Monday, March 05, 2012

Market Outlook as at March 5, 2012

Over the past few days, the global equity markets went on a tear. Our FBMKLCI was no exception when it broke above the horizontal resistance at 1565-1566 on February 29 & hit an intra-day high of 1594 today- 3 point shy of the all-time intra-day high of 1597 recorded on July 11, 2011. See Chart 1 below.

After the sharp rally over the past few days & the failure to surpass the all-time high today, our market is likely to enter into a short correction over the next few days.You may use this correction to gain entry into the market.

Chart 1: FBMKLCI's daily chart as at March 2, 2012 (Source: Tradesignum)

As the FBMKLCI approaches the all-time high, we can expect the same for many of the sector indices. A quick look at the major sectors revealed the following:
- Consumer Products has been making new high ever since it surpassed the previous all-time high in December last year;
- Industrial Products, Plantation and Trading Services are at or near their respective all-time high; and
- Finance, Construction & Properties have not come near the all-time high but they have broken above their respective downtrend line.

Of these three laggard sectors, finance sector may be the first to test its all-time high. From Chart 2 below, we can see that Finance index has just broken to the upside of the wedge formation at 14100. It could rally to test its immediate resistance is at 14500 & then the psychological 15000 mark.

Chart 2: Finance's weekly chart as at March 2, 2012 (Source: Quickcharts)

The properties index broke above its intermediate downtrend line at 1040 in early February. It nearly tested its horizontal resistance at 1070 before it entered into a correction. This brought the index down to its medium-term uptrend line support at 1032. Today, it tested the horizontal resistance of 1070 but it failed to stay above it. An upside breakout above this horizontal resistance could send the index to the next horizontal resistance at 1130 & then the psychological 1150 mark.

Chart 3: Properties's weekly chart as at March 2, 2012 (Source: Quickcharts)

Finally, the construction sector corrected back to its medium-term uptrend line support at 260. It has earlier broken above its intermediate downtrend line resistance at 264 in early February. Can it recruit enough support to continue its upleg?

Chart 4: Construction's weekly chart as at March 2, 2012 (Source: Quickcharts)

If you are looking at some laggards to play catch-up, you can consider these three sectors. My personal preference is for the finance & construction sectors. Some finance stocks to consider are AMMB, CIMB, RHBCap & Maybank, and some construction stocks to look at are MMC, Gamuda, WCT & IJM.


WYS said...

Thanks for the heads up

Anonymous said...

Hi Alex

Can you comment on P.I.E? It share price keep show good performance despite market on correction mode. Could P.I.E resume it uptrend and reach its all time high of RM6.00?

Based on its EPS of 59sen, it is now trading at merely 7.7x, lower than its historical PE of 10x. In accord to its dividend policy of 2/3 net profit payout as dividend, P.I.E could potential payout at least 39sen nett or 50sen gross dividend. P.I.E afford to adopt high payout policy as its has net cash of RM 1.30/share.

luckystock2 said...

Hi Alex ,
Any comment on TWSplant ? Looks like it has dropped back to its support again.

Anonymous said...

Hi Alex

Can you comment on UOA development? Its Q4 result look impressive, but that include fair adjustment of its investment properties. UOA has proposed dividend of 10 sen, give rise to net yield of 6.8% based on current share price, i think is one of the highest yield among the property sector

Alex Lu said...

Hi hng

P.I.E reported an increased net profit but a lower turnover for QE31/12/2011.

Chartwise, it broke above the rising line connecting its peaks over the past 2 years. That breakout level is at RM4.30. Its next resistance is at RM4.60 & RM5.00.

Alex Lu said...

Hi luckystock2

TWSplant hit the rising line connecting the peaks over the past 15 months. That level at RM5.00 was a resistance & it has since corrected.

Its strong support is at the 30-week EMA line at RM4.10 & thereafter at the 50-week SMA line at RM3.80.

Alex Lu said...

Hi hng

UOADev proposed a generous dividend of 10 sen. The question is whether this can be sustained. That depends on its earning. My feeling is that we have seen a peak in the earning for property developers. So, I believe it will be hard for UOADev to have the same dividend payout next year.

Chartwise, the stock is trapped within a symmetrical triangle with resistance at RM1.55 & support at RM1.45. I think it is a good buy if it dropped to RM1.45.

Malaysia Stock Talk said...

Would you analyse Greenyb?