Currency Play KRW: It's About Time

South Korean won plunges to new multi-year low against dollar and yen on recession fears

(RTTNews) - During early deals on Friday, the South Korean won declined to new multi-year lows against the US dollar and the Japanese yen on escalating concerns that Asia's fourth-largest economy will slip into a recession for the first time since 1998.
As the economic and financial troubles spread, the country's central bank is due to hold an emergency policy meeting next week to decide whether to join a proposed 10 trillion won or $6.57 billion fund to buy bonds issued by local companies.On November 3rd, the South Korean government unveiled a stimulus package worth 14 trillion won to boost the slowing economy. The package includes 11 trillion won fiscal spending next year and 3 trillion won tax benefits. The package also calls for 3.4 trillion won to assist small and medium sized companies and farmers. The ministry said an additional 1.3 trillion won would be spent for low-income earners.
The central bank has also slashed its base rate by 75 basis points to 4.25% from 5% in a series of cuts, including the biggest in its history, from early October, as the global downturn bites into South Korean economic growth.The South Korean economy, Asia's fourth-largest, is slumping hit by a global economic downturn as exports, which account for more than 60 percent of its economic expansion, is faltering on economic recession worldwide.
The South Korean won slumped to 1519.00 against the US dollar during early Asian deals on Friday. This set the lowest mark for the won since March 1998. On the downside, 1644 is seen as the next target level for the won. The dollar-won pair that closed Thursday's North American session at 1496.40 is currently trading at 1509.20.The South Korean won that closed Thursday's North American session at 15.9325 against the Japanese yen declined to 16.0895 at 9:35 pm ET. This set a new multi-year low for the South Korean currency.

1000KRW = 2.45MYR now compared to 3.6MYR two years ago.

S&P 500 @ 752

MALAYSIAN shares are expected to open lower today after the Standard & Poor’s 500 index plunged to its lowest level in 11 years on worsening fears about the US economic slowdown. The Standard & Poor’s 500 Index lost 54.14 points, or 6.71 per cent, to 752.44 after data showed the number of US workers on jobless rolls surged to the highest in a quarter century. “Basically, we are looking at a gloomy, gloomy day for Malaysian stocks. There will be further downside pressure because the S&P 500 crashed to its lowest level since 1997,” said Stephen Soo, technical analyst at TA Securities. “The US government’s possible bailout plan for the auto sector will definitely affect market in the region and we will not be able to escape that regional selldown,” he said.
The Dow Jones industrial average plunged 444.99 points, or 5.56 per cent, to 7,552.29. The Nasdaq Composite Index slid 70.30 points, or 5.07 per cent, to 1,316.12. - Reuters

AUD & KRW Currency Play

From recent peak, AUD currency has drop by 30% while KRW has drop by 28%. GBP also has fallen 28%. Time to buy...?
I think commodity currencies AUD, BRR will descend further and so will export currency KRW. Hold your horses just a bit longer..
Approximate Rate: 1 AUD = 2.3 MYR, 1000KRW = 2.5MYR
http://www.forexcult.com

Risk Control & Size Positioning

5 years low since 2003. DJIA down 457 (5%) to 7997 with S&P500 down 52(6%) to 806 points: 3390 losers and 303 gainers were registered.
Auto industryin trouble, consumer spending down, energy down 9%.
Oil at 22 months low.

For reader interested in position sizing:
http://turtleinvestor888.blogspot.com/2008/08/art-of-risk-control-position-sizing.html
Suppose you have RM100,ooo capital and you wants to buy/sell stock shares but is willing to lose only up to RM10,000. Then what is the size of your position in the stock market given a risk control loss?

1. Set up a cut loss line. If your risk loss is 20% tolerance, that means you can take a position up to RM50,000. The Rm50,000 is the size of your stock investment/trading. In any event of a sharp value decline of your stock holding by 20%, you lose only RM10,000.
But if your tolerance is 10%, then you can actually position the size of your whole capital of RM100,000 to buy shares. In any event of loss, it is restricted to RM10,000.

So say you bought IOI Corp share at RM4 x 25000 shares and unfortunately the market declines. Share now goes down in price. Your cut loss is 10% and you should sell when price drops to RM3.60 thus preserving your capital: 25ooo shares x RM3.60 = RM90,000.

2. Assuming you quit the stock market and place your reduced capital of RM90,000 with a bank earning deposit interest of 3.75%, it will take 3 years for your placement to revert back to RM100,000.

S&P500 chart

Someone say S&P 500 is a better indicator of trend as it is more broader reflection of the American economy.

On Friday, it closes down 38 points (4.2%) at 873. Materials and financials were weak.

Commodity Currencies Down

Fears about a global slowdown weigh on the markets.
Commodity Index down 1% to 257, Gold down 2% to USD728, Crude Oil down 5% to USD59.
DJIA down 3% to 8600 at 12.20pm
Commodity currencies all down with AUD and NZD losing 3%
USD Index strength at 86.8

LONG TERM PLAY?

KLSE vs DJIA

Regional Recovery?

AUD drops

Time to take a holiday in Australia, NZ or Korea