PP 7767/09/2010(025354)

RHB Research
Malaysia Technical Research
8
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

Da ily T rad ing S trat egy

23 August 2010
MARKET DATELINE

Market Technical Reading

1,390 - 1,400 Resistance Zone Remains Firm…

Chart 1: FBM KLCI Daily Chart 2: FBM KLCI Intraday

Local Market Leads:

♦ Underpinned by banking heavyweights, Bursa Malaysia extended its impressive rally for the sixth straight day on
Friday, even as most Asian markets ended down amid overnight slump in US markets.

♦ The FBM KLCI climbed another 2.46 pts or 0.18% to 1,395.02, as institutional investors snapped up banking
stocks, CIMB (+8sen) and Maybank (+6sen) and other index-linked counters on better earnings expectation.

♦ But overall market sentiment remained cautious, due to constant profit-taking pressure across the board.

♦ Elsewhere in the region, Asian markets mostly finished negatively after taking cues from the overnight selloff in
Wall Street and a sharp correction in China markets on fresh property tightening moves.

♦ China government said it would reinforce its campaign to crack down land hoarding and misuse by property
developers. Shanghai Composite tumbled 1.70% on Friday as a result.

♦ Daily turnover declined further to 834m shares from 983m shares previously. Market breadth was in the negative
territory once again with 394 counters down and 316 counters up.

Technical Interpretations:

♦ Despite a weaker opening, the FBM KLCI recouped its early losses and ended in the positive territory.

♦ And with a positive confirmation candle to above the 1,390 technical hurdle on Friday, this has confirmed another
important technical breakout on the chart.

♦ As such, we expect the FBM KLCI to test the 1,400 psychological level soon, even as the short-term momentum
readings remain in the “extremely overbought” region. The stochastic oscillators hit 99.99% of a 100% on Friday.

♦ Having said that, a further penetration of 1,400 will turn the chart even more bullish and points to a sustained
rally towards the 1,450 mild hurdle, before heading towards the all-time high of 1,524.69.

♦ The immediate support is now pegged at 1,390, followed by the rising 10-day SMA of 1,370.

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Daily Trading Strategy:

♦ Impressively, the FBM KLCI appeared stronger than expected, based on last Friday’s trading performance,
especially against the backdrop of the weaker overseas sentiment.

♦ In fact, as the market has decisively removed the 1,390 technical barrier, the prospect of challenging the 1,400
psychological level this week has turned even brighter now.

♦ But due to the persistent overbought momentum readings and a slightly weaker daily turnover on Friday, the FBM
KLCI must remove 1,400 decisively with increase turnover in order to prolong the current run-up.

♦ Technically, we admit that a further removal of the 1,400 psychological level will aid the current buying
momentum in the key heavyweights and selective mid-cap stocks, but we also warn of the risk of failing to garner
the tough 1,390 – 1,400 major resistance zone will invite substantial profit-taking pressure on the current
extended rally.

♦ For now, the uptrend will be underpinned by 1,390 and the 10-day SMA of 1,370. The stronghold for the current
uptrend is at the 1,350.

Table 2 : Major Indices & Commodities

Table 1 : Daily Statistics Change Change
Scoreboard 16 Aug 17 Aug 18 Aug 19 Aug 20 Aug Local Key Indices Closing
(Pts) (%)
Gainers 405 391 334 407 316 FBM KLCI 1,395.02 2.46 0.2
Losers 320 367 377 321 394 FBM 100 9,158.24 12.38 0.1
Unchanged 261 292 312 293 327 FBM ACE 3,837.11 -12.79 -0.3
Untraded 389 326 353 352 334 Major Overseas
Indices
Market Cap Dow Jones 10,213.62 -57.59 -0.6
Turnover Nasdaq 2,179.76 0.81 0.0
(mln shares) 974 1,113 998 983 834 S&P 500 1,071.69 -3.94 -0.4
Value (RM FTSE 5,195.28 -16.01 -0.3
mln) 1,363 1,756 1,616 1,700 1,341 Hang Seng 20,981.82 -90.64 -0.4
Jakarta Composite 3,117.72 12.37 0.4
Currency Nikkei 225 9,179.38 -183.30 -2.0
MYR vs US Seoul Composite 1,775.54 -4.10 -0.2
Dollar 3.1790 3.1575 3.1540 3.1330 3.1360 Shanghai Composite 2,642.31 -45.67 -1.7
SET 893.92 2.69 0.3
Source: RHBInvest & Bloomberg Straits Times 2,936.48 -10.29 -0.3
Taiwan Weighted 7,927.31 -1.63 0.0
India Sensex 18,401.82 -53.12 -0.3
Major Commodities
NYMEX Crude Oil
(US$/barrel) 73.46 -0.97 -1.3
MDEX CPO – Third
Month (RM/metric ton) 2,608.00 -39.00 -1.5
US Interest Rate Current Last Updated
10 Aug
Overnight Fed Fund Rate 0-0.25% Unch
2010
Next FOMC meeting 21 Sep 2010

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Chart 3: FKLI Daily Chart 4: FKLI Intraday

Technical Interpretations:

♦ Backed by the resilient cash market sentiment, traders resumed their buying spree on Friday, after the FKLI
suffered a temporary retreat in the early session, amid the overnight sharp pullback in the US markets.

♦ Upon closing, the FKLI for Aug contract inched up by 1.0 pt or 0.07% to end at 1,390.00, well off its day’s low of
1,383.50 (-5.50 pts).

♦ On the chart, by forming a “bullish engulfing” candle on Friday, this has successfully neutralised the previous two
negative reversal candle patterns on the chart.

♦ This means the futures index might have escaped from a technical pullback. In fact, the latest candlestick reading
points to a further rally ahead.

♦ Despite the fact of a mixed reading on the momentum indicators, we are of the view that the FKLI will still head
higher if it manages to surpass the 1,390 level convincingly this week.

♦ In other words, it is poised to charge further towards the 1,450 technical hurdle, if it surpasses 1,390 and 1,400
pyschological level soon.

♦ On the support, the 10-day and 40-day SMAs near 1,369 and 1,346 will be able to underpin the recent rally.

Daily Trading Strategy:

♦ It appears that the risk of staging an immediate technical pullback has reduced substantially after the FKLI chalked
up a “bullish engulfing” candle on last Friday.

♦ However, it still needs to secure its position at above 1,390 to convince a further rally to 1,450.

♦ The FKLI is projected to swing from 1,380 and 1,395 today.

Table 3: FKLI Closings

FKLI (Month)
Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest
Aug 10 1386.00 1393.50 1383.50 1390.00 1.00 1390.00 4480 17205
Sep 10 1383.00 1392.50 1383.00 1389.50 0.50 1389.50 464 1519
Dec 10 1385.50 1392.50 1385.00 1389.00 Unch 1389.50 180 426
Mar 11 1385.00 1392.00 1385.00 1389.00 -0.50 1389.50 82 170

Source: Bursa Malaysia

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Chart 5: US Dow Jones Industrial Average (DJIA) Daily Chart 6: US Nasdaq Composite Daily

US Market Leads:

♦ Most US stocks continued to end lower for a third consecutive day on Friday, as concerns over a possible
economic slowdown persist after a spate of poor economic data announced in late last week.

♦ This has translated into a series of fresh selling in commodity-related stocks, with oil and metal-related stocks
taking the beating, on signs of a weakening economic recovery. Copper producer Freeport-McMoRan dipped 1.0%,
while oilfield-services contractor Schlumberger fell 2.4%.

♦ Despite Research In Motion (-3.5%) and Hewlett-Packard (-2.2%) suffered strong selldown amid downgrades by
some brokers, other tech stocks managed to stage recovery, after Marvell Technology Group and Intuit
announced some positive forecasts. The bounce has mitigated part of the negative sentiment overall.

♦ Due to worries over oil demand amid a gloomier US economic outlook, the expired US light sweet crude oil
futures for Sep delivery extended its losing leg by falling another 97cents or 1.3% to US$73.46/barrel.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

♦ As the bearish sentiment mounted, the US DJIA dropped 57.59 pts or 0.56% to 10,213.62 on Friday.

♦ But even with a successful rebound from the 10,150 technical support, it still added a second negative candle on
the chart to indicate a follow-through selling leg likely ahead.

♦ Moreover, the stochastic oscillators have issued a marginal “sell” signal to double the impact from the falling 14-
day RSI. This suggests a weaker momentum and an imminent threat to the 10,150 level this week.

♦ Crucially, the index mustt defend the 10,150 and the 10,000 psychological levels to avoid an extended correction
leg towards 9,700 and lower.

Nasdaq Composite (Nasdaq)

♦ After experiencing an early selloff, the Nasdaq Composite index made a timely rebound and finished almost flat at
day end. It inched up just 0.81 pt or 0.04% to 2,179.76 for the day.

♦ Technically, a small positive candle suggests a further rebound today. But due to the mixed momentum readings,
it must at least recapture the 2,190 technical level by today to protect Friday’s rebound leg, in our view.

♦ Otherwise, it will risk further corrections toward the next support of 2,100 and Jul’s low of 2,061.14 soon.

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Daily Technical Watch:

Chart 7: Pos Daily Chart 8: Pos Intraday

Pos Malaysia (4634)

Potential retreat this week, but medium-term uptrend remains intact…

♦ The share price of Pos kicked of a powerful rally in late Mar 2010, after the 10-day SMA cut steeply to above the
40-day SMA near RM2.00 region.

♦ The rally led the stock to a fresh multi-year high of RM3.21 in early Apr 2010, but fell to below the RM3.07 level
to begun a consolidation move shortly afterward.

♦ But, near the support region of RM2.54 in May 2010, the stock recovered its momentum and slowly plotted for a
renewed recovery leg.

♦ By mid-Jun as it broke out the RM2.80 level, it started the recovery leg that eventually hit a fresh multi-year high
of RM3.34, near a key resistance level of RM3.26 in Jul.

♦ After a series of sideways trading mode, the stock picked up its momentum again of late, and closed last Friday
at RM3.28, just above the RM3.26 significant level.

♦ However, on the chart, it registered a “hanging man” candle, suggesting a potential retreat this week.

♦ Added to the overbought momentum readings, the stock could pull back towards RM3.07 if selling resumes
today.

♦ Nevertheless, its medium-term uptrend will remain intact so long as it sustains at above the 40-day SMA of
RM3.07, on the dot of the lower immediate support level.

♦ Ironically, a bullish investor will view the pullback, if any, as an opportunity to collect the stock on weakness. Our
uptrend view will only turn negative if it breaches RM3.07.

Technical Readings:

♦ 10-day SMA: RM3.104

♦ 40-day SMA: RM3.068

♦ Support: IS = RM3.26 S1 = RM3.07 S2 = RM2.80

♦ Resistance: IR = RM3.54 R1 = RM3.85

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IMPORTANT DISCLOSURES

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. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
be 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 be
construed 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 any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
may 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 objectives
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or
strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts
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RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB
Group 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 equity
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“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
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services 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 reflect
information 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 recommended
securities, 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 the
actions of third parties in this respect.

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