PP 7767/09/2010(025354)

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

Da ily T rad ing S trat egy

20 May 2010
MARKET DATELINE

Market Technical Reading

Expect More Correction Ahead!

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

Local Market Leads:

♦ Knocked down by a global sell off amid the unexpected German’s overnight decision to ban naked short-selling in
selected investment intruments, regional investors unloaded their stocks in a big way on Wednesday.

♦ Indonesia’s Jakarta Composite and India’s Sensex led the regional markets sharply lower by 3.69% and 2.77%
respetively, after Germany’s financial regulator announced to temporarily ban naked short-selling of shares in 10
leading German financial institutions and in certain euro-zone debt and credit default swaps.

♦ Instead of preventing volatile moves in the financial markets, the preemptive measures have been viewed as
signs that the conditions in European financial markets might be worse than expected. Apart from that, investors
are also nervous about the outcome from the voting of the US financial regulation this week.

♦ In fact, selling activities intensified after European markets plunged over 2% in the afternoon.

♦ Locally, with strong selling on the big blues, the FBM KLCI tanked 21.94 pts or 1.65% to 1,308.23. Turnover
expanded to 782m shares from Tuesday’s 691m shares. Decliners outpaced advancers by a ratio of 5 to 1.

Technical Interpretations:

♦ As the bears gathered strength, the FBM KLCI intensified its downside momentum and headed towards the
psychological support of 1,300.

♦ With a huge bearish candle at below the recent low of 1,315.63, the selling pace is likely to accelerate today.

♦ Compounded with the bearish short-term momentum readings, a retest of 1,300 looks imminent. Losing this level
will confirm a bearish medium-term trend ahead, as the 10-day SMA will cut below the 40-day SMA next.

♦ In short, the FBM KLCI is due for further retracement to a lower support at 1,250, followed by another important
test to the key psychological point at 1,200.

♦ Strong immediate hurdles are still pegged at the 40-day and 10-day SMAs near 1,334.
Please read important disclosures at the end of this report.

A comprehensive range of market research reports by award-winning economists and analysts are exclusively Page 1 of 6
available for download from www.rhbinvest.com
 20 May 2010

Daily Trading Strategy:

♦ With yesterday’s double-digit slump, the FBM KLCI has turned more bearish on the chart.

♦ The index is poised to test the critical psychological threshold at 1,300 today, as we had expected earlier.

♦ However, given the current negative signs in most of the indicators, plus the breakdown of the recent low at
1,315.63, the index might overshoot the key support at 1,300 soon, in our view.

♦ In fact, the 10-day SMA will cut below the 40-day SMA near 1,334 on further downside today, to trigger a “dead
cross”, reflecting a major “sell” signal for the medium-term outlook on the FBM KLCI.

♦ All said, we expect the index to breach 1,300 today and gear up for further retracement towards the next support
region near 1,250 and the lower psychological level at 1,200 in the near term.

♦ As such, investors should cut market exposure, pending more correction ahead.

Table 2 : Major Indices & Commodities

Table 1 : Daily Statistics Change Change
Scoreboard 13 May 14 May 17 May 18 May 19 May Local Key Indices Closing
(Pts) (%)
Gainers 396 293 187 336 135 FBM KLCI 1,308.23 -21.94 -1.6
Losers 253 371 557 295 689 FBM 100 8,563.14 -149.16 -1.7
Unchanged 285 260 194 287 175 FBM ACE 3,932.74 -52.45 -1.3
Untraded 443 453 439 460 379
Major Overseas
Market Cap Indices
Turnover Dow Jones 10,444.37 -66.58 -0.6
(mln shares) 906 682 633 691 782 Nasdaq 2,298.37 -18.89 -0.8
Value (RM S&P 500 1,115.05 -5.75 -0.5
mln) 1,040 1,084 1,009 1,144 1,403 FTSE 5,158.08 -149.26 -2.8
Hang Seng 19,578.98 -365.96 -1.8
Currency Jakarta Composite 2,729.48 -104.71 -3.7
MYR vs US Nikkei 225 10,186.84 -55.80 -0.5
Dollar 3.1950 3.1835 3.2265 3.2100 3.2510 Seoul Composite 1,630.08 -13.16 -0.8
Shanghai Composite 2,587.81 -6.97 -0.3
Source: RHBInvest & Bloomberg SET 765.54 5.43 0.7
FT Straits Times 2,774.54 -69.81 -2.5
Taiwan Weighted 7,559.16 -26.14 -0.3
India Sensex 16,408.49 -467.27 -2.8
Major Commodities
NYMEX Crude Oil
(US$/barrel) 69.87 0.46 0.7
MDEX CPO – Third
Month (RM/metric ton) 2,435.00 -10.00 -0.4
US Interest Rate Current Last Updated
Overnight Fed Fund 27-28 Apr
0-0.25% Unch
Rate 2010
Next FOMC meeting 22-23 June 2010

A comprehensive range of market research reports by award-winning economists and analysts are exclusively Page 2 of 6
available for download from www.rhbinvest.com
 20 May 2010

Chart 3: FKLI Daily Chart 4: FKLI Intraday

Technical Interpretations:

♦ As the bears fully took charge yesterday, the FKLI intensified its bearish momentum and plummeted nearly 2%
amid growing nervousness in Europe and US’s financial tightening woes.

♦ From the day high of 1,325, the bears have worked its way down, before experiencing greater selling pressure in
the afternoon on the back of a free fall in the overseas markets, especially in the European bourses.

♦ At the close, the FKLI for May contract plunged a whooping 26.50 pts to 1,304.00.

♦ This led to a formation of a huge bearish candle, confirming the medium-term “sell” call, following the bearish
crossover of the 10-day and 40-day SMAs on Tuesday.

♦ Given such bearish technical developments, it is not a surprise to see a fall below the immediate level of 1,300
today.

♦ But cautiously, breaching to below 1,300 will mark a confirmation sign to the current corrective wave on the FKLI.

♦ The immediate downside target for this downswing is pegged at 1,270. However, realistically, we are looking at
the psychological stronghold of 1,200 for this correction.

♦ Strong resistances stay at the 10-day and 40-day SMAs near 1,331 and 1,334 respectively.

Daily Trading Strategy:

♦ Yesterday’s steep pullback was within our expectation, as we have been aiming for a retest of 1,300 soon.

♦ But in our opinion, traders should hold on to their “short” positions, as a further breakdown of 1,300 will lead to a
retest of 1,270 or lower.

♦ The trading range for the futures index should be around 1,288 to 1,304 today.

Table 3: FKLI Closings

FKLI (Month)
Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest
May 10 1323.00 1325.00 1303.50 1304.00 -26.50 1304.00 11543 21684
Jun 10 1323.00 1325.00 1304.00 1304.50 -26.00 1304.50 1374 1208
Sep 10 1322.50 1325.00 1306.00 1306.00 -25.00 1305.50 234 260
Dec 10 1323.00 1326.00 1308.00 1308.00 -24.00 1307.50 94 190

Source: Bursa Malaysia

A comprehensive range of market research reports by award-winning economists and analysts are exclusively Page 3 of 6
available for download from www.rhbinvest.com
 20 May 2010

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

US Market Leads:

♦ Wall Street ended lower for a second day on Wednesday following German’s surprise moves to ban short-selling
in selected stocks and bonds that have triggered uncertainties in the financial markets.

♦ Investors unloaded industrial stocks on worries that the recent slide to a 4-year low in the euro would hurt their
profits. Caterpillar, the worst Dow’s performer, fell 2.8%, while Boeing and 3M dropped 2.2% and 1.1%
respectively.

♦ But after suffering from strong sell off in the early session, the markets recovered on the back of renewed
bargain-hunting support as the US Senate prepared to vote on whether to end debate on legislation overhauling
financial regulation.

♦ After suffering six losing streaks, the US light sweet crude oil futures for June delivery finally staged a mild
rebound. The expiring contract was up US$0.46 or 0.6% to US$69.87/barrel.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

♦ After hitting 10,324.66 low, the US DJIA made a strong comeback in the afternoon session. For the day, it
narrowed its triple-digit losses to 66.58 pts or 0.63% to 10,444.37.

♦ This resulted in a potential “hammer” candle on the chart, signaling a possible rebound today after the recent
steep pullbacks.

♦ But due to the overall weak technical readings, we remain skeptical on any rebound attempt with strong hurdle
expected near the 21-day SMA at 10,850.

♦ As a matter of fact, a swift resumption of selling or failure to cross the 10,850 hurdle would reverse yestedray’s
late recovery momentum towards 10,150. We are keeping our bearish view on the DJIA.

Nasdaq Composite (Nasdaq)

♦ The Nasdaq Composite Index also trimmed down its losses by forming a possible “morning star” candle. The
index settled at 2,298.37 with a decline of 18.89 pts or 0.82% yesterday.

♦ While it could experience a recovery today, any such moves are unlikely to be strong and sustainable, given the
recent breakdown from 2,330 as well as the depressed readings in the short-term momentum indicators.

♦ Hence, without reclaiming the 2,330 level, it is still vulnerable to further downside towards 2,190.

A comprehensive range of market research reports by award-winning economists and analysts are exclusively Page 4 of 6
available for download from www.rhbinvest.com
Daily Technical Watch:
Chart 7: IOICorp Daily Chart 8: IOICorp Intraday

IOI Corporation (1961)

Could overshoot the immediate support at RM4.85…

♦ After failing its initial test to the RM3.88 resistance level in early Jan 2009, the share price of IOICorp recharged
and pierced through the level in Apr 2009.

♦ Thereafter, the stock resumed its steady uptrend and went on to remove another resistance at RM4.85 in Aug
2009.

♦ The smooth uptrend continued until it reached the one-and-a-half year high level of RM5.60 in Jan 2010.

♦ Since then, its upside was constantly capped near RM5.60.

♦ Started in early May, selling momentum increased significantly as the stock retreated in greater magnitude after
the 10-day SMA has cut below the 40-day SMA.

♦ It registered a huge bearish candle, its third negative line in a row yesterday, losing 26 sen or 4.9% to RM5.00.
The chart points to a likelihood of a follow-through selling momentum today.

♦ An immediate support is sighted at RM4.85, but given the bearish momentum readings and chart pattern, it could
overshoot the support soon and extend its downside further in the near term.

♦ Next key support is only seen near the resistance-turn-support level of RM3.88.

Technical Readings:

♦ 10-day SMA: RM5.331

♦ 40-day SMA: RM5.423

♦ Support: IS = RM4.85 S1 = RM3.88 S2 = RM2.96

♦ Resistance: IR = RM5.60 R1 = RM6.40 R2 = RM7.20

A comprehensive range of market research reports by award-winning economists and analysts are exclusively Page 5 of 6
available for download from www.rhbinvest.com
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.

A comprehensive range of market research reports by award-winning economists and analysts are exclusively Page 6 of 6
available for download from www.rhbinvest.com