AFG- a nasty surprise in a cheerful market

Alliance Bank Malaysia Bhd, the flagship Malaysian bank of Temasek Holdings and the investment arm of the Singapore government, is believed to have placed several of its top managers on forced leave pending completion on an informal internal investigation, people familiar with the matter said yesterday. This is according to a report in Business Times today (go here). Alliance Bank Malaysia Bhd belongs to Alliance Financial Group Bhd ('AFG'). As expected, the share price of AFG dropped sharply today.

AFG broke its horizontal support of RM2.60 as well as the third fan line ('T3') of a Fan Trend (also at RM2.60). The immediate support would be an uptrend line ('SS') that connects the "low" since June last year until today. That support is at RM2.55. If this support is also violated, then AFG may drop to the next horizontal support at RM2.35.


Chart: AFG's's daily chart as at Jan 5, 2010_11.55am (Source: Quickcharts)

Should one get into AFG now? We do not know the reason why AFG or the bank has requested several of its top managers to go on leave. The report that the CEO has tendered her resignation indicates that AFG or the bank is facing a very serious problem or a potentially significant loss. Under such circumstances, one would be prudent to wait for the news before taking any action.