The FTSE Bursa Malaysia Palm Oil Plantation Indices include:
•The ringgit-denominated FTSE Bursa Malaysia Palm Oil Plantation Index based on FTSE Bursa Malaysia Emas,All three indices have gone up significantly since the launch. See Chart 1-3 below.
•The ringgit-based FTSE Bursa Malaysia Asian Palm Oil Plantation Index, and
•The US dollar-based FTSE Bursa Malaysia Asian Palm Oil Plantation Index.
Chart 1: FBMPALMOIL's 15-min chart as at 20/5/2009_12.30 noon (Source: Quickcharts)
Chart 2: FBMAPMYR's 15-min chart as at 20/5/2009_12.30 noon (Source: Quickcharts)
Chart 3: FBMAPUSD's 15-min chart as at 20/5/2009_12.30 noon (Source: Quickcharts)
While these new indices may continue to rise due to demand by some fund managers-- allocating their moneys into agri-food sector-- I believe that this new dynamic is likely to be short-lived. The supply & demand of commodities & commodity-related equities as an investment asset-- which was a mania one or two years ago-- may not make a return so soon. While, this kind of investment approach may fit nicely into the inflation-hedge theme, I do not see the smart money or the deep pocket jumping onto this bandwagon again so quickly after their recent spectacular bust.
With the above in mind, I believe that the strong run-up in plantation stocks today may present a good opportunity to sell into strength. From the Plantation index's weekly chart, we can see that the immediate resistance posed by the medium-term downtrend line is at 6000, while horizontal line resistance can be seen at 5500 & 6400.
Chart 4: Plantation's weekly chart as at 19/5/2009 (Source: Quickcharts)
We must not forget the CPO price index. This index looks rather topppish after a sharp run-up from a low of RM2000 in end-March to a recent high of RM2870 on May 13. At the end of this morning session, CPO prices for June delivery closed at RM2735. If this price can hold above RM2600, the CPO price's uptrend is still be intact. A break below that could signal a correction in CPO. This could then lead to a correction in plantation stocks. As noted before, the output of CPO increased by about 20% in the second half of the calendar year & this additional supply would put pressure on the prices of CPO.
Chart 5: CPO's daily chart as at May 19, 2009 (source: ifs.marketcenter.com)
2 comments:
Hi Alex,
Hope you can do some analysis and write-up on the spin-off of property division by TA Enterprise into TA Global. Would it be wise to buy in TA Ent. now to ride through the exercise with them giving TA Global shares as dividend-in-species + irredeemable convertible Pref. Shares (ICPS) at no cost. Basically, what's this ICPS? Is this instrument trade-able on the bourse, or we will have to hold till maturity? Appreciate you detailed analysis and opinion on the above subject.
Thank you in advance.
Regards,
Brian
Hi Brian,
The idea that a demerger may be value-enhancing is based on the idea that the parts are worth more than the whole (or, simply put as 2+2<4). On the other hand, Sime had undertaken a huge merger exercise in October 2007 that is premised on the idea that 2+2>4. I believe that the split-up of TA & its property arm may prove that sometime 2+2=4.
In a good market, investors will chase up stocks with any decent corporate exercise. I believe that the TA spin-off may be viewed by investors in a positive light because of the current positive outlook in the market.
Having said that, I believe that TA- like many second & third liner stocks- are showing signs of weakness. I would not be surprise if second & third liner stocks were to correct further over the next one or two weeks. A good entry level for TA would be about RM0.85-90.
Post a Comment