIONAL
EXPENSES & CASH FLOW

• GUIDANCE FOR FUTURE FINANCIAL RESULTS

• ANALYSTS’ ESTIMATES OF KEY METRICS
- FINANCIAL PUBLICATIONS AVERAGE THESE
ESTIMATES

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 STOCK VALUATION
• EARNINGS-BASED

• REVENUE-BASED

• CASH-FLOW BASED

• EQUITY-BASED

• MEMBER-BASED

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 Lower gasoline
price reduces
transportation &
production cost

Japan import
almost 100% Lower cost
of its oil. As reduces the price
crude price of Japanese
falls, gasoline exports
price also
falls.

Lower price
attracts more
imports &
increases demand
for Japanese Yen
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 LOWER
DOMESTIC
PRICE

HIGHER LOWER
EXCHANGE INFLATION

LOWER HIGHER
STOCK EXPORT
VALUE PRICE

LOWER
REVENUE

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 FINANCIAL
MARKET

CAPITAL
COMMODITY DERIVATIVES CURRENCY INSURANCE
MARKET

BOND EQUITY

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YIELD & RISK

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 CARRY TRADE

• YIELD DIFFERENTIALS

• APPRECIATION/DEPRECIATION OF
DIFFERENTIALS

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 CURRENCY

FUND USING INVEST IN

LOW YIELD HIGH YIELD EQUITY
FUNDING ASSET

DIVIDEND
YIELDING
SECURITIES

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COST OF FUNDING & RISK FACTORS
• GLOBAL MARKET: MOVEMENT OF INVESTMENT FUND ACROSS
BORDER

• LIBOR RATE: GLOBAL REFERENCE RATES FOR SHORT TERM

INTEREST RATES
- INTEREST RATE SWAPS, FLOATING RATE LOAN RESETS &
INTERBANK RATE
- PUBLISH DAILY AT 11:45 GMT (7:45PM MALAYSIA TIME)

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 POSITIVE NEGATIVE
SENTIMENT SENTIMENT

LOW HIGHER
LIBOR LIBOR

LOW HIGHER
FUNDING FUNDING
COST COST
 SIGNIFICANCE

• MOVEMENT OF FUNDS
- COST OF FUNDING

• POLICY DECISION BY CENTRAL BANKS

- SUPPLY OF CREDIT
- EASING & TIGHTENING POLICY TOOLS

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 RISK RISK
APPETITE AVERSION

YIELD SAFETY OF
SEEKING FUND

CARRY CARRY
TRADE TRADE
INTENSIFIES UNWINDING
SENTIMENT IS THE KEY
TO SPECULATION

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 S
E
N
T MARKET
THEMES I
M DATA
E
N
T

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41
 LEADING INDICATORS
• CONFIDENCE-BASED SURVEY
- CONSUMER, BUSINESS, PURCHASING
MANAGERS SURVEY

• ECONOMIC DECISIONS ARE LARGELY BASED ON

EMOTION
- INDIVIDUAL LEVEL
- COLLECTIVE LEVEL

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 SPENDING DECISIONS
• CONFIDENCE OR LACK OF CONFIDENCE
IN THE FUTURE OF ECONOMY

• THIS IN TURN IS REFLECTED IN THE

COINCIDENT INDICATOR: GROSS
DOMESTIC PRODUCT (GDP)

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 REPORT
IHS MARKIT PMI
https://www.markiteconomics.com/Public/
Release/PressReleases?language=en
ISM REPORT ON BUSINESS
https://www.instituteforsupplymanagemen
t.org/certification/content.cfm?ItemNumbe
r=28965&navItemNumber=30165
DESCRIPTION
PROVIDES AN ADVANCE SIGNAL OF
WHAT IS REALLY HAPPENING IN PRIVATE
SECTOR ECONOMIES
ISM MANUFACTURING AND NON-
MANUFACTURING ARE 2 OF THE MOST
RELIABLE ECONOMIC INDICATORS
AVAILABLE, PROVIDING GUIDANCE TO
SUPPLY MANAGEMENT
PROFESSIONALS, ECONOMISTS,
ANALYSTS, & GOVERNMENT &
BUSINESS LEADERS
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 REPORT DESCRIPTION

IVEY PURCHASING MANAGERS INDEX AN ECONOMIC INDEX WHICH MEASURES

THE MONTH TO MONTH VARIATION IN
ECONOMIC ACTIVITY AS INDICATED BY A
PANEL OF PURCHASING MANAGERS
http://iveypmi.uwo.ca/ FROM ACROSS CANADA, AND IS
PREPARED BY THE IVEY BUSINESS
SCHOOL.

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FUNDAMENTAL STRATEGY

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 CORRELATED CENTRAL
SURVEYS POLICY DATA
DATA BANK POLICY

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 INTRINSIC VALUATION

GROWTH SLOWDOWN

• YIELD SEEKING • VALUE SEEKING

• CYCLICAL & • NON-CYCLICAL &
RISK SAFETY OF
FUND

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• LEADING INDICATORS
EXPANSION • LEADING INDICATORS
RECESSION
RISING START TO DROP
• INVENTORIES DROPPING • DROP IN CONSUMER
• RISING INTEREST RATE • UNEMPLOYMENT RISING
• STOCKS OUTPERFORM CONFIDENCE & INDUSTRIAL
BONDS • SLOWDOWN IN CONSUMER PRODUCTION STRONGLY
CONFIDENCE & INDUSTRIAL • BONDS BECOMING MORE • NEGATIVE GDP GROWTH &
• CONSUMER CONFIDENCE & PRODUCTION FALLING INFLATION
INDUSTRIAL PRODUCTION APPEALING
STRONG • STOCKS CONTINUE • BONDS OUTPERFORM
OUTPERFORM BONDS STOCKS

EARLY
SLOWDOWN
RECOVERY

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 CONSUMER DISCRETIONARY

ENERGY

FINANCIALS

CYCLICAL INDUSTRIALS

INFORMATION TECHNOLOGY

MATERIALS

BUSINESS CYCLE
TELECOMMUNICATION SERVICES

CONSUMER STAPLES

NON- UTILITIES
CYCLICAL
HEALTHCARE

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QUANTITATIVE ANALYSIS

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 ECONOMIC
POLICY
PROJECTION & CREDIT

LEADING
INDICATORS
PMIs, SURVEYS

CORRELATED
POLICY DATA
DATA
RETAIL SALES, BALANCE OF GDP, INFLATION,
TRADE EMPLOYMENT
 LEADING
INDICATORS
PMIs, SURVEYS
POLICY
PROJECTION
MONETARY, FISCAL
CORRELATED
DATA INLINE
DATA NOT
CONTINUATION OF TREND
DATA INLINE
INLINE
BULLISH BEARISH

POLICY DATA POLICY DATA

INLINE NOT INLINE
CONTINUATION OF TREND REVERSAL OF TREND
 LEADING
INDICATORS
PMIs, SURVEYS
POLICY
PROJECTION
MONETARY, FISCAL
CORRELATED
DATA NOT INLINE
DATA NOT
REVERSAL OF TREND DATA INLINE
INLINE
BULLISH BEARISH

POLICY DATA POLICY DATA

INLINE NOT INLINE
REVERSAL OF TREND CONTINUATION OF TREND
INVEST IN A SYSTEM,
TRADE YOUR SYSTEM

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Q&A SESSION

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