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Thursday, May 04, 2017

FGV: What's Up!


FGV tumbled down badly over the past 3 days, from a high of RM2.10 on April 28 to an intra-day low of RM1.79 today. From the daily chart, we can see that FGV has broken its intermediate uptrend line, SS at RM2.00. It has just tested the support at the horizontal line at RM1.80.


Chart 1: FGV's daily chart as at May 4, 2017_4.00pm (Source: Malaysiastock.biz)

If it breaks below the RM1.80 support, it may go to RM1.40-1.50!


Chart 2: FGV's weekly chart as at May 4, 2017_4.00pm (Source: Malaysiastock.biz) 

The reason for the sharp decline is not because of the decline in CPO prices. Though CPO is still in an intermediate downtrend line, it has rebounded a bit in the past few days. In any event, other plantation stocks are holding up quite well.


Chart 3: CPO's chart as at May 4, 2017_4.00pm (Source: ifs.marketcenter.com)  

I believe the reason for the sharp decline is that Felda, the parent of FGV, is putting a squeeze on FGV to get a better deal on the land lease  agreement with FGV. This being an election year, only turn the heat up on Felda's political masters to get a good deal from the land lease agreement in order to reward the settlers. Any good deal for Felda will likely be a bad deal for FGV. For more, go here.

But the politicians must also be mindful that any excessive drop in FGV share price will anger these settlers, who are also shareholders of FGV. How to structure a win-win deal will be a true test for these politicians!

Based on the sharp decline in the share price over the past 3 days, FGV should be due for a rebound. Any further drop to the horrific low of RM1.50 will not be tolerated by anyone. If you are having FGV in your portfolio, you may be better off just holding on it than joining the sell side now.

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