Market Outlook as at August 14

The failure of the market to stage a convincing rebound over the past few days reflects the current market weakness, which is likely to lead to further selling ahead. Looking at Chart 1 below, you can see that the KLCI's next supports are at 1285 (February high), 1250 (psychological level) & 1220 (longer-term uptrend line support). Similarly, if we look at the 2nd Board (see Chart 2 below), it is heading towards its uptrend support at the 100 level. On the other hand, the Mesdaq index (see Chart 2 below) is already at its uptrend support at the 128 level.


Chart 1: KLCI's weekly chart as at August 14 (courtesy of Quickcharts)


Chart 2: 2nd Board's weekly chart as at August 14 (courtesy of Quickcharts)


Chart 3: Mesdaq's weekly chart as at August 14 (courtesy of Quickcharts)

DJIA nearing the 13000 level

DJIA dropped 208 points overnight to close at 13029 level with more signs that the weakness in the housing market is beginning to impact consumers' spending. In addition, hedge funds are facing withdrawal demands from their investors at a time that the assets are hard to sell.

The sharp fall in DJIA has brought the index almost to the psychological 13000 level. A break of this important level could see the DJIA testing the next horizontal support of 12850 (the February high) and thereafter the long-term uptrend line support of 12750. The latter support should hold but a break of this level could well signal the beginning of the bear market for Wall Street; something that is hard to imagine just 2 months ago.



Chart: DJIA's daily chart as at August 14 (courtesy of Yahoo Finance)

Tong Herr reported higher net profit for QE30/6/2007

Tong Herr has just announced its results for QE30/6/2007. Its net profit increased by 30.5% q-o-q or 122.5% y-o-y to RM24.7 million while its turnover increased by 25.3% q-o-q or 118.7% y-o-y to RM139.5 million.

Tong Herr’s last 4 quarterly result is substantially better than the preceding 4 quarterly result, with net profit jumping 196% from RM28.1 million to RM83.1 million, while turnover more than doubled from RM207.8 million to RM442.8 million. EPS has also jumped from 33 sen to 98 sen during these periods.

Based on its closing price of RM5.85 for today & last 4 quarter’s EPS of 98 sen, Tong Herr is now trading at a PE of 6.0 times.

Technically, Tong Herr is still in an uptrend line, with support at RM4.80. In addition, it has a strong horizontal support at RM5.00.

Chart: Tong Herr' weekly chart as at August 8 (courtesy of Quickcharts)

Based on cheap valuation & good technical outlook, Tong Herr is a good stock to invest in for the long term.

Market Outlook as at August 8

On August 1, I posted that the KLCI might be testing the immediate uptrend line support at 1340 and, if that support failed, the index might drop to test three horizontal supports, i.e. 1320, 1300 & 1285 (go here). The market has in fact broken through the uptrend line & dropped to a low of 1290 before staging a convincing rebound yesterday.

If the March recovery is a guide, the current rebound may still have some way to go before exhaustion. I think the resistance levels will likely be at the second recent gap-down level of 1333, the psychological level of 1350 and the first recent gap-down level of 1374.

Is the worst over? The answer is probably. The damage to the technical picture is significant enough that one has to be very careful at this period of time. Those who are underweighted in equity may accumulate slowly now or when the market does a pullback to re-test the low.

Chart : KLCI's daily chart as at August 8 (courtesy of Quickcharts)

CWs over KLCI & HSI

On Friday (3^rd August), two new CWs over indices were listed. They are KLCI-C1 & HIS-C1, which are European-style Cash-settled CWs over the Kuala Lumpur Composite Index (‘KLCI’) & the Hang Seng Index (‘HSI’), respectively.

KLCI-C1 was issued at an IPO price of RM0.215 with exercise ratio of 500:1; exercise level of 1,380 and maturing on 3^rd March 2008. On the first day of listing, the KLCI-C1 dropped to RM0.165, reflecting the lower level of the KLCI (which closed at 1,335.42). At that price & index level, the KLCI-C1 was trading at a premium of 9.5%.

On the other hand, HSI-C1 was issued at an IPO price of RM0.40 with exercise ratio of 2,500:1; exercise level of 23,000 and maturing on 29^th February 2008. On the first day of listing, the HSI-C1 dropped to RM0.26, reflecting the lower level of the HSI (which closed at 22,495.17). At that price & index level, the HSI-C1 was trading at a premium of 5.1%.

CWs for HK stocks as at August 2, 2007

Since my latest update on July 19, there were 3 new CWs listed. They are CHALCO-C1, CNOOC-C1 and SHENHUA-C1. These are all non-collateralized American-style cash-settled CW issued by OSK. They were listed on July 31.

Since the last posting on this subject, we have also witnessed a very sharp correction in global equity. Being a leverage instrument, these CWs suffered severely. Once this correction is over, you would likely see a sharp rebounce in these same CWs.

The updated CWs valuation table for Hong Kong stocks is appended below. CWs, which traded at premium of less than 4%, are highlighted in blue.

Second- & third-liners could be due for correction

If one were to look at the KLCI & the activity in our stock market for the past 2 months, one would notice that the play has shifted to the second- & third-liners stocks. This is pretty much borne out by the 3 daily charts (for FBM Smallcap, 2nd Board & Mesdaq) appended below. Due to the recent weakness in oversea stock markets, all 3 indices had violated their immediate uptrend line. Only FBM Smallcap has recovered above its uptrend line (but it has violated this uptrend line again today). The present weakness in all these indices is signaling an imminent correction amongst the second- & third-liners stocks.


Chart 1: FBM Smallcap's daily chart as at July 31 (courtesy of Quickcharts)



Chart 2: 2nd Board's daily chart as at July 31 (courtesy of Quickcharts)



Chart 3: Mesdaq's daily chart as at July 31 (courtesy of Quickcharts)

Market Outlook as at July 31, 2007

The KLCI appears to have tested its medium-term uptrend line at the support level of 1340 on July 30. Given the continuing correction on Wall Street, I believe our KLCI could re-test this uptrend line again over the next few days. A break of this uptrend line could see the KLCI testing its reaction low of 1320 recorded on May 25. Thereafter, we can expect support from the psychological level of 1300 as well as the KLCI's reaction high of 1285 recorded on Feb 26.


Chart: KLCI's weekly chart as at July 31 (courtesy of Quickcharts)

Digi has just tested its uptrend line

Digi has broken its medium-term uptrend line (in blue) at the RM22.75 level on July 23. Today, it has tested the longer term uptrend line at RM20.00/50 level. If this uptrend line support can hold, this could be a good entry level to this stock.



Chart: Digi's daily chart as at July 26 (courtesy of Quickcharts)

This is a technical recommendation without any consideration of the company's financial performance nor its financial position.

PBA may have a bullish breakout

Background

PBA Holdings Bhd ('PBA') is involved in the treatment & distribution of water for Penang. PBA is regarded by many as the best-managed water treatment and/or distribution company that is listed on the Malaysian stock market. The reason why it is less profitable than the other listed companies is because its treated water is sold at lower rates in Penang than in the other states.

Recent Financial Results

Based on the latest quarterly results for QE31/3/2007, PBA's net profit has increased by 11.2% q-o-q or 45.9% y-o-y to RM11.8 million. The improved profitability was attributed to higher turnover of RM43.9 million, an increase of 3.6% q-o-q or 7.8% y-o-y.

If you compared the last 4 quarters with the preceding 4 quarters, you can see that net profit has increased by 38.5% from RM30.4 million to RM42.2 million while turnover has gained 7.8% from RM162.6 million to RM175.2 million. EPS has similarly increased by 38.3% from 9.2 sen to 12.7 sen.



Current Financial Position

Based on the Balance Sheet as at 31/3/2007, PBA's financial position is deemed sound. Its liquidity position is adequate with current & quick ratio at 1.1 & 0.9 times, respectively. Unlikely others, PBA's Total Borrowings to Shareholders' Funds is very manageable at 0.2 times.

Valuation

Based on the trailing 4-quarter EPS of 12.7 sen & yesterday(27/7/2007)'s closing price of RM1.37, PBA is now trading at a PE of 10.8 times. That's relatively inexpensive for a defensive utility stock.

Technical Outlook

Since making a high of RM2.09 in September 2003, PBA has been in a downtrend. While it appears to have a breakout to upside of the downtrend line at RM1.28/30 level in mid-June, that breakout could not sustain & the share price eased back to find support at the downtrend line (see the 2 charts below). Yesterday, PBA made a big move & broke above the strong horizontal resistance at RM1.35. While the volume build-up has been fairly timid, I believe this breakout of the RM1.35 level could signal a bullish phase ahead for this stock.


Chart: PBA' monthly chart as at July 26 (courtesy of Quickcharts)


Chart: PBA' weekly chart as at July 26 (courtesy of Quickcharts)

Conclusion

Based on the bullish technical outlook and fairly decent fundamental picture, I believe PBA is a good investment for the medium-term. Good entry level is at RM1.35.

DJIA broke its medium-term uptrend line

DJIA dropped more than 310 points overnight on concerns about mortgage & corporate lending markets. The sharp drop has caused the index to violate its medium-term uptrend line at the 13700 level. You would notice that the index rebounded off its low of 13300, which is a strong horizontal support.

The Asian markets have been more volatile in the past few trading days, mirroring the current correction in the US & European markets. Despite greater volatility, most Asian markets (with the exception of the Japanese market) are still tracking their short-term, steep uptrend line. Today's trading could be different. The breakdown in Dow overnight could lead to similar breakdowns across the region. The Malaysian market, which has yet to breakout of its consolidation or waiting phase, may suffer less in term of drop in the main indices but the same may not apply to some stocks which had seen sharp price run-up lately.


Chart: DJIA's daily chart as at July 26 (courtesy of Yahoo Finance)

CWs for HK stocks as at July 19, 2007

The updated CWs valuation table for Hong Kong stocks are appended below. I have highlighted those attractively-priced CWs that are trading at premium of less than 4%. Since the Hong Kong stock market is doing relative better than our Malaysian market, it may be a good opportunity to benefit from this outperformance by 'investing' in these short-term derivatives.

HWL-C1 down on correction for the underlying share, HWL

HWL-C1 is one of those recommendation that I wish I have not made (go here). It was imprudent to call a buy on a stock [or, a CW linked to it] after a very sharp price run-up. From the daily chart below, we can see that HWL is likely to pull back & test its January high of HK$83.00 and, in the process, closing the July 9 gap. If the HK$83.00 support is violated, the next support would be the HK$82.00 level. A recovery from either level would likely lead to a recovery in HWL-C1. If both support levels are violated, it would be advisable to close your position on this CW, if you are still holding it.


Chart: HWL's daily chart as at July 13 (courtesy of HKEX)

This is strictly a technical call without any consideration of the company's financial performance & position.

Maybulk's uptrend to recommence

Maybulk has broken to the upside of the horizontal resistance at RM3.60/62 today. It gained 12 sen to close at RM3.72 for the morning. Volume for the morning session is marginally higher than normal at about 13,000 lots.

If Maybulk can sustain above the breakout level of RM3.60 over the next day or two, this stock's uptrend will continue. As such, Maybulk could be a good trading BUY.

Chart: Maybulk's daily chart as at July 9 (courtesy of Quickcharts)

This is strictly a technical call without any consideration of the company's financial performance & position.

CWs for HK stocks

There has been a few more listing of new CWs for Hong Kong stocks since my last posting in June. I have posted here an update for your guidance. Two CWs in particular are trading at a discount or at very low premium. They are HKEX-C1 and CCCC-C1. The former has been running up since the underlying share has a breakout in the middle of June ( see my post here). CCCC-C1 is a fairly new CW, only listed on July 5. The underlying share, CCCC has been on a strong uptrend since its listing in November last year (traded initially at HK$6.00). CCCC (closed at HK$17.78 today) has gained about HK$7.00 or 65% in the past 1 month alone. The attractive pricing of both HKEX-C1 and CCCC-C1 may reflect investors' cautious stance.



Looking at the above table, there are a few things that I like to point out. They are:

1. For the purpose of computing the premium of the CW, I have used the exercise price stated in RM or RM equivalent. The exercise price highlighted in yellow is as per the Term Sheet. The exercise price stated in HK$ is converted to the RM equivalent at an exchange rate of HK$1=RM0.44.
2. The market prices to be plugged in are highlighted in green. They are the underlying share price, which has been extracted from the HKEX website and the CW price, which is available from the Bursa website. The former will then be converted to RM equivalent at the same exchange rate as (1) above.
   
3. For informational purposes, the IPO price of these CW & the underlying stock code are given. To check on the prices of the underlying share, you need to go here.
   

HWL-C1 could be a good trading BUY

Today is the first day of trading for HWL-C1, a call warrant issued by CIMB for the underlying share of Hutchison Whampoa Ltd ("HWL"). The main terms for HWL-C1 are:

1. Exercise Price: RM34.25 (or HK$77.84, assuming exchange rate of HK$1 : RM0.44)
2. Tenor: 6 months from issue date (June 22, 2007)
3. Exercise Ratio: 10 to 1

HWL share price gained HK$3.40 to HK$86.40 as at 4.02 p.m. today. As a result, HWL has surpassed its recent high of HK$83.00 recorded in January this year. With this bullish breakout, I believe HWL should have further upside (see the chart below). To check on HWL share price, you can go here. HWL's stock code 13.



Chart: HWL's daily chart as at July 6 (courtesy of HKEX)

Based on the breakout of the underlying share, HWL-C1 could be a good trading BUY.

This is strictly a technical call without any consideration of the company's financial performance & position.

Tenaga has just tested its medium-term uptrend line

Tenaga dropped 50 sen to hit RM11.00 at the start of the afternoon session. From the chart below, you can see that the RM11.00 level is both a strong horizontal support as well as the support given by the medium-term uptrend line.

Based on technical consideration, Tenaga is a good trading BUY at RM11.00.


Chart: Tenaga's weekly chart as at July 4 (courtesy of Quickcharts)

This is strictly a technical call without any consideration of the company's financial performance & position.

Shanghai- Another test ...

The Shanghai's SSECI may test its medium-term uptrend line at 3,700-3,750 today. Technically speaking, an uptrend line is likely to hold & provide the staging area for a recovery. SSECI has however exhibited some weaknesses that are worth noting. Firstly, on its recent test of the uptrend line in early June, the SSECI's uptrend line was violated before recovery. Secondly, the rebounce that followed failed to make a new 'high'. Finally, the MACD & Stochastics are both showing bearish divergence. This divergence is noticeable in April to May period, where both MACD & Stochastics were not making new 'highs' while the index was inching higher. And, again this can be seen now as both MACD & Stochastics are inching lower while the index has yet to surpass the early June low.

A break of the medium-term uptrend line support at 3,700-3,750 could lead to the consolidation of the overheated Shanghai stock market.



Chart: SSECI's daily chart as at July 4 (courtesy of Yahoo Finance)

VS reported continued growth in net profit for QE30/04/2007

VS has just announced its results for QE30/4/2007. The results show that VS’ net profit has increased 6.7% q-o-q or 129% y-o-y to RM17.7mil. Its turnover has also increased by 9.2% q-o-q or 60.0% y-o-y to RM289mil.

If we compared VS’ latest 4 quarters with the preceding 4 quarters, we can see that its net profit has doubled from RM20.7mil to RM42.0mil, while turnover increased by 46% from RM668mil to RM978mil. EPS has similarly doubled from 20.7 sen to 42.0 sen.

Based on its trading price of RM3.38 as at 11.00 am today & its EPS of 42.0 sen, VS is now trading at a PE of 8.0 times. This is considered inexpensive in view of VS’ strong growth.



The share price has run quite a bit since I highlighted the potential of this stock (go here). The last 4 weeks' price run-up is very sharp (see the chart below). If the price weakened back to RM3.00-3.20, you may want to gain entry into this growth stock.

Chart: VS' weekly chart as at June 28 (courtesy of Quickcharts)

Market Outlook as at June 28, 2007

Many of you must have heard of the saying that investing is hard. Even harder than that is investment blogging. From Abnormal Returns, you have a recent post that deals with the same subject (go here). It seems that some bloggers are giving up & moving on. Sad, indeed.

This brings me to the subject at hand, i.e. where is our market heading to? You would recall my recent post on this subject (go here), where I have confidently predicted the start of the next bullish rally. After a short rally where the KLCI hit a high of 1392 on June 22, the market reversed. In the next 4 days, the KLCI dropped about 3% to close at 1351, yesterday (see the chart below).


Chart: KLCI's daily chart as at June 28 (courtesy of Tradesignum.com)

The drop has been so steep that the KLCI has broken below its 20- & 30-day SMA as well as closing marginally below the 50-day SMA. The sharp correction in our market, which is likely to be a reaction to the weakness in US equity market, has effectively put an end to my bullish rally call. Our market is likely to put in a throwback rally from the 1350 level, which is not likely to go very far. A break of the 1350 level may see the KLCI testing the strong horizontal support of 1335 or even the psychological support of 1300.

Dow's correction- another look

On June 13, I have posted a piece on Dow's ongoing correction (go here). That post was written using Dow's weekly chart. After last Friday's sharp 186-point drop in the Dow, I have re-examined the Dow's chart again; this time I concentrate on the daily chart. The picture that emerged is not good.

From Chart 1 below, we can see that Dow has just broken to the downside of its medium-term uptrend line at the 13380-400 level. The break is fairly marginal & there is possibility of a quick recovery on next Monday.


Chart 1: DJIA's daily chart as at June 22 (courtesy of Yahoo Finance)

The same outlook also applies to Nasdaq, which has also broken to the downside of its medium-term uptrend line at the 2600 level (see Chart 2 below).


Chart 2: Nasdaq's daily chart as at June 22 (courtesy of Yahoo Finance)

The S&P500's daily chart tells a slightly different story. This index has broken its medium-term in early June & failed to recover despite the recent rebound. A market that has violated its uptrend will go into either a sideway market or a downtrend. For a downtrend to be confirmed, you need to sight a 'lower high and a lower low'. In the case of S&P500 index, a lower high was sighted and, if the current renewed weakness could bring the S&P500 below its early June low of 1485, we would have a lower low. This means that the S&P500 index could be entering a cyclical bearish phase (see Chart 3 below). If this were to happen, it is hard to see how the Dow can escape a similar fate.


Chart 3: S&P500's daily chart as at June 22 (courtesy of Yahoo Finance)

The on-going correction in the US markets is brought on by the rise in bond yield as well as deteriorating situation in the housing market; both might impact American consumer confidence & spending.

A sharp drop in Dow in the coming week will cause some knee-jerk reaction on this side of the Pacific. So, a better course of action is to stay light on equity for the next week or so. For those who are heavy on stocks, you would have to trim your position & take some losses. A complete sell-off of your equity position may not be necessary at this stage because we do not have any confirmation that Asian markets are about to do a similar correction like the US markets. On the contrary, some Asian markets have broken their recent highs (Hong Kong & Malaysia for example) that are prelude to another bullish rally.

CWs for HK shares

Recently, there was a spate of CWs issued for foreign underlying shares, traded on the HKEx and SGX. I have posted on the issuance of these CWs as well as highlighting the potential of 2 such CWs, i.e. HKEX-C1 & CHMOBIL-C3. To help in your short-term investment or trading, I have prepared a table valuing all the CWs for underlying stocks traded on HKEx, except the zero-strike CWs. From this table, you can see why HKEX-C1 & CHMOBIL-C3 are doing so well lately. One other CW that may do well soon maybe HSBC-C1.

Genting has tested its uptrend line

One of the best-known blue chip in our local bourse is Genting. The stock, which made a high of RM9.95 on April 11 (just prior to its 5-for-1 split), has corrected back to its medium-term uptrend line. It has tested the uptrend line as well as the strong horizontal support line at the RM7.80. If Genting's share price can break above its 30-day SMA at the RM8.05/8.10 level, the stock's uptrend could continue.

Buy between RM7.80-8.00 & wait for the breakout, or buy when the stock surpass the RM8.05/8.10 level.


Chart: Genting's daily chart as at June 20 (courtesy of Tradesignum.com)

Market Outlook- Uptrend recommencing...

Yesterday, I had posted that the market uptrend might continue if the KLCI can surpass the 1380-90 level with good volume (say, 1.5-2.0 billion units). The 1380-90 level was chosen because the overhead resistance (see the blue line) was approximately there, and if this level is taken out, the KLCI's daily MACD would likely to have achieved a positive crossover & the 20-d SMA would likely to 'bounce off' the 30-d SMA (instead of doing a crossunder).

Well, as if on a cue, the KLCI put in a very positive performance today by gaining 9.5 points to close at 1386, with a total volume of 1.8 billion units traded. While the MACD crossover is not very clear just yet & the same may apply to the interaction of the 20-d SMA & 30-d SMA, I believe that, in due course, both of these will likely to take place & confirm the start of the uptrend for the market. With this, I believe it is timely now to increase our exposure to equity again.


Chart: KLCI's daily chart as at June 20 (courtesy of Tradesignum.com)

Bursa has a bullish breakout

Bursa gained 40 sen to hit RM12.60 at 11.00 a.m. this morning. In the process, Bursa has just broken to the upside of the strong horizontal resistance at RM12.20. With this bullish breakout, Bursa's uptrend is likely to re-commence. Bursa & the related CWs would be good trading BUY. Of the CWs, I prefer Bursa-CB & Bursa-CC.


Chart: Bursa's daily chart as at June 19 (courtesy of Quickcharts)

This is strictly a technical call without any consideration of the company's financial performance & position.

BJToto has a bullish breakout

BJToto has finally broken to the upside of the strong horizontal resistance of RM4.96/98. As at 11.00 a.m. this morning, it has gained 25 sen to hit RM5.30. Volume is also very substantial. With this breakout, BJToto would be a good trading BUY. You may also like to consider the related CW, i.e. BJToto-CB.


Chart: BJToto's daily chart as at June 19 (courtesy of Quickcharts)

This is strictly a technical call without any consideration of the company's financial performance & position.

Market Outlook as at June 19, 2007

On June 6, I wrote that our market correction had most likely been completed. A good 2 weeks after that post, our market is still trading without clear direction. Is the market telling us anything new in the past 2 weeks? From the chart below, we can observe the following:

1. Higher 'highs' for the past 2 months;
2. Increased volume in the past 1 month;
3. Volume Oscillator has done a positive crossover;
4. Stochastic RSI has gone into overbought territory (a positive sign);
5. The sloping resistance line (in blue) is still blocking advances (currently, at 1380);
6. MACD has yet to do a positive crossover; and
   
7. While the 10-d SMA has crossover the 20-d SMA, the 20-d SMA is still threatening to crossunder the 30-d SMA.
   

Chart: KLCI's daily chart as at June 19 (courtesy of Tradesignum.com)

In my opinion, if the KLCI can surpass the 1380-90 level with good volume (say, 1.5-2.0 billion units), our market's uptrend would continue. It is possible that this breakout might happen within the next week or so. Watch out for this.

CHMOBIL may have a bullish breakout

China Mobile ('CHMOBIL') is reputed to be the largest mobile phone operator in China. It is also considered to be the world's largest mobile phone operator, ranked by number of subscribers (which totaled about 300 million).

Recently, OSK & CIMB have issued CWs for China Mobile (CHMOBIL-C1 by OSK and CHMOBIL-C2 & CHMOBIL-C3 by CIMB). For this post, I shall ignore CHMOBIL-C2, which is a zero-strike CW because it is too costly in absolute term. The main terms of CHMOBIL-C1 & CHMOBIL-C3 are listed below:



The main reason why we are looking at CHMOBIL is the share price appears to have broken above its strong horizontal resistance at the HK$79.75 level yesterday when the share price gained HK$4.55 to close at HK$80.35 (see the chart below). A possible reason for this bullish development is that CHMOBIL is planning its listing on the super-heated Shanghai Stock Exchange as early as next month (go here). If this breakout can sustain over the next day or two, I expect the share price of CHMOBIL will trend higher. We can benefit from this development by buying either CHMOBIL-C1 or CHMOBIL-C3. From the table above, you can see that CHMOBIL-C3 has a lower premium of 6.9% as compared to CHMOBIL-C1, which has a premium of 15.9%.


Chart: CHMOBIL's daily chart as at June 18 (courtesy of HKEX)

To check on CHMOBIL's share price, you can go here. CHMOBIL's stock code 941.

This is strictly a technical call without any consideration of the company's financial performance & position.

Ranhill- False News & Fiduciary Duties

The share price of Ranhill went up 30% to RM2.35 at the close of the morning session today. In the afternoon, the share price retreated sharply to RM2.18 before trading was suspended. What could have caused the initial sharp price run-up & its subsequent retreat?

In short, 2 articles (here & here) have contributed to investors' frantic buying in the morning session. The Star newspaper has reported that Ranhill's oil exploration project in the Citarum block, off West Java might be 5 times larger and also being accessible at a shallower depth than initially projected. The NST newspaper has reported that Ranhill maybe part of the Paradigm Consortium that is in talk to develop a RM9.0 billion integrated oil & gas facility in Doha, Qatar.

While Ranhill has subsequently clarify the serious mistakes in both articles (here & here), I wonder whether the company could have acted more firmly, such as requesting for an immediate suspension to better clarify the errors in both reports. To remain quiet & to allow one's shares to be traded under a false impression to the detriment of the ignorant investors, does not reflect well on the company as well as its directors & management. A duty is owed to the investing public to correct any serious error in any significant report of a company's actual business operation. Would the directors & management have acted differently if the reports have been erroneously negative, instead of positive?

Hang Seng Index may have a bullish breakout

The Hang Seng Index ('HSI') has convincingly broken above its strong horizontal resistance of 21000 when it gained 300 points to hit 21317 level at 10.16 a.m. this morning. If this bullish breakout can sustain for the next day or two, the Hong Kong stock market's uptrend will continue (see the chart below).


Chart: Hang Seng Index's daily chart as at June 15 (courtesy of Yahoo Finance)

This breakout will re-inforce the bullish breakout of Hong Kong Exchange & Clearing Limited ('HKEX') as noted in my earlier post (go here). In fact, HKEX has gained HK$3.20 (or 3.37%) to hit HK$98.90 as at 11.23 a.m. this morning. HKEX-C1, traded on our exchange, has gained 7 sen to hit RM0.855 as at 11.51 a.m. this morning.

Haio's net profit jumped for QE30/4/2007

On March 20, I have posted on Haio's substantially better results for QE31/1/2007 (go here). Since then, the share price of Haio has risen about 93 sen from RM1.92 to yesterday's closing price of RM2.85.

Yesterday, Haio has announced its quarterly results for QE30/4/2007. Haio's net profit has jumped by 56.5% q-o-q or 239% y-o-y to RM7.8 mil, while its turnover has increased by 10.4% q-o-q or 65.4% y-o-y to RM56.7 mil. If we compared the results of the last 4 quarters with those of the preceding 4 quarters, we can see that its net profit has doubled from RM9.9 mil to RM21.2 mil while turnover has increased by 30% from 146 mil to RM189 mil. For these periods, the 4-quarter EPS has jumped from 16 sen to 32 sen. The company attributed its improved results to higher sales from its MLM & retails divisions.



Based on yesterday's closing price of RM2.85 & last 4-quarter EPS totaling 32 sen, Haio is now trading at a PE of 8.9 times. This is an undemanding PE multiple given its strong growth in both topline & bottomline.

From the chart below, we can see that the share price has risen quite substantially in the past 2 week from about RM2.25 to RM2.85 now. It is quite possible that some profit-taking may occur around the RM3.00 level. You may use any price weakness to gain entry into this stock.


Chart: Haio's daily chart as at June 15 (courtesy of Tradesignum.com)

This call is made without due consideration of the company's position.

HKEX-C1 to benefit from HKEX's bullish breakout

Recently, CIMB has issued 2 CWs for the underlying share of Hong Kong Exchange & Clearing Limited ('HKEX'). These CWs, HKEX-C1 & HKEX-C2 were listed yesterday (June14).

HKEX share price gained HK$1.60 (or, 1.7%) to close at HK$94.90 at the close of this morning session. As a result, HKEX has surpassed its recent high of HK$93.70 recorded in January this year. With this bullish breakout, I believe HKEX should have further upside (see the chart below). To check on HKEX share price, you can go here. HKEX's stock code 388.



Chart: HKEX's daily chart as at June 14 (courtesy of Yahoo Finance)

For this post, I shall ignore HKEX-C2- a Zero Strike Call Warrant over HKEX share- because it is too costly in absolute term. I shall concentrate on HKEX-C1. The main terms of HKEX-C1 are:

1. Exercise Price: RM37.00 (or HK$84.90, assuming exchange rate of HK$1 : RM0.4358)
2. Tenor: 7 months from issue date (May 30, 2007)
3. Exercise Ratio: 10 to 1

Based on the underlying share price of HK$94.90, HKEX-C1 (closed at RM0.775 at the end of the morning session) is now trading at a premium of 8.2%. This is a substantially improvement to the premium of 17.23% at the date of its issuance (on May 30) when it was issued at a IPO price of RM0.635. This is because HKEX share price has gained 12.2% from an average price of HK$84.56 as at May 30.

Based on bullish breakout of the underlying share (HKEX), I believe HKEX-C1 (and, HKEX-C2) would be a good trading BUY.

This is strictly a technical call without any consideration of the company's financial performance & position.

AMMB's uptrend may accelerate

CLSA in its daily report yesterday has highlighted an interesting angle to the story of ANZ’s hiring of Michael Smith (formerly with HSBC) to spearhead its Asian operation. According to the report, this move by ANZ could bode well for AMMB, which is ANZ’s biggest investment in Asia todate. Incidentally, Smith was HSBC Malaysia’s deputy CEO from 1995-97.

From the monthly chart (Chart 1), it appears that AMMB (closed RM4.10 as at June 13) has broken out of its big consolidation pattern at RM3.70/80 level. Its next resistance will be at RM5.00, 5.50 & 7.00. From the daily chart (Chart 2), we can see that its immediate support is at the medium-term uptrend line at RM4.00, while resistance is at RM4.20.

As at 12.00 noon, AMMB share price has jumped 20 sen to RM4.32. The volume accompanying the breakout of the RM4.20 horizontal resistance is huge & convincing. I believe AMMB's uptrend should accelerate & it may test the RM5.00 target next.

Chart 1: AMMB's monthly chart as at June 13 (courtesy of Quickcharts)


Chart 2: AMMB's daily chart as at June 13 (courtesy of Quickcharts)

This is strictly a technical call without any consideration of the company's financial performance & position.

Dow's correction- how much more?

Dow has been dropping for the past few trading days; down 2.8% to 13295 from its record close of 13676 recorded on June 4. From the chart below, we can see that the Dow may find support at the psychological level of 13000 or the horizontal support of 12845 (Dow's February high). A break of these levels could send the Dow to test its tentative uptrend line, with support at 12600.

The current correction in Dow could be precipitated by investors' disappointment with Fed's decision to leave interest rate unchanged at the recent FOMC meeting. Hawkish comments have raised the prospect of further rise in interest rate in the future. Yesterday, the yield on the 10-year Treasury note soared to a 5-year high of 5.295%.


Chart: Dow's daily chart as at June 12 (courtesy of Yahoo Finance)

Jobs may be testing its all-time high of RM2.07

Jobs is a stock that I've recommended in December last year (go here). The stock has risen only marginally since then. From the weekly chart, you can see that Jobs is in a medium-term uptrend line, with support at RM1.75/80. At the same time, its advances have been blocked by a short-term downtrend line, with resistance at RM1.95. Today, Jobs has broken above that short-term downtrend line as well as poised to test the all-time high of RM2.07. This is a bullish development, but volume is definitely lacking to confirm this breakout. Let see whether the volume can come in tomorrow. If so, Jobs could be a good trading BUY. Remember to set a SELL STOP at the breakout level of RM1.95.


Chart: Jobs' weekly chart as at June 8 (courtesy of Quickcharts)

This is strictly a technical call without any consideration of the company's financial performance & position.

The market correction could be over

The market outlook has continued to improve. It is very likely that the recent market correction is over. I have come to this conclusion after making the following observations:

1. The KLCI has closed above its recent highs of around 1368.
2. The 10-day SMA has crossed above the 20-day SMA.
3. The daily MACD is nearly done a positive crossover.

In addition, you may note that the volume traded has increased to 1.5 billion units. In the light of these positive signs, I believe that we can add to our long positions again over the next days, especially if the market were to soften a bit.


Chart: KLCI's daily chart as at June 6 (courtesy of Tradesignum.com)

Market Outlook as at June 4, 2007

The KLCI made a new high of 1375 today. Unfortunately, the index lost all its gain to close at 1360. In Japanese candlestick charting method, today's market action would be represented by a gravestone doji. Generally, a doji conveys a sense of indecision between buyers & sellers, but a gravestone doji (like its opposite counterpart, the dragonfly doji) normally appears at market turning points. Assuming that this is a potentially toppish signal, this candlestick still requires a bearish confirmation, such as a gap down or a long black candlestick & high accompanying volume.

The appearance of the gravestone doji is certainly a disappointment to me. The way the KLCI has been moving in the past few trading days, I was getting a feeling that the correction is nearly over. The next upside was just around the corner. Well, we will have to wait and see for the next few days for clearer signs of the market ahead.



Chart: KLCI's daily chart as at June 4 (courtesy of Tradesignum.com)

High Noon in Shanghai

After making a high of 4335.96 on May 30, the Shanghai Stock Exchange Composite Index ('SSECI') has pulled back quite sharply. Today, it dropped 330 points to close at 3670.40. From the chart below, you can see that the SSECI will be testing its medium-term uptrend line at 3450 level very soon. This level should provide a short respite & the market may rebound from here. A break of this level could signal the beginning of a bearish phase for the Shanghai stock market.



Chart: SSECI's daily chart as at June 1 (courtesy of Yahoo Finance)

Unlike the February selloff, the current selloff in Shanghai is having a lesser impact on the markets around the region. Some see an orderly correction in Shanghai may benefit other markets, including Bursa Malaysia.

UMW has made a new high again

UMW has just made a new high of RM12.20, after breaking to the upside of the flag formation, which has contained the share price for the past 2 months (see Chart 1 below). The breakout level is at RM12.00.


Chart 1: UMW's daily chart as at May 31 (courtesy of Quickcharts)

We can also see a similar bullish breakout in UMW-CA, at the RM1.15 level. This CW has an exercise price of RM9.60; exercise ratio of 2:1; & expiring on November 13. As at 4.15 pm, the CW was at RM1.30 (see Chart 2 below).


Chart 2: UMW-CA's daily chart as at May 31 (courtesy of Quickcharts)

With these breakouts, I believe UMW & UMW-CA could be a good Trading Buy. Remember to set your Sell Stops at the respective breakout level.

This is strictly a technical call without any consideration of the company's financial performance & position.