January trader scompass

Transcription

1 January trader scompass For Internal Circulation Only DISCLAIMER The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. TA SECURITIES H OLDINGS B ERHAD (14948-M) (A Participating Organisation of Bursa Malaysia Securities Berhad) Kaladher Govindan, Head of Research Menara TA One, 22 Jalan P Ramlee, Kuala Lumpur. Malaysia Tel : Fax :

2 AMemberoftheTAGroup January trader scompass Contents Page MARKET FOCUS Economic Outlook 1 Technical Outlook 7 Blue Chip Picks 16 Major Events For Bursa 23 CORPORATE EARNINGS SUMMARY 29 DERIVATIVES Warrants 30 Convertible Unsecured Loan Stock 36 Redeemable Unsecured Loan Stock 37 A-share & Preference Shares 38 ENTITLEMENTS Bonus & Rights Issues 39 Dividend / Interest Payments 41

3 A Member of the TA Group Economic Outlook January trader s Compass Embracing A Volatile External Climate Global manufacturing sector showed mix performance with rebound seen for the US and most parts of Asia including China, India and Austral, while EU and UK continued to show contraction in output levels. EU faces ongoing challenges. The summit among the 27-EU leaders will be held at the end of January. Maintain economic growth projections of 4.6% for 2012 following a projected 5.2% growth in Ringgit had depreciated by 2.7% vs. the greenback in 2011 to end the year at RM per USD. Our 2012 year-end projection for the Ringgit is RM3.05 per USD. Continued focus on the economic development in China, the country that has been the global growth driver since the downturn in With the economic downside risk ahead, OPR will likely to be retained at 3.0% during the first MPC meet of the year. Overview A brand new year began amidst further signs of weakening in the EU region. Thus, implying heightened uncertainties and increasing volatilities for the Asian economies in The first trading day of the year on 3 January 2012 saw FBMKLCI consolidating on profit taking, closing at (or points down from Friday s close) despite data over the New Year weekend suggesting some positive signals especially in terms of the manufacturing sector outlook in the US and throughout most parts of Asia. Turmoil in the Eurozone EU- Summit at the end of the month Elsewhere, European leaders are struggling to conclude negotiations on fostering closer economic ties and strengthening the surveillance on budgets by the end of March. On 2 January 2012, the leaders of Germany and France had aligned plans for a bilateral summit prior to the 27 EU leaders meeting at the end of the month. In optimism to pursue an obscure solution to the debt situations, the French and German leaders' meeting will be the first of several gatherings this month which will begin on the 9 th of January. EU focuses on budget surveillance US- Fed Will Detail Rate Plans The easy-money policies and record low interest rate in the US will probably remain through to mid-2013 as the Federal Reserve officials this month begin detailing their plans for short-term interest rates. The Fed chairman is making these moves with several goals in mind as the FOMC commences its first meeting for the year on Jan with the next set of forecasts due as well. Firstly, as the Fed indicate that short-term rates stay near zero, it could drive longer-term rates lower, amping up the recovery by spurring investment and spending. Secondly, Bernanke wants to inject more clarity into how the Fed makes decisions about the direction of rates, believing such guidance will reduce public uncertainty about the Fed and give it more scope to manage the economy. Economic Outlook [ 1 ]

4 A Member of the TA Group Global manufacturing rebounded in December The uncertainties from the Eurozone have inflicted shocks and financial market volatility unto other parts of the world. Various consumer and business confidence indicators in advanced economies have retreated sharply due to temporary shocks. Dampening effect on the manufacturing division had been notable in the prior months in October and November before the Asian manufacturing sector rebounded in December. January trader s Compass Withstanding the ongoing external uncertainties, manufacturing PMI for China/ India/ Australia had improved to 50.3/ 54.2/ 50.2 in December. Contrastingly, the Eurozone manufacturing activity fell for the fifth consecutive month with PMI reading coming in at 46.9 last month; while a gauge of UK factory output based on a survey by Markit Economics and the Chartered Institute of Purchasing and Supply was at Figure 1: Manufacturing PMI Mixed performance of the global manufacturing sector US China UK EU 30 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Sources: Bloomberg, TA Securities Malaysian economy Interestingly, Malaysia has yet to experience an immediate slowdown in the manufacturing segment through to October We are keeping our view for economic growth of 4.6% for 2012 following an expected 5.2% growth for Owing to the uncertainties ahead, hence, we are maintaining our economic outlook for Malaysia based on the projections as seen in the following table: Fundamentals remain in tact Figure 2: TA s Forecasts 2011e 2012f Q3 11 Q4 11f Q1 12f Q2 12f Q3 12f Q4 12f GDP YoY% CPI YoY % Trade Balance: RM/ bn BNM overnight rate: end period Malaysian Ringgit: end period Sources: TA Securities Economic Outlook [ 2 ]

5 A Member of the TA Group January trader s Compass Figure 3: GDP growth projections (YoY %) GDP Components f 2012f 1Q11 2Q11 3Q11 4Q11f 1Q12f 2Q12f 3Q12f 4Q12f GDP 4.8 (1.6) Demand Side Government Final Consumption Expenditure Private Final Consumption Expenditure Gross Fixed Capital Formation 1.1 (5.6) Exports 1.7 (10.5) Imports 2.1 (12.2) Supply Side Agriculture, Forestry & Fishing (AF) (0.2) Mining & Quarrying (2.4) (6.3) 0.2 (7.0) 0.7 (4.2) (9.2) (6.1) (8.8) (5.9) (2.0) (3.7) (2.0) Manufacturing (Mfg) 1.2 (9.3) Construction Services Sources: Department of Statistics, TA Securities Ringgit performance in December In December 2011, the Ringgit exhibited a mixed performance against its major trading partners. During the month, it had advanced against EUR (+3.0%); THB (+1.6%); GBP (+1.3%); PHP (+0.8%); SGD (+0.5%); and USD (+0.3%). Ringgit slipped against JPY (-0.1%); CNY (-1.0%); and AUD (-1.4%) while it remained unchanged vis-à-vis IDR on a monthly basis. Relative to the performance of USD, the local currency had erased its gains seen during the first 9 months of the year. Overall, Ringgit had depreciated by 2.7% vs. the greenback in 2011 to end the year at RM per USD. RM gains vs. EUR, THB, GBP, PHP, SGD and USD last month Figure 4: Ringgit MoM performance (%) EUR THB GBP PHP SGD USD IDR JPY CNY AUD Sources: Bank Negara Malaysia, TA Securities Economic Outlook [ 3 ]

6 A Member of the TA Group Figure 5: Ringgit performance for 2011 (%) January trader s Compass THB EUR IDR SGD GBP AUD PHP USD CNY JPY Sources: Bank Negara Malaysia, TA Securities Figure 6: International Reserves at BNM Jan Feb Apr May Jul Aug Oct Nov Jan Feb Apr May Jul Aug Oct Nov Jan Feb Apr May Jul Aug Oct Nov-11 USD/ bn (LHS) Months of Retained imports (RHS) Sources: Bank Negara Malaysia, TA Securities Continued surplus through trade While the inflows of funds and sustainable surplus through trade will likely persist, nonetheless, the rate of Ringgit appreciation may be slower than previously anticipated. Partly, the global economies will succumb to a slowdown in terms of growth while the economic risk could underweigh worldwide trade activities going forward. Our 2012 year-end projection for the Ringgit is RM3.05 per USD assuming that: (1) OPR stays at 3.0%; (2) trade balance to register a surplus of RM120.0bn in 2012; and (3) GDP to growth by 4.6%. Inflow of funds and trade surplus a boost for Ringgit Exports probably register double digit growth in November Ahead of the statistical releases for this month, we expect the exports growth for November to register a double digit growth of 14.0% YoY following an increase of 15.8% in the preceding month. The Department of Statistics will release November s trade data on the 11 th of this month. Other data may show continued growth in the IPI and manufacturing sales for November led by the boost in domestic demand. On the back of the heightened economic downside risk though, Bank Negara will likely maintain the OPR at 3.0% during the Monetary Policy Committee meeting on the 31 st of January. The key economic data releases will be based on the schedule as seen in Figure 7. OPR to stay at 3.0% Economic Outlook [ 4 ]

7 A Member of the TA Group January trader s Compass Figure 7: Statistical Releases for January 2012 Dates Source Events 9 BNM BNM statement of account as at 31 December Department of Statistics Index of Industrial Production for November Department of Statistics Manufacturing sales for November Department of Statistics External trade for November Department of Statistics Consumer Price Index for December Department of Statistics Employment and unemployment in November BNM BNM statement of account as at 13 January Department of Statistics Producer Price Index in December BNM Detailed disclosure of international reserves at end December BNM Monetary policy statement (1/6) Sources: BNM, Department of Statistics, TA Securities Figure 8: Macro Economic Trends Economic Indicators Remarks GDP Growth Rate -1.7% 7.2% Economic rebound to growth in 2010 subsequent to a contraction in 2009 Final Consumption Growth Rate 1.3% 5.2% Boost through robust domestic demand Private Consumption Growth Rate 0.7% 6.5% Improved sentiments and favourable economic environment Gross Domestic Investment Ratio Investment opportunity ahead Consumer Price Index 0.6% 1.7% Moderation growth in inflation as prices remain in check Producer Price Index -7.1% 7.8% Cost pressure puts a strain on input cost Unemployment Rate 3.6% 3.3% Healthy labour market condition and persistent full employment Exports (USD/ bn) Advancement in exports Imports (USD/ bn) Imports move in line with exports growth Current Account Surplus (USD/ bn) Continued surplus through trade Exchange Rate (RM/ USD) Ringgit moves in tandem with regional currencies Foreign Exchange Reserves (USD/ bn) Continued inflow of funds Income Tax Charges of your Country 25.0% 25.0% Announcement of the reduction in corporate tax rate in the 2008 Budget (from 28% Sources: Department of Statistics, TA Securities Economic Outlook [ 5 ]

8 A Member of the TA Group January trader s Compass Figure 9: Key Monetary and Financial Statistics for Malaysia Sep-11 Oct-11 Nov-11 RM/bn yoy % RM/bn yoy % RM/bn yoy % Monetary Aggregate Reserve Money M M M BNM International Reserves (end-period) Net Reserves in RM/ bn Net Reserves in USD/bn (equivalent) Months of retained imports Interest rates at end-period (average for the month) Overnight Policy Rate (OPR) Interbank: Overnight 1-week 1-month Fixed deposits of commercial banks: 1-month 3-month BLR of commercial banks ALR of commercial banks [2.98] 3.02 [3.01] 3.09 [3.06] [2.98] 3.01 [3.01] 3.06 [3.05] [2.99] 3.01 [3.01] 3.05 [3.05] Prices Consumer Price Index (CPI) (2005=100) Exchange Rates of Ringgit against selected currencies (end-period) USD Euro GBP 100 Japanese yen Singapore Dollar 100 Thai Baht 100 Philippines Peso 100 Indonesia Rupiah 100 Korean Won Capital Market Net Funds raised (RM/ bn): public -11,594 6,349 6,199 private ,837 6,673 Bursa Malaysia Composite Index (end-period) 1, , , Bursa Malaysia Market Capitalization (RM/bn, end-period) Sources: BNM, TA Securities Economic Outlook [ 6 ]

9 A Member of the TA Group January trader s Compass Technical Outlook Sell Rally to Double-Top KLCI to Peak Near 1,597 in Feb, Then Dip to 1,293 in July Wave (5) Peak at 1,583 by End 2012 More Bullish Alternate Wave (5) Peak at 1,690 or 1,780 Sell Rally to 1,597 December Market Review The FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) spiked up from the 23 Nov low of 1, to peak at 1, on 1 Dec, after the US Federal Reserve joined forces with the ECB and four other central banks in lowering borrowing costs for European banks to ease the debt crisis. A subsequent dip was arrested at low of 1, on 15 Dec, after the ECB cut interest rates to a record low of 1% and a rash of M&A news flow involving Proton Holdings & DRB-Hicom, KFC & QSR, SapuraCrest & Kencana and finally RHB Capital and OSK helped lift the index above the 1,500 level by month-end. Better-than-expected economic data suggesting a recovering US economy and year-end window-dressing added upside fuel for the local blue-chip benchmark to end 2011 on a firm note. For the month of December, the FBM KLCI climbed points, or 3.98% to end 2011 at 1,530.73, with Public Bank (+84sen), DIGI (+36sen), IOI Corp (+37sen), TM (+64sen) and CIMB (+30sen) contributing more than half of the index s rise. For 2011, the index registered a mild 0.78% gain. Average daily traded volume and value last month rose to 1.59bn shares and RM1.23bn respectively, compared with the 1.85bn shares and RM1.4bn average in November. On the external front, neighbours Thailand and Indonesia latched on gains of 3% and 2.53% in December, followed by Hong Kong (+2.47%), the US Dow Jones average (+1.43%) and the UK s FTSE (+1.21%). Losers were led by China s Shenzen (-12.8%) and Shanghai (-5.74%) exchanges, then India (-3.76%) and Singapore (-2.08%). For the year 2011, the US Dow Jones Industrial Average stayed in a pole position with 5.53% gain, second best performer remains the Indonesian stock exchange which was up 2.85%, while our stock market benchmark index managed a commendable third placing with a 0.78% rise. On the flip side of the coin, emerging markets suffered heavy double-digit losses, the worst being Shenzen (-32.86%), followed by India (-24.34%), Taiwan (-22.52%), Shanghai (-21.68%), Hong Kong (-19.97%), Nikkei-225 ( %) and Singapore (-17.04%) (Please refer to Table 1). Lower liners and small-cap stocks were steadier last month, with the FTSE Bursa Malaysia Small Cap (FBMSC) index, a capitalization weighted index of the top 98% of main board stocks, excluding the FTSE Bursa Malaysia 100 (FBM100) index, rising 1.32% to 11, The FTSE Bursa Malaysia EMAS (FBMEMAS) index, a capitalization weighted index of stocks in the FBM100 and FBMSC, appreciated by 4.22% to 10, For 2011, the FBMSC however lost 7.57% while the FBMEMAS gained 1.1%. ECB Rate Cut, M&As and Window-dressing Lift KLCI to End 2011 on Firm Note PBB, DIGI, IOI, TM & CIMB contribute more than half KLCI gain in Dec Thailand, Indonesia & Hong Kong led rise in December US Dow Jones up 5.53% in 2011 FBMSC lost 7.57% while FBMEMAS gain 1.1%in 2011 Technical Outlook [ 7 ]

10 A Member of the TA Group January trader s Compass The table below (Table 1) depicts the performance of KLCI, FBM Emas and FBM Small Cap Indices compared with major global and regional stock indices for the month of December and for Table 1 net Dec-11 net 2011 Index 31-Dec Nov Dec-11 chg % chg chg % chg Dow Jones 11, , , Nasdaq 2, , , (15.19) (0.58) (47.72) (1.80) S&P500 1, , , (0.04) (0.00) FTSE 5, , , (327.66) (5.55) GDAX 6, , , (13.32) (0.22) (838.67) (12.13) Nikkei 10, , , ( ) (17.34) Hang Seng 23, , , ( ) (19.97) Korea 2, , , (21.14) (1.14) (224.63) (10.95) Taiwan 8, , , ( ) (22.52) S'pore 3, , , (56.11) (2.08) (543.69) (17.04) Thailand 1, , (7.44) (0.72) Jakarta 3, , , India 20, , , (605.58) (3.76) ( ) (24.34) Shanghai 2, , , (133.99) (5.74) (608.66) (21.68) Shenzen 1, (127.37) (12.81) (424.21) (32.86) KLCI 1, , , FBMEMAS 10, , , FBMSC 12, , , (955.29) (7.57) The FBM KLCI peaked at high of 1, on 1 Dec, just below the 200- day moving average resistance then, followed by profit-taking retracement to low of 1, on 15 Dec but it managed to close back above the 50-day moving average support (Chart 1). A bullish reversal was spotted, confirmed by the golden cross event, whereby the 50-day crossing above the 100-day moving average fueled a window-dressing rally to end the year above the 200-day moving average, constituting a bullish breakout. Golden Cross Fuel Rally to Breakout Above 200-day ma Chart FBMKLCI (1,508.98, 1,530.73, 1,508.60, 1,530.73, ) 1,597 high (11/7/11) 0.0% 1, high (18/1/11) 1,565 high (4/4/11) 1,566 high (31/5/11) 50-day ma (1,470) 100-day ma (1,457) 23.6% 38.2% 1,474 low (28/2/11) 50.0% 1,454 1, % 1,423 low (9/8/11) 200-day ma (1,501) 1, % 100.0% 1,310 low (26/9/11) 1,488 1,529 1,424 low (23/11/11) Relative Strength Index ( ) RSI overbought, highest since early July February March April May June July August September October November December 2012 Februar Technical Outlook [ 8 ]

11 A Member of the TA Group January trader s Compass On the weekly chart below (Chart 2), we forecast a preferred wave count with the latest up-leg from September 2011 marked as wave b to peak near the recent all-time high of 1,597 and form a double-top sometime in February 2012, to be in line with a 5-month Fibonacci cycle from the 1,310 low. A subsequent wave c down-leg should see the index re-test the 1,310 trough with a more specific target at 1,293, representing the 38.2% Fibonacci Retracement (FR) of the 801 to 1,597 up-swing. This low will also be considered as the end of corrective wave (4). Hence, this is a flat corrective a-b-c wave pattern, with the index establishing a doubletop followed by double-bottom formation, estimated sometime in July 2012 for a similar 5-month Fibonacci down-cycle. Looking forward, we should enjoy the resumption of up-trend within impulse wave (5) with potential to peak near 1,583 in December 2012 in a worse case scenario, which is the length of wave (3) projected from 1,293 low. Our base case assumption will be a breakout to target 1,673, the 0.5 length projection of wave (3), in 8 months, i.e. in March A more bullish scenario will be a rally to peak at 1,763, the magnitude of wave (3), in 13 months, or by August Preferred Wave Count is Flat a-b-c with Peak Near 1,597 in Feb and Trough Near 1,293 in July Wave (5) Peak at 1,583 in Dec 2012, 1,673 in March 2013 or 1,763 by August 2013 Chart , high (26/2/07) 883 low (15/6/06) 3 1, (14/1/08) Head LS ~ 1,150 Neckline 1,157 low (14/3/08) 30wk SMA b a RS -38.2% -23.6% 0.0% 23.6% 1,305 high (29/4/08) 38.2% 50.0% 61.8% 76.4% 100.0% 801 low (28/10/08) c FBMKLCI (1,494.15, 1,530.73, 1,490.16, 1,530.73, ) 50wk SMA (1) 836 low (12/3/09) (2) MACD ( ) 1,576 high (6/1/11) 3/3 SRL (3) 2/3 SRL 200wk SMA (1,272) Speed Resistance Line (SRL) a 1/3 SRL b 1,597 high (11/7/11) 1,310 low (26/9/11) 1,409 1,293 c (4)? 1,199 1, (5)? Weekly MACD hooking up again A M J J A S O N D 2007 A M J J A S O N D 2008 A M J J A S O N D 2009 A M J J A S O N D 2010 A M J J A S O N D 2011 A M J J A S O N D 2012 A M J J A S O N D 2013 A M J J -100 A more bullish alternate wave count, shown on the KLCI monthly chart below (Chart 3), would see the index breaking above the 1,600 level by February 2012, representing the 38.2% length of wave (3) projected from 1,310 low. The base case assumption for this alternate wave will be an extended rally to reach 1,690, the 50% magnitude of wave (3), in 8 months, i.e. in May The most optimistic setting will be a superb rally to peak at 1,780, which represents the 61.8% projection of wave (3), in 13 months or by October More Bullish Alternate Wave (5) Peak at 1,690 or 1,780 Technical Outlook [ 9 ]

12 A Member of the TA Group January trader s Compass Chart low (12/87) 2 3 BULL CYCLE 1332 peak (1/94) b a a c BEAR CYCLE 0.0% 1279 peak (2/97) 4 5 b a 23.6% 38.2% 50.0% b 61.8% 100.0% c c 1 FBMKLCI (1,486.92, 1,530.73, 1,448.54, 1,530.73, ) 1, , ,021 high (2/00) 4 a 261 low (9/98) b c low (4/01) BULL CYCLE ,525 high (1/08) 4 5 a 3 Fibonacci Fan Lines (FFL) b (1) (2) c 836 low (03/09) (3) 1,597 high (11/7/11) (4) 50m SMA 100m SMA 200m SMA (5)? FFL 0.5 FFL FFL MACD ( ) Bearish divergence vs KLCI Monthly MACD decline losing steam The table below summarizes the up and down cycles for the KLCI since July 2007 to current, followed by our forecast on the likely direction for 2012 (in bold): Table 2 DOWN-CYCLE DURATION WAVE UP-CYCLE DURATION WAVE July 2007 to Aug month Aug 2007 to Jan months (1,392 high to 1,141 low) 251 pts (1,141 low to 1,525 high) 384 pts 3 Jan 2008 to March months March 2008 to Apr month (1,525 high to 1,157 low) 368 pts a (1,157 low to 1,305 high) 148 pts b Apr 2008 to Oct months Oct 2008 to Jan months (1,305 high to 801 low) 504 pts c (801 low to 936 high) 135 pts (1) Jan 2009 to Mar months Mar 2009 to July months (936 high to 836 low) 100 pts (2) (836 low to 1,597 high) 761 pts (3) July 2011 to Sept months Sept 2011 to Feb 2012* 5 months* (1,597 high to 1,310 low) 287 pts (a) (1310 low to 1,597 high)* (b) (down-wave a) (up-wave b) Feb 2012 to July 2012** 5 months** July 2012 to Dec 2012# 5 months# (1,597 high to 1,293 low)** (1293 low to 1,583 high)# Worse case (5) (down-wave c) impulse wave (5) Preferred a-b-c July 2012 to Mar months## corrective wave count (1293 low to 1,673 high)# Base case (5) July 2012 to Aug months### (1293 low to 1,763 high)# Best case (5) * assuming up-wave b to re-test 1,597 high in Fibonacci cycle of 5 months ** assuming down-wave c to 38.2%FR of 801 to 1,597 in Fibonacci cycle of 5 months July 2011 to Sept months Sept 2011 to Feb 2012# 5 months# (1,597 high to 1,310 low) 287 pts (4) (1310 low to 1,600 high)# Worse case (5) corrective wave (4) impulse wave (5) Alternate (4)&(5) Sept 2011 to May 2012## 8 months## impulse wave count (1310 low to 1,690 high)## Base case (5) Sept 2011 to Oct 2012### 13 months### (1310 low to 1,780 high)###best case (5) # assuming impulse wave (5) is the length of wave (3) in Fibonacci cycle of 5 months ## assuming impulse wave (5) is half the length of wave (3) in Fibonacci cycle of 8 months ### assuming impulse wave (5) is the length of wave (3) in Fibonacci cycle of 13 months Technical Outlook [ 10 ]

13 A Member of the TA Group January trader s Compass Table 3 below illustrates the performance of the KLCI for October, November, December and the fourth quarter since For the month of October, the index rose in 16 of the past 22 years, with an average return of 2.26%. For November, gains almost equaled losses with average return of 0.17%, while December showed the best performance with an average gain of 4.5% and the index rising in 19 of the past 22 years. The strong performance in December is supported mostly by year-end window-dressing. As for the fourth quarter, the KLCI was positive in 16 of those 22 years, with a strong average return of 7.58%. The best periods were in 1993, 1998 and 1999, when the benchmark rallied 49.4%, 56.9% and 20.3% respectively. On the opposite end of the scale, the index suffered doubledigit losses in 1994, 1997 and 2008, with falls of 14%, 27% and 13.9% respectively. Index up 7.58% on average in 4Q for past 22 years Table 3 Oct mom Nov mom Dec mom 4Q KLCI Index Sept Oct Nov Dec chg % chg chg % chg chg % chg chg % chg (27.0) (5.5) , , , , (20.9) (1.9) (95.7) (8.6) (41.9) (4.1) (158.6) (14.0) , (43.0) (4.3) (5.9) (0.6) (5.4) (0.5) , , , , (149.9) (18.4) (119.3) (17.9) (220.1) (27.0) (8.2) (1.1) (22.4) (3.0) (50.3) (6.9) (33.9) (4.7) (15.3) (2.5) (30.4) (4.6) (37.8) (4.6) (9.8) (1.1) (16.8) (1.8) (14.6) (1.6) (27.8) (3.0) , , , , , , (16.7) (1.2) , (155.1) (15.2) (141.9) (13.9) , , , , , , , , (20.4) (1.4) , , , , (19.8) (1.3) Average return Gain Loss Total Gain ratio Conclusion Our preferred wave count for the FBM KLCI will be the current up-leg from September 2011, marked as wave b, to peak near 1,597 and form a double-top sometime in February 2012, followed by a wave c down-leg to re-test the 1,310 trough with a more specific target at 1,293, to end corrective wave (4) in July 2012, for a flat a-b-c wave pattern, with the index establishing a double-top followed by double-bottom formation. Our base case assumption for wave (5) will be a breakout to target 1,673, in March 2013, with a more bullish scenario for a peak at 1,763 by August The alternate wave count is more bullish, which would see the index breaking above 1,600 for extended rally to reach 1,690 in May The most optimistic setting will be a superb rally to peak at 1,780 by October Preferred Count is Wave (5) Peak at 1,673 (March 2013) & 1,763 (August 2013) Alternate Wave (5) Peak at 1,690 or 1,780 Technical Outlook [ 11 ]

14 A Member of the TA Group January trader s Compass As such, the trading strategy for January should be to sell into strength towards the 1,597 peak, ahead of an anticipated correction from a double-top formation to re-test 1,300 by July, where investors may then re-enter the market to participate in an impulse wave (5) upswing in the second half of the year. On blue-chip stock picks for January, please refer to the updated list of the FTSE Bursa Malaysia KLCI (FBM KLCI) Index 30 component stocks, with 10 of them highlighted with corresponding charts on the following pages. Sell Rally to 1,597 (THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK) Technical Outlook [ 12 ]

15 A Member of the TA Group January trader s Compass Technical View on Key US and Regional Indices The following is our technical outlook for the US Dow Jones Industrial Average (DJIA), Hong Kong s Hang Seng Index (HSI) and Singapore s FTSE Straits Times Index (FSSTI) for January All charts are updated as at 30 December, Chart 1: DJIA DAILY 12, % 12,106 (23.6%FR) 23.6% 11,630 (38.2%FR) 38.2% 11,245 (50%FR) 50.0% 10,860 (61.8%FR) 61.8% 76.4% Neckline 100.0% 9,614 low (2/7/10) DJI (12,286.13, 12,290.06, 12,213.78, 12,217.56, ) Highest since June ,876 high (2/5/11) 12,391 high (18/2/11) 11,451 high (5/11/10) 200d SMA 10,384 (76.4%FR) 10,604 low (9/8/11) Fibonacci Fan Lines (FFL) 10,404 low (4/10/11) 12,284 high (27/10/11) 50d ma 0.382FFL 0.5FFL 0.618FFL 100d SMA 11,231 low (25/11/11) MACD ( ) Bullish expansion on daily MACD June July August September November 2011 February March April May June July August September November 2012 February March The US stock market benchmark index surged from the 10,404 pivot low on 4 Oct to peak at 12,284 on 27 Oct, matching the 0.5 Fibonacci Fan Line (FFL), pulled back to 11,231 low on 24 Nov which coincide with the 50%FR (11,245) support level prior to a steep recovery buffered by the 50-day moving average and FFL supports in mid-december. The late December rally looks promising for a breakout, supported by bullish expansion on the daily MACD. Late Dec Rally Breakout Attempt Chart 2: DJIA WEEKLY 12, % DJI (12,293.47, 12,328.47, 12,140.17, 12,217.56, ) 14, (11/10/07) 13,780 high (Dec 2007) ,136 high (May 2008) 12,876 high (2/5/11) % 12,374 11,867 high (Aug 2008) 11,750 high (Jan 2008) % 11, % 10, wk SMA (10,608) ,708.4 (29/10/04) UTC fm 2003 low 61.8% 76.4% 8,294 9,422 Record 18% weekly loss 7, low (21/11/08) 30wk SMA (11,773) 50wk SMA (11,976) , low (11/10/02) 100.0% 6, low (6/3/09) MACD ( ) Weekly MACD crossed above zero On the weekly chart, the MACD signal line just crossed above zero, a bullish indication promoting breakout above 12,374 (23.6%FR) to challenge more significant chart resistance from 12,876 (May 2011 high) or 13,136 (May 2008 high). Pullbacks should see immediate downside cushion from the 200-day and 50-day moving averages, with more solid retracement supports at 11,630 and 11,245, the respective 38.2%FR and 50%FR on the daily chart. To Challenge 12,876 & 13,136, Key Retracement Supports at 11,630 & 11,245 Technical Outlook [ 13 ]

16 A Member of the TA Group January trader s Compass Chart 3: HSI DAILY 18, HSI (18,489.04, 18,506.27, 18,415.85, 18,434.39, ) ,988 high (8/11/10) 100.0% % 22,907 (76.4%FR) % 50.0% 38.2% 23.6% 20,579 (50%FR) 19,538 (38.2%FR) 21,620 (61.8%FR) 18,251 (23.6%FR) Fibonacci Fan Lines (FFL) 18,868 low (9/8/11) 0.0% 23.6% 38.2% 50.0% 61.8% 100d SMA 50d ma 200d SMA 0.618FFL 0.5FFL 0.382FFL % 100.0% 16,170 low (4/10/11) MACD ( ) Daily MACD turn bullish October November December 2011 February March April May June July August September October November December 2012 February March The HSI staged counter-trend rally from low of 16,170 on 4 Oct, the lowest point since May 2009, to peak at 20,272 on 28 Oct, before dipping back to 17,613 low on 25 Nov for a 61.8% retracement of the prior rally. The subsequent recovery in December was capped by the 100-day moving average overhead which continues to limit upside pending a breakout. The daily MACD remains in a bullish bias, with key retracement support at the 17,613 low, while 16,170 acts as an important pivot support. 100-day ma Cap Upside Pending Breakout Chart 4: HSI WEEKLY 18, HSI (18,621.50, 18,621.50, 18,293.81, 18,434.39, ) % 31,958 all-time high (Oct 2007) Fibonacci Fan Lines (FFL) % 26, FFL % 23, FFL FFL % 21, % 15, % 18,806 30wk SMA 50wk SMA (21,272) 200wk SMA (20,255) wk SMA (19,830) % 10,918 low (May 2004) 10,676 low (27/10/08) ,331 low (April 2003) MACD ( ) Buy signal on weekly MACD still intact Despite the Nov/Dec correction, the weekly MACD buy signal is still intact to support upside bias, with immediate hurdles seen at 20,272, the 28 Oct peak, and 20,579, the 50%FR on the daily chart. Looking ahead, a breakout above the 200-week moving average at 20,255, and 21,317 (50%FR) would strengthen the recovery. Immediate Hurdles at 20,272 & 20,579 Technical Outlook [ 14 ]

17 A Member of the TA Group January trader s Compass Chart 5: STI DAILY 2, STINDEX (2,662.73, 2,671.28, 2,646.35, 2,646.35, ) ,313 high (9/11/10) % % 200d ma 3,127 (76.4%FR) % 3,011 (61.8%FR) % 2,918 (50%FR) 0.0% 100d ma 0.618FFL % 2,824 (38.2%FR) 23.6% 0.5FFL % 2,709 (23.6%FR) 2,680 low (22/8/11) 38.2% 50.0% 61.8% 76.4% 50d ma 0.382FFL % 2,521 low (5/10/11) 100.0% MACD ( ) Daily MACD turn positive October November December 2011 February March April May June July August September October November December 2012 February March -100 The steep rebound on the Singapore STI from low of 2,521 on 5 Oct, the lowest since August 2009, stalled at 2,905 high on 28 Oct, which coincide with the 0.5FFL and 100-day moving average resistance levels. Subsequent weakness brought it down to 2,606 low on 20 Dec, matching the 76.4%FR of the previous upswing, before stabilizing. The STI should move into base-building mode pending upside catalyst, with key pivot low supports from the 2,606 and 2,521 cushioning downside. Base Building With Key Supports at 2,606 & 2,521 Chart 6: STI WEEKLY 2, % STINDEX (2,679.02, 2,683.03, 2,646.35, 2,646.35, ) 3,906 all-time high (Oct 2007) 3,621 high (Dec 2007) FFL 0.50 FFL % 38.2% 2,923 3, FFL % 61.8% 2,363 2,643 50wk SMA (2,959) % 1,690 low (May 2004) 100.0% Fibonacci Fan Lines (FFL) 200wk SMA (2,706) 2,016 1,473 low (28/10/08) 1,455 low (10/3/09) 30wk SMA (2,850) ,205 low (March 2003) MACD ( ) Weekly MACD flattening On the weekly chart, the STI would need to move back above 2,643 (50%FR) and the 200-week moving average (2,706), as these are important threshold levels to anchor recovery going forward. The weekly MACD is flattening despite the Nov/Dec correction, implying weak downside momentum and higher probability for base building. The immediate hurdle to overcome will be the overhead 50-day and 100-day moving averages on the daily chart. Need Move Above 2,643 (50%FR) & 200- week MA to Promote Recovery Technical Outlook [ 15 ]

18 A Member of the TA Group January trader s Compass Blue Chip Picks for Jan 2012 Listed below is the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) 30 component stocks sorted by market capitalization in descending order, which represent above 70% of the total market cap of the FTSE Bursa Malaysia 100 Index. Stocks with their statistics in bold reflect our blue chip picks for January 2012, with more details and corresponding charts in the following pages. Stock Close Bollinger Bands RSI Moving Averages DMI MACD DMI MACD Name 30-Dec Lower Mid Upper 14d 10d 30d 50d DI + DI - ADX Diff Line Signal Diff Recent Signal KLCI BUY BUY MAYBANK BUY BUY PBBANK BUY BUY SIME BUY BUY CIMB BUY BUY AXIATA BUY BUY GENTING BUY BUY IOI CORP BUY BUY TNB BUY BUY DIGI BUY BUY PCHEM (7.75) SELL BUY AMMB (5.49) SELL BUY TM BUY BUY MAXIS (10.07) (0.01) SELL SELL KLK BUY BUY PET GAS BUY BUY GENM (0.01) BUY SELL PPB GROUP BUY BUY HL BANK BUY BUY AIRASIA (5.59) SELL BUY BAT BUY BUY YTL CORP BUY BUY UMWH BUY BUY YTLPOWER (0.12) (0.00) SELL SELL PET DAG BUY BUY HLFG (3.68) SELL BUY BUMI ARMAD (0.01) BUY SELL MMC CORP BUY BUY RHBCAP BUY BUY UEM LAND BUY BUY MMHE BUY BUY INTERPRETATION OF TECHNICAL INDICATORS: Bollinger Bands: Variable width bands that narrow during less volatile periods and widen during more volatile periods. As a general rule, in a bearish trend, traders should buy when share price touches the lower band and exit when price touches the middle band. The reverse is true in a bullish trend, ie. buy when price touches the middle band and sell when price touches the upper band. Momentum traders tend to buy on price breakouts above the upper band, and sell when price breaks down below the lower band. 14-day Relative Strength Index (RSI): A reading below 30 is considered oversold, above 70 is overbought. A rise above 50 with a corresponding share price surge above the 30-day moving average should be taken as a bullish move with good short-term upside potential. A fall below 50 and a simultaneous dip below the 30-day average is bearish and imply further near-term downside risk. Moving Averages: A stock s short-term trend is bullish if share price stays above the 10-day moving average, and bearish if it stays below. The medium-term trend is positive if share price stays above the 30-day average, and negative if it remains below. A longer-term uptrend is intact if share price sustain above the 50-day average, and is deemed broken if it breaches below this level. Directional Movement Indicator (DMI): The DMI is an indicator of trend strength. A positive DMI difference (DMI diff) value is bullish and indicate a higher DI+ vs. DI-, while a negative DMI diff is bearish due to a lower DI+ vs. DI- (DMI diff = DI+ minus DI-). A crossover of DI+ above DI- triggers a BUY signal, while a SELL signal is flashed when the DI+ crosses below the DI-. The Average Directional Movement Index (ADX) indicates the strength of a trend, whether it is up or down. The higher the value of ADX, the stronger the trend. An ADX value above 25 suggests a trending market or stock, while a value below 20 signal congestion or absence of trend. Daily Moving Average Convergence Divergence (MACD): The MACD diff value is derived from the difference between the MACD line (the 12-day EMA minus the 26-day EMA) and the MACD signal line (the 9-day EMA of the MACD). A positive MACD diff value is bullish, while a negative MACD diff is bearish. A BUY signal is generated when the MACD diff rises above zero, and SELL signal sparked when the MACD diff value falls below zero. Blue Chip Picks [ 16 ]

19 A Member of the TA Group January trader s Compass SIME RM9.20 BOLLINGER BANDS SIMPLE MOVING AVERAGES Upper RM day RM 9.01 Middle RM day RM 8.95 Lower RM day RM 8.89 DMI DAILY MACD Recent Signal BUY Recent Signal BUY CIMB RM7.44 BOLLINGER BANDS SIMPLE MOVING AVERAGES Upper RM day RM 7.07 Middle RM day RM 6.99 Lower RM day RM 7.10 DMI DAILY MACD Recent Signal BUY Recent Signal BUY Blue Chip Picks [ 17 ]

20 A Member of the TA Group January trader s Compass IOI CORP RM5.38 BOLLINGER BANDS SIMPLE MOVING AVERAGES Upper RM day RM 5.19 Middle RM day RM 5.11 Lower RM day RM 5.11 DMI DAILY MACD Recent Signal BUY Recent Signal BUY DIGI RM3.88 BOLLINGER BANDS SIMPLE MOVING AVERAGES Upper RM day RM 3.73 Middle RM day RM 3.66 Lower RM day RM 3.50 DMI DAILY MACD Recent Signal BUY Recent Signal BUY Blue Chip Picks [ 18 ]

21 A Member of the TA Group January trader s Compass PCHEM RM6.20 BOLLINGER BANDS SIMPLE MOVING AVERAGES Upper RM day RM 6.17 Middle RM day RM 6.10 Lower RM day RM 6.17 DMI DAILY MACD Recent Signal SELL Recent Signal BUY AIRASIA RM3.77 BOLLINGER BANDS SIMPLE MOVING AVERAGES Upper RM day RM 3.71 Middle RM day RM 3.73 Lower RM day RM 3.76 DMI DAILY MACD Recent Signal SELL Recent Signal BUY Blue Chip Picks [ 19 ]

22 A Member of the TA Group January trader s Compass BUMI ARMADA RM4.10 BOLLINGER BANDS SIMPLE MOVING AVERAGES Upper RM day RM 4.10 Middle RM day RM 4.02 Lower RM day RM 3.91 DMI DAILY MACD Recent Signal BUY Recent Signal SELL MMC CORP RM2.77 BOLLINGER BANDS SIMPLE MOVING AVERAGES Upper RM day RM 2.56 Middle RM day RM 2.51 Lower RM day RM 2.53 DMI DAILY MACD Recent Signal BUY Recent Signal BUY Blue Chip Picks [ 20 ]

23 A Member of the TA Group January trader s Compass RHB CAP RM7.48 BOLLINGER BANDS SIMPLE MOVING AVERAGES Upper RM day RM 7.04 Middle RM day RM 7.16 Lower RM day RM 7.25 DMI DAILY MACD Recent Signal BUY Recent Signal BUY UEM LAND RM2.42 BOLLINGER BANDS SIMPLE MOVING AVERAGES Upper RM day RM 2.35 Middle RM day RM 2.23 Lower RM day RM 2.18 DMI DAILY MACD Recent Signal BUY Recent Signal BUY Blue Chip Picks [ 21 ]

24 January 2012 trader s Compass Major Events (Dec 2011) Dec Bank of Canada, Switzerland, Japan and the UK, led by the Federal Reverse, made it cheaper for banks to borrow dollars in emergencies in a global effort to ease Europe's sovereign debt crisis Dec Ekovest-MRCB JV Sdn Bhd, a 60:40-joint venture between Ekovest Bhd and Malaysian Resources Corp Bhd, has finally been appointed the project delivery partner of the RM2.2bn River of Life project Dec Kencana Petroleum Bhd has bagged a RM1bn contract from Bechtel International Inc. to help build a liquefied natural gas processing facility in Australia. ECB policy makers meeting in Frankfurt lowered the benchmark interest rate by a quarter percentage point to 1% to match a record low Dec Khazanah Nasional Bhd is selling its 42.7% stake in Proton Holdings Bhd to DRB-HICOM Bhd Dec Sunway Bhd has acquired the leases of two parcels of land for RM745.3mn with a GDV of RM12bn in Medini Iskandar via a joint venture with Khanazah Nasional Bhd Dec U.S. housing starts jump 9.3% to highest in the year, led by a surge in multifamily units, signaling the market is stabilizing heading into Dec BNM will be more flexible in allowing more foreign banks to set-up operations in Malaysia in 2012, as long as these banks meet the central bank's criteria Dec Khazanah MD said any sale of Proton Holdings Bhd will be subject to a general offer as it is looking to sell its entire 42.7% stake Dec RHB Capital Bhd may pay as much as RM1.9bn in shares for OSK Holdings Bhd's investment bank unit Dec CVC Capital Partners Ltd teamed up with Johor Corp to make buyout offers today for KFC Holdings (Malaysia) Bhd and parent QSR Brands Bhd at RM4 and RM6.80 per share respectively. SapuraCrest Petroleum Bhd shareholders approved the proposed merger with Kencana Petroleum Bhd and the merged entity would allocate RM1.4bn as capital expenditure over the next two years. MajorEvents 6 [ 22 ]