Monday May 25, 2009.

WEEKLY MARKET REPORT.

Friday Market Closing Prices.

KLCI 1045.26 up 9.70.

DJIA 8,277.32 down 14.81 or 0.18%.

Crude Oil USD 61.67.

August FCPO RM2,521.

Ringgit 3.4880.

STOCK MARKET OUTLOOK.

I forecast the KLCI MOST LIKELY SCENARIO for the rest of 2009, the stock market is to trade between a very strong support at 1000 level and an upside potential of 1200 level based on the world economic recovery story.

To recap my earlier forecast on the KLCI :-

KLCI BEST CASE SCENARIO - 1331 by end of 2009, 1524 by middle of 2010 and a new high of 1661 by end of 2010 based on better than expected economic recovery.

KLCI WORST CASE SCENARIO - 860 to 880 level this year based on worse than expected world economic condition.

For this week, the market is expected to resume an upward trend with an intermittent profit taking based on positives political and corporate news flow. The better than expected results for Q1 2009 (Jan to March 2009 period) for the banking sectors indeed is very reassuring for the investors. The very low level of banks non performing loans (NPL) so far this year, has confirmed the strengths of the Malaysian banking system per se and the country economy as a whole, even though exports remain a serious concern. The continuing weakening of US Dollar and strengthening of the Ringgit will certainly help the oil and commodities prices and eventually further recovery of Malaysian economy.

LOCAL NEWS

Court of Appeal ruled Zambry Kadir is the legitimate MB of Perak but former MB Nizar to appeal in Federal Court.

Government proposes new bridge that will connect eastern Johor to Singapore and the Causeway to stay but will be upgraded.

Analysis - While the third link move is inevitable and laudable, the government is definitely need to do some serious rethinking again and hopefully not making a very serious and costly mistake again, politically and economically, by meekly agreeing for Tambak Johor not to be replace with a new bridge. This colonial legacy will remains as a major hindrance and an obstacle not only to a free flow of water over the Strait of Johor but also to the real growth of Iskandar Malaysia.

ECONOMIC NEWS.

Bank Negara Malaysia forex reserves as at May 15, 2009, rose to RM321.5 billion fro RM320.1 billion.

FOREIGN NEWS.

For the week, Wall Street may feel more pressure unless a raft of economic data including consumer confidence, home sales and GDP, restores back the optimism. The potential bankruptcy of General Motors remain a concern, as further job losses could imperil the U.S. economy.

Stabilization in housing and manufacturing, the two areas suffering the biggest contractions, will help ease the economic slump. Still, gains will be difficult to sustain in coming months as bank remain hesitant to lend and unemployment climbs, underscoring projections from Fed officials and private economists that a recovery will be subdued.

STOCKS RECOMMENDATION.

Continue to accumulate KLCI links stocks and quality lower liners especially on any market retracement toward the support level. For trading strategy, take profit on market strength, buy back on price weakness and keep a close eye on an individual stocks trading range.

BUY TNB Bhd at RM7.65 as the company prospect has become more and more attractive on an increase in power demand and strengthening ringgit as the economy continue to recover.

TNB had recently announced plans to build two hydro power plants with a combined capacity of 700 MW in Kelantan costing around RM2.8 billion.

For further inquiries please call:-

Kamel Bin Mohd Yusoh.

Institutional Dealer.

Kenanga Investment Bank Bhd.

013-6306544 or 03-21634549/50.

May 24, 2009.