Reflections on Volume

Big volume without further upside equals distribution
Big volume without further downside equals accumulation

Volume tends to peak at turning points
Volume often precedes price movement
Volume is a relative study

Sunday, October 24, 2010

Broker way to ride on bull run


PETALING JAYA: The market has “come back to life” and one way to ride on this rejuvenation is by buying stocks of stock-broking houses, says research house Credit Suisse’s Malaysian unit. However, not all analysts share its view.

“The blue chip way to play it is through Bursa Malaysia Bhd given that 60% to 70% of its top-line is directly attributable to volume-related activities.

“Alternatively, you might want to take a look at TA Enterprise Bhd or OSK Holdings Bhd, the two more liquid brokers,” Credit Suisse told its clients in a note on Thursday.

Manulife Asset Management (M) Sdn Bhd chief executive officer Jason Chong pointed out that the current interest in the stock market was largely being fuelled by institutional buying.

“Technically, we are in a bull run but listed brokers rely on retail participation.

“Thus far, that has been lacking so will they (stock-broking houses) do exceptionally well, especially in the shorter term? I’m not sure about that,” he said.

“Normally, retail participation only comes in the last leg, I believe we’re at the initial stages (of a bull run),” Areca Capital Sdn Bhd chief executive officer Danny Wong said.

Retailers normally let institutions take the lead, he added.

Trading values at Bursa Malaysia have been growing over the past few months as markets flushed with cash chase after stocks with growth potential.

In July, daily average trading values stood at below RM1.1bil.

In August, this grew to RM1.3bil, expanding in September to RM1.5bil and this month, RM1.7bil, according to Bloomberg data.

Daily average trading volumes have also ballooned to the current 1.3 billion shares from below the 1-billion mark months ago.

Year-to-date, the benchmark FTSE Bursa Malaysia KL Composite Index is up about 17%.

“There is plenty of action among second-line stocks. If liquidity and pre-election confidence grows, this could sustain due to low valuation,” Credit Suisse said in its note.

“Given that 62% of the 936 stocks listed are trading below book value, we believe this market activity is sustainable,” it said.

At the close yesterday, Bursa was up 7 sen to RM8.24 , TA was flat at 70 sen while OSK added 4 sen to RM1.38.

Taken from here...

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