Airasia- EPF bought a 5.2%-stake

EPF announced yesterday that it had purchased a 5.2%-stake in Airasia. Prior to this, EPF did not hold any shares in Airasia. This purchase is a strong vote of confident in the management of Airasia. Interestingly, T. Rowe Price Associates, Inc., one of the foreign funds that had been selling down its Airasia stake, announced on January 14th that it had purchased back 134,000 Airasia shares on January 7th.

The EPF purchase came one day after Airasia's press statement on the recent controversy over its fuel hedging policy. You may read more about here. The important gist is given below:

Due to the high volatility in oil prices, we are of the view that adopting a static hedged approach (through fixed/plain vanilla swaps) at current price levels would involve taking excessive risks. If one were to opt for a fixed swap now and should fuel prices retrace subsequently, we would be left with effectively an obligation to purchase expensive fuel with no room to manoeuvre out of the position. Therefore, we opted for a dynamic approach and layered fuel hedge structures.

This is how I envisaged Airasia would approach its hedging of fuel cost, but the actual working of the hedging is obviously more complex than layman, like us, could understand.

Chartwise, Airasia's uptrend line support at RM1.65-68 has since been violated. It is now holding above its horizontal support of RM1.50, with the next support at RM1.40. The overhead resistance will be at RM1.65.

Chart: Airasia's weekly chart as at January 16 (courtesy of Quickcharts)

Based on the entry of a "knowledgeable" investor of substantial mean, i.e. the EPF, I believe that the bottom for Airasia has been made. A BUY at the current level would be a fairly safe BUY.