market technical reading - index’s direction is expected to stay negative - 8/6/2010

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Local Market Leads:

♦ The local market extended its losing leg for a second day on Monday, after regional markets hit by the US

markets’ crash last Friday.

♦ US major gauges plunged more than 3%, as investors were spooked by news of Hungary’s debt problem and

surprisingly weak US jobs report. Hungary’s new government warned late last week that it could face a Greek-

style debt crisis.

♦ The story triggered a fresh selling wave across Asian region, forcing most Asian indices to fall more than 1.50%

lower with the Nikkei 225 taking the hardest hit by sliding 3.84%.

♦ Nonetheless, the FBM KLCI trimmed its earlier losses after some key markets, like Hang Seng staged a recovery

on views that Hungary’s debt problem might not be as serious as thought. For the day, the FBM KLCI dipped only

8.12 pts or 0.63% to 1,286.27, off its low of 1,278.89.

♦ There were only 492m shares traded, compared to last Friday’s 674m shares. Market breadth turned negative

with losers overwhelming gainers by a ratio of 3 to 1.

Technical Interpretations:

♦ After falling as much as 15.50 pts to cover the previous technical gap near 1,281.96 in the early session, the FBM

KLCI bounced higher before easing back again on late selling activities.

♦ This resulted in a small positive candle with long upper and lower shadows, the candle suggests a volatile session

ahead.

♦ But due to the weakened momentum readings, the risk on the downside remains high.

♦ If the index loses the immediate support at the 10-day SMA of 1,276, it will mark a resumption of the corrective

wave, hence leading the index to the major support of 1,250 soon. Resistance remains at 1,300.

Chart 1: FBM KLCI Da ily Chart 2: FBM KLCI I ntraday

Techn ica l Research

D a i l y T r a d i ng S t r a t egy

Market Technical ReadingIndex’s Direction Is Expected To Stay Negative...

M a l a s i a

M A R K

E T

D A T E L I N E

P P

7 7 6 7 / 0 9 / 2 0 1 0 ( 0 2 5 3 5 4 )

RHB ResearchInstitute Sdn BhdA member of theRHB Banking GroupCompany No: 233327 -M

8 June 2010

Please read importan t disclosures at the end of this report.



8 June 2010



Daily Trading Strategy:

♦ Despite bouncing from an early sell off, the FBM KLCI registered a candlestick pattern that still points to a volatile

trading day ahead.

♦ In fact, the market is still overwhelmed by the poor trading sentiment from the recent fallout.

♦ Given further weakness on the short-term momentum indicators, the index’s trading direction is expected to stay

negative.

♦ The poor level of participation yesterday was also in line with our expectation that investors at current stage,

would prefer to stay sideline ahead of Thursday’s FIFA 2010 World Cup kick-off.

♦ Immediate level is at the 10-day SMA of 1.276. Losing it will refresh selling activities, hence retest the 1,250

support level and the recent low of 1,243.86.

♦ We maintain a medium-term retracement target at between the 23.6% Fibonacci Retracement (FR) level at 1,229

and the 38.2% FR level at 1,154.

Source: RHBInvest & Bloomberg

Table 2 : Major Indices & Commodities

Local Key Indices ClosingChange(Pts)

Change(% )

FBM KLCI 1,286.27 -8.12 -0.6

FBM 100 8,435.29 -52.77 -0.6FBM ACE 3,768.29 -15.76 -0.4

Major OverseasIndices

Dow Jones 9,816.49 -115.48 -1.2

Nasdaq 2,173.90 -45.27 -2.0

S&P 500 1,050.47 -14.41 -1.4FTSE 5,069.06 -56.94 -1.1

Hang Seng 19,378.15 -401.92 -2.0

Jakarta Composite 2,750.23 -73.02 -2.6

Nikkei 225 9,520.80 -380.39 -3.8Seoul Composite 1,637.97 -26.16 -1.6Shanghai Composite 2,511.73 -41.86 -1.6

SET 759.85 -11.63 -1.5FT Straits Times 2,751.88 -54.63 -1.9

Taiwan Weighted 7,157.83 -186.76 -2.5India Sensex 16,781.07 -336.62 -2.0

Major Commodities

NYMEX Crude Oil

(US$/barrel) 71.44 -0.07 -0.1

MDEX CPO – ThirdMonth (RM/metric ton) 2,449.00 -25.00 -1.0

US Inte rest Rate Current Last Updated

Overnight Fed FundRate

0-0.25% Unch27-28 Apr

2010

Next FOMC meeting 22-23 June 2010

Table 1 : Daily StatisticsScoreboard 1 June 2 June 3 June 4 June 7 June

Gainers 200 287 542 312 151

Losers 487 294 154 274 463Unchanged 214 269 244 278 206

Untraded 477 528 435 511 555

Market Cap

Turnover(mln shares) 653 585 655 674 492

Value (RMmln) 758 803 1,244 989 844

Currency

MYR vs US

Dollar 3.3070 3.2990 3.2630 3.2730 3.3310



8 June 2010




♦ In tandem with the regional selloff, the local futures market sharpened its bearish momentum by ending sharply

lower on Monday.

♦ Though the futures index experienced steady recovery towards the 1,285 high in the afternoon session, fresh

selling momentum returned in the late session.

♦ For the day, the FKLI for June contract stumbled 20.00 pts or 1.54% to 1,279.00.

♦ While it had successfully covered the previous technical gap at 1,282 – 1,289.50, the FKLI formed a new

technical gap at 1,285.0 – 1,293.0 yesterday.

♦ And just like the cash market, the formation of a small positive candle with long upper and lower shadows pointsto a volatile day ahead.

♦ This means if selling pressure persists, the futures index could risk falling below the 10-day SMA near 1,276,

which could renew the selling pressure.

♦ That will mean a retest of the key 1,270 technical level. The recent low of 1,240.5 and the psychological level at

1,200 will be tested if it loses 1,270.

♦ Any rebound from the current level will be capped by yesterday’s technical gap at 1,285.0 – 1,293.0 and the

heavy psychological level at 1,300.

Daily Trading Strategy:

♦ Stay bearish in anticipation of further weakness ahead.

♦ Should the 10-day SMA of 1,276 and 1,270 fail to curb selling, more downside is possible.

♦ We expect the FKLI to fluctuate at between 1,260 and 1,280 today.

Table 3: FKLI Closings

FKLI (Month)Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest

Jun 10 1277.00 1285.00 1272.00 1279.00 -20.00 1279.00 8596 16147Jul 10 1276.00 1284.50 1272.00 1278.00 -21.00 1278.50 239 290

Sep 10 1275.00 1283.00 1271.50 1277.50 -20.00 1277.00 135 443

Dec 10 1276.00 1283.00 1273.00 1277.00 -22.00 1278.00 45 250

Source: Bursa Malaysia

Chart 3: FKLI Da ily Chart 4: FKLI Intraday



8 June 2010



US Market Leads:

♦ Led by the sell off in technology and financial stocks, the US markets ended sharply lower for a second day in late

session on Monday.

♦ This was despite some positive news from Germany and Hungary. Germany’s manufacturing activity expanded

for a second month in Apr, thanks to the weakness in the euro. Meanwhile, Hungary’s leaders over the weekend

stressed that the country isn't facing sovereign credit default like Greece.

♦ However, selling pressure in technology and financial stocks accelerated in late session. Apple fell 2.0%, while

Google shed 2.7%.

♦ Goldman Sachs declined 2.6% after the US government subpoenaed the company for an investigation.

♦ On the NYMEX, the US light sweet crude oil futures for July delivery eased 7cents or 0.1% to US$71.44/barrel.


Dow Jones Industrial Average (DJIA)

♦ After seesawing between the positive and negative territories in early trading, the US DJIA tumbled 115.48 pts or

1.16% to 9,816.49 on Monday to extend its bearish momentum.

♦ Chart wise, it accumulated a second bearish candle to suggest further selling is underway.

♦ Undermined further by the weak momentum readings, a retest of the recent low of 9,774.48 looks imminent.

♦ Once this recent low is breached, the index will see more correction towards the next lower support region at

9,200 – 9,700 region.

Nasdaq Composite (Nasdaq)

♦ The Nasdaq Composite Index plunged another 45.27 pts or 2.04% to 2,173.90 yesterday, on strong follow-

through selling momentum.

♦ As it ended with another bearish candle, just below the key support level of 2,190, the technical outlook for the

near term remains firmly negative.

♦ If it fails to rebound today, it is poised to trade within a support zone of 2,100 – 2,190 region.

Chart 5: US Dow Jones I ndustrial Average (DJI A) Daily Chart 6: US Nasdaq Composite DailyChart 5: US Dow Jones I ndustrial Average (DJI A) Daily Chart 6: US Nasdaq Composite Daily





Daily Technical Watch:

Faber Group (1368)

Continuous buying momentum if it sustains at above RM2.60…

♦ The share price of Faber kicked off its rally when it created a 3sen technical gap near the RM1.12 level in Nov

2009.

♦ The uptrend hit a bump at RM1.81, where profit-taking activities pulled down the share price to a support of

RM1.51, before resuming its uptrend in Feb 2010.

♦ After removing the level of RM1.81, the stock rallied steeply to a high of RM2.63 in Apr 2010, near a tough

resistance at RM2.60, prior to another round of profit-taking pressure.

♦ The stock eventually stabilised and renewed its upward momentum back to above the RM2.29 level. It

rechallenged the tough hurdle at RM2.60 in recent trading.

♦ Yesterday, Faber registered its seventh positive candle in the last eight trading days, and pierced over the

RM2.60 level resistance to end the day at RM2.64, off a day high of RM2.65.

♦ As the bullish candle suggested, the upbeat momentum readings are pointing to continuous buying momentum

today if it sustains at above RM2.60.

♦ Coupled with the fresh cut of the 10-day SMA to above the 40-day SMA, the stock is likely to rechallenge the

RM2.80 level in the near term, before heading towards the RM3.04 and RM3.40 higher resistance zone.

♦ Lower support is seen at RM2.29.

Technical Readings:

♦ 10-day SMA: RM2.371

♦ 40-day SMA: RM2.305

♦ Support: IS = RM2.60 S1 = RM2.29 S2 = RM1.98

♦ Resistance: IR = RM2.80 R1 = RM3.04 R2 = RM3.40

Chart 7: Faber Daily Chart 8: Faber Intraday





IMP ORTANT DI SCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. Theopinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ orbe contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to beconstrued as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in anymanner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated personsmay from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectivesof persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluateparticular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment orstrategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents acceptsany liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providinginvestment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHBGroup may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equitysecurities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or otherservices from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflectinformation known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based

upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

Technical recommendation framework for stocks and sectors are as follows: -

Technical Recommendation:Trading Buy = Short-term positive opportunity spotted. It is an aggressive trading recommendation with a book to sellers’ price for short-term technical upside.Bargain Buy = Short-term positive but technical signals have yet to trigger a rally. Traders can park and queue for their desired entry level within a small range.Buy on Weakness = Short- to Medium-term positiveness anticipated, but technical readings are still negative. Traders can pick-up the stock for future rally.Sell on Strength = Short-term momentum still positive, Traders are advice to lock in profit base on current strength.Take Profit = Short-term target achieved. Traders are advice to exit before the technical readings turn bearish.Avoid = Risky situation in the short-term and high volatility expected on the share price. Traders’ best strategy is staying away until it stabilises.

Technical Time Frame:Immediate-term = short time frame within a contra period.Short-term = moderate time frame within two to three contra periods. For tracking purposes, we refer to 10 trading days.Medium-term = medium time frame usually refers to two to three weeks period. For tracking purposes, we refer to 20 trading days.

Technical recommendations are generally short-term in nature and may differ from RHBRI’s equity fundamental view and recommendation on the same company.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommendedsecurities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for theactions of third parties in this respect.

market technical reading - index’s direction is expected to stay negative - 8/6/2010

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