PP 7767/09/2010(025354)

20 May 2010

Malaysia Technical Research

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

Chart S urv eillance

20 May 2010
MARKET DATELINE

FBM KLCI
“Sell In May, Go Away!” Scenario Recurring…

Chart 1: FBM KLCI Daily

A Technical Correction Phase On The 13-mth Old Uptrend

♦ According to Chart 1, the FBM KLCI began its uptrend when the 10-day SMA cut above the 40-day SMA in Apr
2009 near the 880 region.

♦ Along the uptrend, the 10-day SMA and the 40-day SMA have served as a great support for the index.
Everytime the 10-day SMA retreated to near the 40-day SMA, the FBM KLCI would stage a rebound, hence
prolonging the uptrend and led the index to a higher level.

♦ The uptrend turned uncertain only since Dec last year, when the index traded closer to the 1,300 psychological
level.

♦ In late Jan 2010, strong profit taking set in and dragged the index to a low of 1,224.37, and forced the 10-day
SMA to cut below the 40-day SMA convincingly for the first time since Apr 2009.

♦ That signal had threatened a potential major correction for the uptrend, but to our surprise, the index
reversed and removed the 1,300 level completely in early Mar 2010 and lifted the 10-day SMA to above the
40-day SMA, before extending its uptrend to a fresh more-than-two-year high of 1,349.92 in early May 2010.

♦ Only then, when it hit a stumbling block at the resistance zone of 1,347 – 1,350, buying momentum petered
off as the index registered a “triple top” formation on the chart.

♦ It plummeted in the last few sessions, and forced the 10-day SMA to close on the dot of the 40-day SMA at
1,334 yesterday. The FBM KLCI ended the day at 1,308.23.

♦ Given the negative signals in other indicators, we are of the view that the 10-day SMA will cut below the 40-
day SMA again to trigger a “dead cross”, a medium-term bearish sign on the chart today.

♦ We even expect the index to fall below the 1,300 psychological level today to confirm a technical correction
phase on the 13-mth uptrend on the FBM KLCI soon.

Please read important disclosures at the end of this report.

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Chart 2: FBM KLCI Weekly - Fibonacci Retrcement (FR)

A normal retracement will see the FBM KLCI revisiting the 1,154 – 1,229 region soon

♦ Given the expectation that the FBM KLCI will fall into a correction phase, we plotted Chart 2 above with the
Fibonacci Retracement (FR) analysis.

♦ As the index has fallen to below the 10-week SMA of 1,328, it has triggered a fresh “sell” call for a retracement
on the successful upswing from the low of 836.51 to a high of 1,349.92.

♦ This retracement, if it proceeds, will initially lead the index towards the 23.6%FR level at 1,229.

♦ If the index fails to stabilise and relaunch a technical rebound near 23.6%FR level, it will head towards the
38.2%FR level near 1,154 on follow-through selling momentum.

♦ Should it continue its retracement to the 50%FR level at 1,093, it will threaten the long-term outlook for the FBM
KLCI. A retracement of more than 50%FR will swing the index into a long-term bearish zone.

♦ Under normal circumstances, a retracement of between 23.6%FR and 38.2%FR levels will be considered a
healthy market condition.

♦ In this case, even if the index retraces to 1,154 support region (38.2%FR), the overall uptrend will remain
healthy.

Conclusion

♦ The FBM KLCI has fallen below both the 10-day and 40-day SMAs, and it is about to breach below the
psychological level of 1,300 soon, to confirm a technical correction phase for the 13-mth old uptrend.

♦ We are of the view that the 10-day SMA will cut below the 40-day SMA today at 1,334 to trigger the most-feared
medium-term bearish sign on the chart.

♦ Hence, leading a major retracement on the FBM KLCI, possibly towards the next psychological level of 1,200 and
a lower support of 1,160, near the 23.6%FR – 38.2%FR target range from 1,154 – 1,229 in the next one-to-three
months period.

♦ As a result, we expect investors to cut market exposure pending an imminent correction phase ahead.

♦ Moreover, given the poor trading sentiment locally and abroad due to global markets jitters, plus the pathetic
low-volume trading activities of late, the beginning of the summer months ahead where fund managers often opt
to take long holidays and the run-up to the Jun – Jul 2010 FIFA World Cup finals in South Africa, chances are very
high that investors will continue to “sell in May, go away” from now onwards until late Jul at the earliest,
before investors will likely retake fresh investment position again, in our view.

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 20 May 2010

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
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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.

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actions of third parties in this respect.

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