Thursday, April 18, 2013

Market Outlook as at April 18, 2013

FBMKLCI has managed to stay above the 1700 level for the past few days (see Chart 1). If FBMKLCI can stay above its previous all-time high, then the market may continue its uptrend. In July 2011, FBMKLCI broke above its then all-time high of 1573 (denoted as 'A' on Chart 2) but it failed to stay above its breakout level and succumbed to profit-taking.

Chart 1: FBMKLCI's daily chart as at Apr 18, 2012_3.30pm (Source: Quickcharts)

Chart 2: FBMKLCI's weekly chart as at Apr 18, 2012_3.30pm (Source: Quickcharts)

Besides the Property index, three other sectoral indices have broken above their previous all-time high. These indices are Trading Services (due in part to a strong move by Tenaga), Finance and Consumer. I am encouraged that the upside breakout in FBMKLCI is accompanied by similar breakout in Trading Services and Finance indices. We will have to wait for a short while longer to see whether the market can continue its uptrend.

Chart 3: Trad Serv's weekly chart as at Apr 17, 2012  (Source: Quickcharts)

Chart 4: Finance's weekly chart as at Apr 17, 2012  (Source: Quickcharts)

Chart 5: Consumers weekly chart as at Apr 17, 2012  (Source: Quickcharts)

The consumer sector has continued to rise, driven by rising income & consumption. However, many of the blue chips in that sector are trading at high PE multiples. The recent profit-taking in the consumer sector in the US is a sign that smart moneys are not impervious to taking some chips off the table when stocks trade at high PE multiples. A report in Clusterstock noted that Buffet, Paulson & Soros had reduced their exposure to consumer stocks, probably betting that US consumers may not have the spending power to drive earning higher. Would the same thing happen to Malaysian consumers? Among the Malaysian consumer stocks, I prefer YeeLee (or, Spritzr).

Finally, I like to note that the ability of our index to stay above the 1700 mark is quite commendable, given the uncertainty in the upcoming General Election as well as the developing risk-off trade which has sent many equity market swooning as well as flooring almost the entire commodity asset class. In view of the increased volatility (and more to come), we should exercise careful discretion in this market.


lai said...

Hi Alex,

Would appreciate some comment on cliq warrant.

Thanks so much

Alex Lu said...

Hi lai

Cliq-WA (remaining tenor of 3 years) is trading at a premium of 25%. Hibiscus-WA (remaining tenor of 1.3 years) is trading at a slight discount. Everything being the same, Cliq-WA appears overvalued while Hibiscus-WA appears undervalued. For the profile of Cliq-WA, go to the link below.