PP 7767/09/2010(025354)

RHB Research

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

Dail y Trad ing St rat eg y

MARKET DATELINE 1 October 2010
Market Technical Reading
Optimism On A Technical Rebound Persists...

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

Local Market Leads:

♦ Local market continued to edge higher for a second day on Thursday amid mild bargain-hunting support on
selective blue chips.

♦ Upon closing, the FBM KLCI added another 1.72 pts or 0.12% to 1,463.50, after institutional investors drove up
index-linked stocks, like Maybank (+9sen), MAS (+12sen) and AMMB (+8sen).

♦ But on the broader market, trading sentiment turned cautious, partly due to the heavy T+4 selling pressure from
last Friday’s 1.73bn shares transacted, as well as the weaker sentiment in most of the regional markets.

♦ Leading the downside was the Nikkei 225 that slumped 1.99% to defy the 1.72% rebound on the Shanghai
Composite following the latest announcement of a less tougher-than-expected tightening measures on property.

♦ Daily turnover increased for the first time in four trading days to 1.05bn shares, from 905m shares a day earlier.
However, the market breadth turned negative with 399 losers against 329 gainers.

Technical Interpretations:

♦ Due to the lack of strong conviction from the local buyers, the FBM KLCI failed to regain the 10-day SMA of 1,465
on its fourth attempt yesterday.

♦ By accumulating three consecutive negative candles on the chart, as well as the lower 10-day SMA, the
benchmark is poised to persist its consolidation mode today.

♦ This means it may pull back to cover a technical gap at 1,453.99 – 1,456.30, before retesting the 1,450 critical
support level soon.

♦ However, thanks to the moderately positive momentum readings, there is still optimism that bargain-hunting
activities could return near the 1,450 critical level, after covering the small technical gap.

Please read important disclosures at the end of this report.

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Daily Trading Strategy:

♦ From a positive perspective, the heavy T+4 force-selling pressure from last Friday’s 1.73bn shares transacted has
been well-absorbed by yesterday’s improved trading volume, amid a mild gain on the FBM KLCI.

♦ But due to the index’s failure to overcome the key resistance of the 10-day SMA near 1,465 for a fourth
consecutive day, the short-term technical readings on the index have gradually turned negative.

♦ In fact, we expect the current consolidation to continue with a further dip on the index to cover a small technical
gap at 1,453.99 and to retest the 1,450 critical support soon.

♦ However, as we reiterated earlier, as long as the index can sustain at above 1,450, the short-term outlook on the
FBM KLCI will remain positive.

♦ As such, aggressive investors can prepare to bargain for value stocks that have retraced significantly from their
recent tops, for a technical rebound in the near term should the index sustain at above 1,450 eventually.

Table 2 : Major Indices & Commodities

Table 1 : Daily Statistics Change Change
Scoreboard 24 Sep 27 Sep 28 Sep 29 Sep 30 Sep Local Key Indices Closing
(Pts) (%)
Gainers 408 469 244 430 329 FBM KLCI 1,463.50 1.72 0.1
Losers 307 292 493 283 399 FBM 100 9,596.29 26.31 0.3
Unchanged 289 276 289 306 280 FBM ACE 3,877.00 30.86 0.8
Untraded 342 309 327 330 346 Major Overseas
Indices
Market Cap Dow Jones 10,788.05 -47.23 -0.4
Turnover Nasdaq 2,368.62 -7.94 -0.3
(mln shares) 1,727 1,158 977 905 1,052 S&P 500 1,141.20 -3.53 -0.3
Value FTSE 5,548.62 -20.65 -0.4
(RM mln) 1,531 1,623 1,351 1,449 1,718 Hang Seng 22,358.17 -20.50 -0.1
Jakarta Composite 3,501.30 5.84 0.2
Currency Nikkei 225 9,369.35 -190.03 -2.0
MYR vs US Seoul Composite 1,872.81 6.36 0.3
Dollar 3.0900 3.0885 3.0930 3.0835 3.0835 Shanghai Composite 2,655.66 44.98 1.7
SET 975.3 5.65 0.6
Source: RHBInvest & Bloomberg Straits Times 3,097.63 -8.40 -0.3
Taiwan Weighted 8,237.78 -3.11 0.0
India Sensex 20,069.12 112.78 0.6
Major Commodities
NYMEX Crude Oil
(US$/barrel) 79.97 2.11 2.7
FCPO – Third Month
(RM/metric ton) 2,730.00 32.00 1.2
US Interest Rate Current Last Updated
21 Sep
Overnight Fed Fund Rate 0-0.25% Unch
2010
Next FOMC meeting 2-3 Nov 2010

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Chart 3: FKLI Daily Chart 4: FKLI Intraday

Technical Interpretations:

♦ Underpinned by mild follow-through buying support, the FKLI continued its slow rebound pace for a second day on
Thursday.

♦ The FKLI for the expired Sep contract was up 5.50 pts or 0.38% to 1,464.50, almost at par with the cash market.
However, the more watched Oct contract inched up only 1.00 pts or 0.07% to 1,460.50.

♦ Nonetheless, the Oct contract ended with a small positive candle on the chart, though it has failed to recapture the
10-day SMA of 1,465.

♦ On a negative note, the failure, compounded with the declining 10-day SMA, have heightened the risk of a
potential negative twist on the short-term technical outlook.

♦ If the selling continues today, the FKLI will likely retreat further towards the 1,450 critical support level soon.

♦ Further breakdown of the level will sink it lower to the 40-day SMA of 1,418 and the 1,390 - 1,400 region.

♦ On the other hand, if the 1,450 level manages to trigger a technical rebound, it will refresh the uptrend and
rechallenge the 10-day SMA before heading towards the recent high of 1,485.50. A higher resistance level is at the
all-time high of 1,536.

Daily Trading Strategy:

♦ Following another failure to regain the 10-day SMA of 1,465, the near-term outlook of the FKLI has turned more
negative.

♦ This could lead to a further retest of 1,450, if there is no immediate rebound today.

♦ We believe the FKLI will fluctuate from 1,452 to 1,467 today.

Table 3: FKLI Closings

FKLI (Month)
Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest
Sep 10 1458.50 1467.00 1458.50 1464.50 5.50 1460.50 2057 5716
Oct 10 1458.50 1468.00 1458.00 1460.50 1.00 1460.50 4628 19312
Dec 10 1463.00 1467.00 1458.50 1461.00 2.00 1461.00 122 378
Mar 11 1462.00 1467.00 1461.00 1461.00 1.50 1460.00 7 157

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:

♦ Wall Street ended lower on a volatile day on Thursday, but still managed to record its best quarter in a year.

♦ Earlier, investors ramped up stocks on a surprise 16,000 drop on the latest weekly jobless claims, as well as the
US government’s upward revision on the 2Q US GDP growth to 1.7% yoy from 1.6% earlier.

♦ However, strong selling returned after the employment index of the Chicago’s purchasing managers index turned
out weaker than expected, despite the PMI unexpectedly rose to 60.4 in Sep from Aug’s 56.7.

♦ Meanwhile, Philadelphia Fed President Charles Plosser said he is against further monetary expansion, cited low
risk of deflation. Boston fed President Eric Rosengren said further large-scale purchases of securities would
depend on the economic outlook and data.

♦ As most of the recent economic data refreshed optimism over the US economic outlook, the US light sweet crude
oil futures for Nov delivery rallied further by US$2.11 or 2.7% to US$79.97/barrel.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

♦ After rallying about 114-pts to a nearly 6-month high of 10,948.88 in the early session, the US DJIA staged a
negative reversal by losing 47.23 pts or 0.44% to 10,788.05 at the end of the day.

♦ Chart wise, by ending at below the 10,850 important technical level with another negative candle, this could
imply further weakness ahead.

♦ Added with a fresh “sell” signal on the stochastic oscillators, the index is likely to head lower towards the 21-day
SMA of 10,596 soon, if it continues to stay below 10,850.

♦ In other words, for it to resume its rally, it must stage a decisive breakout from 10,850 soon.

Nasdaq Composite (Nasdaq)

♦ Likewise, after a volatile session, the Nasdaq Composite index gave up its early rally and turned lower by 7.94 pts
or 0.33% to 2,368.62.

♦ And with a “bearish engulfing” candle and the weakened short-term momentum indicators, the risk has increased
for the index to retest the resistance-turn-support level of 2,330 and the 21-day SMA of 2,287 soon.

♦ Nonetheless, as long as these supports can hold, we remain positive on the recent breakout of 2,330.

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Daily Technical Watch:

Chart 7: Sime Daily Chart 8: Sime Intraday

Sime Darby (4197)

Poised to challenge the RM9.00 resistance soon…

♦ The upward momentum on the share price of Sime Darby reduced significantly since late 2009, when the stock
traded near the tough resistance level of RM9.00.

♦ After touching a high of RM9.19 in Jan 2010, the stock turned weaker and started a downtrend.

♦ It then drifted lower for the next few months, and touched a low of RM7.47 in May.

♦ However, with a firm support near the RM7.50 region, the stock initiated a technical rebound in Aug, before
congesting at around the RM8.15 - RM8.50 region in the past few weeks.

♦ It rallied to an intraday high of RM8.57 on Wednesday before closing at RM8.50 yesterday on mild profit-taking
activities.

♦ Although it registered a small negative candle suggesting a likelihood of follow-through profit-taking activities
today, the recent breakout of the congestion area highlighted a fresh hope for a renewed technical upswing in the
near term.

♦ Coupled with the upbeat technical momentum readings, the stock is poised to challenge the next resistance level
of RM9.00 soon, once the current profit-taking leg eases.

♦ Since it broke out from the key level of RM8.00, its medium-term support has always stayed firm near RM8.00.

Technical Readings:

♦ 10-day SMA: RM8.365

♦ 40-day SMA: RM8.037

♦ Support: IS = RM8.00 S1 = RM6.70 S2 = RM5.40

♦ Resistance: IR = RM9.00 R1 = RM10.00 R2 = RM10.80

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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
any 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 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
securities 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 other
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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