PP 7767/09/2011(028730)

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 14 October 2010
Market Technical Reading
Removing 1,500 By The End Of This week...

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

Local Market Leads:

♦ Buoyed by a rally across the overseas markets, the bulls made a strong comeback by lifting the FBM KLCI
benchmark to its highest level since mid-Jan 2008.

♦ And with buying momentum spreading across the board, the FBM KLCI jumped 10.40 pts or 0.70% to finish at its
day high of 1,496.97.

♦ Asian key indices, including Sensex (+2.40%), Jakarta Composite (+1.83%) and FTSTI (+1.68%) scaled to a
fresh year high amid hopes of further monetary easing by the US Federal Reserve as well as upbeat earnings and
sales forecasts from giant chipmaker, Intel.

♦ The local sentiment turned even more bullish in the late session when the European markets kicked off the day
with a strong note on the back of a sharp rally in the US futures market.

♦ Overall turnover for the local market improved further for a fourth day to 1.20bn shares from Tuesday’s 1.17bn
shares. Market breadth turned positive with gainers leading losers with a ratio of more than 5 to 2.

Technical Interpretations:

♦ Instead of staging a follow-through pullback after recording a negative candle earlier, the FBM KLCI resumed its
bullish run-up by hitting a fresh 33 months high of 1,496.97.

♦ By chalking up a positive candle and a fresh uptick in the short-term momentum indicators, the current rally will
likely continue, in our view.

♦ Therefore, we believe that it is now due to completely cover the previous technical gap at 1,497.64 and to
rechallenge the psychological level of 1,500 soon.

♦ A breakthrough from 1,500 will lift the benchmark higher towards the all-time high level of 1,524.69.

♦ Meanwhile, the 10-day SMA of 1,478 will continue to underpin the current upswing, in our view.

Please read important disclosures at the end of this report.

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Daily Trading Strategy:

♦ Impressively, the FBM KLCI shrugged off the pullback risk and made a strong turnaround yesterday to resume its
bullish short-term rally.

♦ With a strong closing at a 33-month high and the upbeat technical indicators, we believe the FBM KLCI will break
above the 1,500 psychological level by the end of this week.

♦ In fact, we expect the current upbeat sentiment to persist on regional markets’ strength, especially with some
Asian markets hitting a new record high or a fresh year high on continuous foreign capital inflows recently.

♦ Moreover, ahead of the 2011 Budget announcement on Friday, speculations are bound to increase in the near term
on selective sectors like the construction, services and property sectors, in our view.

♦ Coupled with a robust daily volume at above the 1.0bn shares mark of late, more investors are expected to return
to the trading floors due to the increased risk appetite following the recent gains.

♦ Technically, upon the removal of 1,500, the benchmark will likely accelerate its upward momentum and head
towards the all-time high level of 1,524.69 or higher soon.

Table 2 : Major Indices & Commodities

Table 1 : Daily Statistics Change Change
Scoreboard 7 Oct 8 Oct 11 Oct 12 Oct 13 Oct Local Key Indices Closing
(Pts) (%)
Gainers 299 397 479 327 576 FBM KLCI 1,496.97 10.40 0.7
Losers 410 332 287 420 236 FBM 100 9,841.79 74.83 0.8
Unchanged 303 301 293 306 356 FBM ACE 4,155.61 68.40 1.7
Untraded 343 324 296 308 296 Major Overseas
Indices
Market Cap Dow Jones 11,096.08 75.68 0.7
Turnover Nasdaq 2,441.23 23.31 1.0
(mln shares) 842 1,075 1,094 1,169 1,200 S&P 500 1,178.10 8.33 0.7
Value FTSE 5,747.35 85.76 1.5
(RM mln) 1,523 1,657 1,715 1,901 2,027 Hang Seng 23,457.69 335.99 1.5
Jakarta Composite 3,611.98 64.73 1.8
Currency Nikkei 225 9,403.51 14.87 0.2
MYR vs US Seoul Composite 1,876.15 8.11 0.4
Dollar 3.0890 3.1125 3.0995 3.1080 3.0925 Shanghai Composite 2,861.36 19.95 0.7
SET 992.6 15.52 1.6
Source: RHBInvest & Bloomberg Straits Times 3,202.16 52.80 1.7
Taiwan Weighted 8,106.66 16.44 0.2
India Sensex 20,687.88 484.54 2.4
Major Commodities
NYMEX Crude Oil
(US$/barrel) 83.01 1.34 1.6
FCPO – Third Month
(RM/metric ton) 2,930.00 30.00 1.0
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:

♦ Taking cues from the bullish cash market performance and the positive overseas markets’ closing, the FKLI staged
a timely rebound by surging 0.84% on Wednesday.

♦ Like the cash market, the futures index enjoyed a strong run-up in the afternoon, especially after overseas
markets like Hang Seng Index intensifying its rally in the late trading hour.

♦ The FKLI for Oct contract rose sharply by 12.50 pts to a fresh year high of 1,492.00 yesterday.

♦ Technically, the positive candle and the immediate improvement on the short-term momentum readings are
pointing towards a firmer and a continuous rally in the near term.

♦ Therefore, it is expected to cover the technical gap at 1,490 – 1,502.5 as soon as today, in our view.

♦ In fact, more rallies toward the all-time high of 1,536 can be expected if it can clear the technical gap with a
strong momentum.

♦ On the downside, the 10-day SMA near 1,478 will continue to support the current uptrend.

Daily Trading Strategy:

♦ By kicking off a timely technical rebound from a level near to the 10-day SMA of 1,478 yesterday, the FKLI has
denied the pullback risk while refreshing its upside potential for the near term.

♦ In fact, the strong closing at a multi-year high at 1,492 indicates further buying support today.

♦ Traders can bet for further upside today to cover the technical gap at 1,490 – 1,502.5, before heading towards the
all-time high level of 1,536.

♦ We expect the futures index to swing from 1,490 to 1,505 today.

Table 3: FKLI Closings

FKLI (Month)
Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest
Oct 10 1485.00 1494.50 1485.00 1492.00 12.50 1492.00 5707 22637
Nov 10 1485.50 1494.50 1485.50 1492.00 12.00 1492.00 165 191
Dec 10 1486.00 1494.00 1486.00 1492.50 13.00 1492.50 48 364
Mar 11 1490.00 1494.00 1490.00 1494.00 14.50 1492.50 3 130

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:

♦ Boosted by stronger-than-expected earnings and the continuous weakening of the greenback, the US markets
finished sharply higher to a 5-month high on Wednesday.

♦ Railroad operator CSX advanced 4.2% after announcing quarterly earnings that beat expectations. Intel’s
earnings also exceeded market estimates, though its share prices fell 2.7% on profit-taking activities.

♦ Also, JPMorgan Chase recorded better-than-expected profit, but it dropped 1.4% as its revenue missed forecast.

♦ Industrial and material-related stocks were the leading sector, fuelled by a weaker US dollar on expectations that
the Federal Reserve will announce to buy more Treasuries on the upcoming FOMC meeting in early Nov.

♦ US light sweet crude oil futures for Nov delivery snapped the recent pullbacks by bouncing back US$1.34 or 1.6%
to US$83.01/barrel on a further decline in the US dollar and news that China’s imports have surged in Sep.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

♦ The DJIA expanded its gains from the 11,000 level yesterday by rising 75.68 pts or 0.69% to 11,096.08.

♦ Though it retreated from its intraday high of 11,155.23 on mild profit-taking activities, the closing with a positive
candle still points to further run-up ahead, technically.

♦ Therefore, we maintain our view that the Dow will extend the current upward leg towards the next resistance
target at 11,250, near the Apr’s high of 11,258.01 soon.

♦ In the meantime, solid supports can be expected at the 11,000 level and the chart breakout point at 10,850.

Nasdaq Composite (Nasdaq)

♦ The Nasdaq Composite index continued to move higher, for the fifth straight day on Wednesday with another
solid gain of 23.31 pts or 0.96% at 2,441.23.

♦ But if it fails to attract follow-through buying support today, it could encounter mild profit-taking pressure soon
on the back of yesterday’s steep rally and the mixed short-term momentum readings.

♦ However, any retreat is likely to be limited, in our view, at a technical gap at 2,421.79 – 2,426.52 and the 21-day
SMA of 2,364. In fact, as long as it sustains at above 2,330, its near-term uptrend to the 2,470 resistance target
and the Apr’s high of 2,535.28 are likely to remain intact.

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Daily Technical Watch:

Chart 7: IncKen Daily Chart 8: IncKen Intraday

Inch Kenneth Kajang Rubber Plc (2607)

Violating RM0.80 will trigger an extension rally on the stock…

♦ IncKen kick-started its technical recovery leg since Mar 2009, but met with a strong resistance region near
RM0.38 in May - Oct 2009, and another region near RM0.465 – RM0.555 in Jan – Jun 2010.

♦ However, despite the strong selling pressure at those hurdles, the stock still managed to hit a strong resistance of
RM0.65 in Jan 2010.

♦ In fact, since Jul 2010, when the 10-day SMA rebounded from the 40-day SMA to refresh a positive medium-term
outlook on the chart, it has realigned the uptrend and slowly moved higher in recent months.

♦ It retested the strong resistance at RM0.65 in Aug and Sep, before violating the level in early Oct.

♦ Added with the powerful bullish breakout candle upon crossing over the RM0.65 level and the upbeat momentum
readings, the stock is certainly gearing up for more upside ahead, in our view.

♦ It touched a high of RM0.805 before closing the day at RM0.795, with a strong bullish candle yesterday,
suggesting follow-through buying support likely today.

♦ The immediate resistance is at RM0.80, but the stock stands a strong chance to remove the level soon given the
positive readings on the chart.

♦ Positively, another chart breakout will trigger an extension rally on the stock that will point to higher resistances
at RM0.98 and the RM1.10 region in the near term.

Technical Readings:

♦ 10-day SMA: RM0.6785

♦ 40-day SMA: RM0.6311

♦ Support: IS = RM0.65 S1 = RM0.555 S2 = RM0.465

♦ Resistance: IR = RM0.80 R1 = RM0.98 R2 = RM1.10

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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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