New all-time high on low volume

by **hlk** Fri 06 Dec 2013, 12:08

Business & Markets 2013
Written by Lee Cheng Hooi
Friday, 06 December 2013 10:23
A + A - Reset
ASIAN SHARE markets retreated yesterday as international investors digested
the November US ADP data that showed a gain of 215,000 jobs (more than the
surveyed number of 170,000 jobs). With this gain in American jobs, the US
Federal Reserve is likely to talk about tapering its quantitative easing (QE)
programme again at its Dec 17-18 meeting. The S&P 500 fell 2.34 points to
close at 1,792.81 points while the Dow lost 24.85 points to end at 15,900.82 on
Wednesday.
In Malaysia, the FBM KLCI traded in an upward range of 28.45 points for the
week with volumes of 1.18 billion to 1.26 billion done. The index closed at
1,824.86 on Dec 5, up 2.96 points from the previous day as blue-chips like
British American Tobacco (M) Bhd, Hong Leong Financial Group Bhd, IOI Corp
Bhd, Kuala Lumpur Kepong Bhd and UMW Holdings Bhd caused the index to
rise on some low volume persistent local window-dressing activities yesterday.
The index rose on a rally from the 801.27 low (October 2008) to the previous
1,826.22 all-time high (May 2013) and it represents an extended Elliott Wave
“Flat” rebound in a “Pseudo-Bull” rise completed. The price movements in the
index over the few months following May 2013 were trapped in a rangy
consolidation with key swings of 1,723.74 (low), 1,811.65 (high), 1,660.39
(low), 1,805.15 (high), 1,759.66 (low) and 1,840.12 (high).
The index’s daily Stochastic indicator turned negative recently. However, the
CCI, DMI, MACD and Oscillator are firm ly positive. Thus, the index’s obvious
support levels are seen at 1,780, 1,800 and 1,824, while the firm resistance
areas of 1,828, 1,830 and 1,840 may see some firm profit taking.
Its simple moving averages (MA) depict a triple time frame (daily, weekly and
monthly) uptrend for now. Due to its positive signals, we believe investors may
adopt a “nibble on dips” philosophy as the KLCI remains at fairly lofty levels with bearish divergent signals. As such, profit taking on index
components as well as small to mid caps may persist this coming week as the local market remains thinly traded in the year-end windowdressing
period.
Despite the lofty tone of the KLCI, we are recommending a chart “buy” on Suria Capital Holdings Bhd, which has a market capitalisation of
RM765 million with a return on equity of 6.3% based on its 12-month trailing earnings. Suria has also consistently delivered gross profit
margins of above 30% for the past five years. For its third quarter ended Sept 30 of financial year 2013 (3QFY13), its revenue and profit
before tax (PBT) rose about 2.9% and 24.5% year-on-year (y-o-y) respectively.
According to the company, the improved profitability was attributed to higher contribution from its port operations and lower operating
expenditure. Port operations contributed approximately 86% of the group’s revenue and 98% of the group’s operating profit.
Maybank-IB does not have fundamental coverage on Suria. A check on Bloomberg reveals that three other brokers have a “buy” call on
the stock. The stock is currently trading at a reasonable historical price-earnings ratio of 13.7 times and a price-book value of 0.9 times.
Suria’s indicated dividend yield is at 2.3%.
The company’s chart trends on the daily, weekly and monthly time frames are very strong indeed. Its share price made an obvious surge
since its weekly Wave-2 low of RM1.40 in November 2012. Since that RM1.40 low, Suria had surged to its recent December 2013 high of
RM2.77.
Its chart has moved into very strong daily, weekly and monthly uptrends to its recent high of RM2.77. As it broke above its recent key
critical resistances of RM2.29 and RM2.47, look to buy Suria on any dips to its support areas as the moving averages depict very firm
short to long-term uptrends for this stock.
The daily, weekly and monthly indicators (like the CCI, DMI, MACD and Oscillator) are very strong and now depict the obvious indications
of Suria’s eventual surge to much higher levels. We expect the company to remain very firm towards its support levels of RM2.29, RM2.47
and RM2.71. It will attract minor profit-taking activities at the resistance levels of RM2.79, RM3.06 and RM3.48. Its upside targets are now
located at RM3.05, RM3.28, RM3.78 and RM4.36.
Lee Cheng Hooi is the regional chartist at Maybank Kim Eng. The views expressed in the article are the opinions of the writer and
should not be construed as investment advice. Please exercise your own judgment or seek professional advice for your investment
decisions. Technical report appears every Wednesday and Friday