Ringgit gains as Brent crude and FBM KLCI rise

by **Cals** Fri 09 Oct 2015, 22:45

Ringgit gains as Brent crude and FBM KLCI rise

By Lee Cheng Hooi / Contributor to The Edge Financial Daily | October 9, 2015 : 10:29 AM MYT

This article first appeared in The Edge Financial Daily, on October 9, 2015.

US equity markets surged on Wednesday as healthcare companies gained and led the American indices up. Recent softer economic data, like the latest American jobs data, has now created market expectations that US interest rates might not rise so soon. The S&P 500 Index gained 15.91 points to 1,995.83, while the Dow Jones Industrial Average surged 122.1 points to end at 16,912.29.
The FBM KLCI moved in a wider range of 72.06 points for the week, with higher volumes of 1.92 billion to 2.69 billion shares traded. The index closed at 1,692.2 yesterday, up 2.95 points from the previous day, as blue-chip stocks like[size=16]Axiata Group Bhd ([You must be registered and logged in to see this image.] Valuation: 1.10, Fundamental: 0.85), Hong Leong Financial Group Bhd ( Valuation: 2.55, Fundamental: 2.20), Public Bank Bhd ( Valuation: 1.80, Fundamental: 2.80), SapuraKencana Petroleum Bhd ( Valuation: 0.80, Fundamental: 0.65), Tenaga Nasional Bhd ( Valuation: 1.80, Fundamental: 1.30) and UMW Holdings Bhd ( Valuation: 1.40, Fundamental: 1.40) caused the index to rise on buying activities. The ringgit was much firmer against the US dollar at 4.2320 as Brent crude surged up to US$51.10 (RM215.64) per barrel.
The index rose on a rally from a low of 801.27 (October 2008) to its all-time high of 1,896.23 (July 2014), and this represents an extended Elliott Wave “flat” rebound in a “pseudo-bull” rise completed. The next few months’ index price movements after July 2014 comprised key swings of 1,837.28 (low), 1,879.62 (high), 1,766.22 (low), 1,858.09 (high), 1,671.82 (low), 1,810.21 (high), 1,706.18 (low), 1,831.41 (high), 1,774.3 (low), 1,867.53 (high), 1,685.03 (low), 1,744.19 (high), 1,503.68 (low), 1,691.93 (high) and 1,595.22 (low).
The index’s daily signals have all turned positive, with its CCI, DMI, MACD, Oscillator and Stochastic indicators showing emerging buy signals. As such, the index’s support levels are seen at 1,595, 1,647 and 1,692, while profit-taking in the resistance areas of 1,701, 1,744 and 1,795 may cap the index’s advances.
The KLCI’s 18-day and 40-day simple moving averages (SMAs) depict a fledgling uptrend for its short-term daily chart. The index’s price bars are now between the 50-day and 200-day SMAs, and this depicts a neutral phase for the KLCI in the medium term.
Due to the firmer tone for the KLCI, we are recommending a chart “buy” on Luxchem Corp Bhd ([You must be registered and logged in to see this image.] Valuation: 1.70, Fundamental: 1.70). A check on the Bloomberg consensus reveals that one research house covers the stock fundamentally, with a “buy” call.
Luxchem currently trades at a mildly high historical price-earnings ratio of 17.35 times. Its price-to-book value ratio of 2.44 times indicates that its share price is trading at a premium to its book value. Recently, there was no news on the stock that caused the share price to rise since early July.
Luxchem’s chart trend in the daily, weekly and monthly time frames is very firmly up. Its share price has made an obvious surge since its major weekly Wave-2 low of 38 sen in September 2011. Since that 38 sen low, Luxchem has risen to its all-time high of RM1.62 this month.
As prices broke above their recent key critical resistance levels of RM1.38 and RM1.40, look to buy Luxchem on any dips into its support areas as the moving averages depict a very firm short- to longer-term uptrend for the stock.
The daily, weekly and monthly indicators (like the CCI, DMI, MACD, Stochastic and Oscillator) have issued clear buy signals and now depict firm indications of Luxchem’s eventual surge towards higher levels. It would attract firm buying activities at the support levels of RM1.38, RM1.40 and RM1.59. We expect Luxchem to witness some profit-taking in its resistance area and all-time high of RM1.62. Its upside targets are located at RM1.75, RM1.87, RM2.25, RM2.43 and RM2.57.
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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.
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