Long term FKLI chart and how trend lines work

I remember mentioning in a previous post about a long term trend line near 1700.  Here it is.  This trendline signifies a breakout from the FKLI previous decade high.  As you can see we have gone lower than the trend line. 

Trend lines are usually set by people who have clout in the market.  Sometimes these trades by big players don't pan out and thus the big player has to re-evaluate his position and is praying for the market to come back to his original trend line so he can cut his remaining position at a positive number.

Trend lines are more like guides than hard fast market rules.  Sometimes the market does dip below the trend line, but buyers push the market up to its trend line and beyond.  Hopefully it turns out this way but of course it all depends.  The lower it dips below the trend line, the more of a failure that trend line is.  I would be extremely concerned if the market dipped near 1600.  That point is a lot further than the big player who pushed the market higher would want.

Magnum Technical Analysis

Magnum stock is one I've always liked and personally purchase their products from time to time.  The stock pays consistent dividends.  The company plies its trade in the gaming industry and has reached a market size which enables it to compete with the big boy, Berjaya Sports Toto.  It's latest 4D jackpot is within the 20 million Ringgit prize pool which is a testament to its market strength.

Any time I get a chance to buy a stock like this on a discount, I'll take it any day.  There are only a few things which have always been recession resilient, alcohol, taxes, cigarettes, death industry, and gaming.  Of course most of these industries face the risk of government meddling, but assuming status quo, buy these industries on the cheap.

Gaming tends to also have a problem with over expansion world wide, but in the case of Malaysia I doubt it will ever experience that scenario, given the conservative religious majority.  Restrictions on new entrants and a resilient industry is a winner in my books.  The price of course is the major issue which leads me to some price analysis.

The stock is on an uptrend with a breakout in 2012.  It is now approaching that particular trend line sent at the start of 2012.  For me, a buy below 2.25 would be the best, but I would consider putting in a purchase at the trend line.

KLCI/FKLI and FCPO Technical Analysis

It's been a quiet weekend.  Not much news only that industrial production has expanded which is good, but the market has been bad regardless. 

The FKLI has stopped its downtrend with the rally a few days ago, buyers can take note of a breakout trend line at 1711, as well as a couple of failed trend lines to provide upside fuel.  At the moment the market is trading in line with regional markets which is somewhat good news in that the selling is getting exhausted for now.  Our market tends to follow regional cues when prices are in line with other markets.  Of course if other markets take a nosedive, we will likely follow.



FCPO has stopped its downtrend lower for a few days now.  But it's tough going for CPO at the moment as Friday saw some selling on a day which is usually quiet.  It may be a bad omen that sellers are willing to sell on a day people are supposed to be off.

The country which benefits the most from falling crude oil is....

Lower crude prices does kind of result in lower petrol prices due to the government now moving petrol prices to a managed float.  But the other side of the coin is the weakening currency.

Moving from 80 USD to 70 USD dollar crude oil is a 12.5 percent discount.  The ringgit has also moved from 3.3 to 3.5 which means crude in Ringgit terms is going from 264 to 245 which is a 7.5 percent discount.  So while the nation does benefit in terms of lower cost of petrol to some extend its not as much.

So which country gets the biggest affect in lowest crude oil...ding ding ding.  The USA.  They capture the full effect of a fall in crude oil price which is 12.5 percent.  Business should definitely be good there.

IJM Corp Technical Analysis

IJM is one of those interesting conglomerates who has been outperforming the market as of late.  Wait a minute, a conglomerate that is outperforming the market?  I didn't know there was such a thing!  Jokes aside,  IJM has been doing quite stellar lately.  It could have fooled me as I thought it was a punter type of stock when I looked at it.

A closer look at the stock reveals two trend lines.  Although its history as a company has been volatile, the stock does seem to have found its footing as of late.  Perhaps its fortunes have been related to its property division which is doing quite well compared to others.  It's order book is strong as well for huge infrastructure projects.

I would have liked to see more consolidation in the stock, but sentiment has been incredibly bullish.  I'd fancy a buy lower near RM 4-5 a share.

Ringgit to USD hits 3.50

From the edge daily

The ringgit is leading a retreat among Asia’s emerging-market currencies as oil prices slide and strategists predict Malaysia’s worsening current account will lead to further losses.

BNP Paribas SA, Macquarie Group Ltd., Malayan Banking Bhd. ( Financial Dashboard) and Skandinaviska Enskilda Banken AB are all in the process of cutting ringgit estimates, with the French lender saying Malaysia is set for the first deficit in its broadest measure of trade since 1997

I mentioned earlier in previous posts that the market collapse the last few weeks was due to oil price weakness. Now we see analysts who are late to the party.  The budget deficit was something I mentioned earlier, but the trade deficit is what is really hitting the market.  I'm not sure what Malaysia can do to stem a weakening currency.

The central government could raise rates, which would be detrimental to companies.  On the other hand they could lower rates which would spur capital investment and economic activity which in the long run is good for the currency.  In the short run though the currency would take a hit.  I advocate plan c.  Keep rates where they are.  Let the currency fall where it will.  Keep it simple.  Keep rates normal.

I suspect though that because the country doesn't want to have a trade deficit, the country will raise rates to bring imports in line with exports.

What will be the central bank's next move?  Zeti has received accolades as a central bank chairwoman.  For me, I don't think its deserving, as she largely has done nothing over the last few years.   I would say if she saw this coming, she could have

1) Lowered interest rates when the currency was strong.  Doing so would raise the economic output and build more foreign reserves.

2) With the lower rates already factored in and crude oil thus putting pressure on the currency, she now can raise rates without an extreme effect on the economy, For example starting from a lower base rate of 1.5 percent to a rise of 2 percent would put the economy on decent footing than a 3.5 percent to 4 percent increase in interest rate hike.

KLCI and FCPO tech analysis with some failed trend lines

Lets take a look at FKLI.  If I was a betting man, I'd suggest the FKLI may be due for a short term rally or slow down in price.  We are approaching failed trend line at the bottom.

In FCPO I can't really discern much from the failed trend lines.  but despite the helter skelter trading sessions over the last few days we still are in a downtrend according to daily time frame.  RM 2,190 looks like top side resistance for now.

Don't erase your trend lines, KLCI outlook

I'm beginning to wonder if trendlines are some arbitrary pricing action manipulated by big players.  The reason being that a lot of trendlines that fail to materialize to a downtrend or uptrend are still valid after they've been proven invalid.  That's a mouthful.

A failed trend down in October for palm oil has simply just been flat out wrong.  Nevertheless, all that selling has seemed to be a large position as the seller who started that downtrend swiftly reversed his position at where the downtrend would be just yesterday.

It's as if the seller said...okay guys I know i'm wrong at this time but I've got a backup sellers behind me that should push the market down.  If it gets back to my area, i'm gonna take a load off.

Boy was that load big!

The FKLI pretty much lives and dies by the price of oil.  They simply get tons of money from the commodity and with Malaysia on a spending spree as well as oil at such a low price, the Ringgit is not so hot.



Fret not though, all is not lost!  We still have hope in the last remaining trend line at near 1710.  This breakout was inspired by infinite QE.  Of course the failed trend line at 1790 will be the resistance.  I won't be erasing the failed trendline just yet.

Telekom Malaysia technical analysis

TM is a Tough stock to analyze.  At first, we have the downtrend.  Yes I know the downtrend was sparked by a split from TM to Axiata.  Nevertheless whether there is a corporate exercise or stock splits, The technical levels more or less stay the same.

In my opinion, TM bears some similar characteristics to punter stocks.  On the previous Tropicana post, I describe punter stocks as one that kicks all the way up and all the way down.  More or less since the de-merger of Axiata and TM, the stock has been punted up.  I have no idea whether it will be punted down or not but we shall see.

It's Long term uptrend line has barely been tested and when it has, very rarely has there been consolidation.  So, it fits the defnition of a punter stock.  But since this is one of the great stocks in Malaysia, we'll give it the benefit of the doubt in that it's really in an uptrend, not a huge range.

In that case we will look for purple trend line to be tested hopefully some time in the future.

FCPO and FKLI/KLCI Technical Analysis update

The FKLI  is trying to test the long term trend line at 1790.  The next few months will be crucial.  If the market still breaks significantly lower, the uptrend will need some time to form again.

FCPO has started a new downtrend.  The support at RM2,193 was handily broken.  At the moment, it is not certain just how low FCPO will go, but by all accounts most palm oil producers will have a difficult future.

In a previous post I was speculating perhaps FCPO was forming a breakout by staying above the RM 2,040 mark.  That turned out to be totally wrong.  Instead RM 2,193 gave out like a rusty old car on a rainy morning.  And we are at RM 2,100.

Tropicana City technical Analysis

Tropicana is known for its high end devlopments and has an excellent land bank, reported a nice 24 percent growth in earnings this morning, but when I read earnings increased from 2.12 to 2.2 sen, I wasn't that impressed.  Third quarter always seems like its weakest and overall, this year hasn't been stellar.

So lets look at the charts.

The question is, is this stock in an uptrend?  I would say it is more of a punters stock as a trend isn't clearly defined.  A punter's stock means the stock gets kicked way up and kicked way down.  I don't see many consolidation periods.  Personally I would stay away.

I can't really recommend anything but to buy below RM 0.80 send and sell at RM1.60.

Indonesia to Foreign banks: we be rolling, we be scammin

I believe CIMB was the first to report dismal earnings in the form of its Indonesia operations not performing so well. More will be coming.   From the latest CIMB research report on Maybank:

The operating environment in Indonesia had been challenging since the middle of last year, due to the rise in inflation and tight liquidity, which has exerted pressure on banks’ margins and asset quality. As such, the net profit of Maybank’s unit in Indonesia, Bank Internasional Indonesia (BII), plunged by 69% yoy to RM100m in 9MFY14.

Lets recall the time where buying large stakes in Indonesia banks were all the rage a couple of years ago.  Maybank purchased Bank International Indonesia for 3.8x book value.  Ridiculous price!  Now what has happened since then?  Joko has been elected president, he has cut fuel subsidies and cost of living has increased.  Indonesians *surprised* now find it hard to make payments on their loans.

Indonesia has more or less outsourced its risk in the banking industry while gearing up to settle their in house problems.  Score 1 for Indonesia, foreigners 0.  I'm sure Indonesia will be willing to buy the stuff back at a discount. 

CIMB and Maybank...ouch.

FCPO and FKLI technical update

The FKLI is trying to reach the resistance level at 1855.  The support near 1803 was tested just once two days later at 1810 before jumping up to 1840.  The buying is something of an oddity but looks like people are anticipating healthy economic news.

Ideally we would like to see the market attempt to test that lower level more than just once.  Three times would be much better.  If the market really is breaking up higher and the buying is strong, we should wait for a solid break above 1855 to make a decision.  At this point the market should still be ranged bound.

FCPO is entering the start of a new down trend according to the DTI indicator.  Now lets look at the likelihood of the downtrend starting.

The major point to consider is whether the new downtrend is heading into tough support areas.  The answer is No, the RM 2,250 and below is no man's land and is anyone's game to where the market can go.

The likelihood that a downtrend could be beginning is quite possible. That being said.  If we consider RM 2,104 support point as a test for the breakdown, the market could be consolidating for a break higher with RM 2,193 as the bottom.

At any rate, we should probably see sub RM 2,200 prices at least once more.

6 percent GST

In the next year, the Malaysian government plans to issue GST at 6 percent.  I have several thoughts on this new tax.

It seems that Malaysia is entering some economic difficulty stemming from poor revenues towards the end of the year.  Generally both consumers and companies are cutting back.  I'm actually surprised that this is the case for Malaysian consumption because like many others, I've done a lot of durable goods purchasing over this year in anticipation that if I didn't buy the big ticket items, I would have to pay 6 percent more next year.

We should expect to see economic weakness NEXT YEAR.  Not this year.  Unless the next few months see an explosion of goods purchased, it's almost guaranteed we will hit an economic slowdown next year.  We haven't had the GST implemented and already the economy is having difficulty.

The 6 percent is actually extremely high.  Malaysia should rethink their rate.  Singapore introduced a 4 percent GST their very first year of implementation and only after some years of the tax regime, moved GST to six percent.

Next year will be tough slogging for many Malaysians.  Any income tax reduction from the government to offset GST won't make up for the increased cost of living most will face.  

Air Asia X, whats going on?

From the Edge:

KUALA LUMPUR: AirAsia X Bhd fell as much as 6.7% to emerge among the most actively traded stocks as investors reacted to a report by The Edge Financial Daily on the airlines financial constraints. The Edge Financial Daily, quoting sources, reported yesterday that the long-haul low-cost carrier faced difficulties in paying staff wages.

Describing the unprecedented payment issue as a temporary setback, the management of AirAsia X blamed the payment delay to the late arrival of incoming funds. It was also reported that Tan Sri Tony Fernandes, AirAsia Bhd co-founder and group chief executive officer, was planning to play a more active role in AirAsia X. 

AirAsia X reported some nasty losses.  I see a lot of finger pointing.  But what is really wrong?  Are they pricing wrongly, is their strategy not working?  It seems no one really knows.

I think the problem is really simple.  It actually starts from my own personal experience with the airline.  I flew on AirAsia X to Sydney and back to Kuala Lumpur from Melbourne.  The plane was quite full.  The experience I felt was decent, although the food was the worst I ever had on an airline.  No problem because it's also the cheapest flight I ever took to and from Australia.

The flight attendants are an upgrade over the regular AirAsia flight attendants.  But still not as professional as Singapore airlines.  Their business model is quite solid.

But there is one thing I felt mad about.  one:  the flight I had originally wanted to take was cancelled and I was moved to the following time slot.  The exact same thing happened for the flight back from Australia.  This not only disrupted my schedule, but also my relatives who were dropping me off at the airport.  But, I'm thinking it's usual for airlines to do this as my brother had the same problem with his Cathay Pacific flight to Malaysia.

After seeing the AirAsiaX losses, I didn't think the cancelled flight was a usual occurrence.  It's apparent that AirAsiaX had expanded too fast and too aggressively, adding capacity even though the demand was not yet there, hence the cancelled flights.

I don't have a strong conclusion, but perhaps the flight industry is due for some hard times.  I don't really see a way for AirAsiaX to claw its way out of this mess, especially if they have obligations to purchase new aircraft.  Deferring those obligations will cost a bomb.