When the stock entered a bear run, even the heavy weighted blue chips counters can not avoid the downtrend. For example, Public Bank, one of the most reputable counter in Bursa Malaysia, was affected by the downtrend.
The share price Public Bank has falled RM 4.85 or 67.8% from its highest of RM 12.00 to RM 7.15. Although share holders had received a RM0.55 dividend (before tax) and some bonus shares, it barely covers the lost in term of share price. Since Public Bank is usually the leader when the stock market recovers, investors should consider it as part of their portfolio.
With the share price of Public Bank getting lower, it has definitely attracted many investors. However, based on the rule of "Buying only on the uptrend", it is usually high risk to catch stocks trading at new low. Therefore, we shall analyze Public Bank's fundamental as well as technical aspect before deciding a proper trading strategy.
(Chart 1): Daily Chart of Public Bank as at 13/03/2009: Closing price RM 7.15
As indicated by A, price of Public Bank formed a short term uptrend, price rose from RM 7.87 to RM 9.25, up RM 1.40 or 18.8%. As shown on the chart above, the 14, 21, 31 EMA also served as the uptrend dynamic support. As indicated by B, price of Public Bank started falling after its ex-dividend and share dividend, brealomg below the 14, 21, 31 EMA. Therefore, it forms a downtrend with the 14, 21, 31 EMA becoming its dynamic resistance.
Currently, price of Public Bank is testing its RM7.00 psychological support level. If the price should break below RM 7.00 level, it would be another new low, this shows that the selling force is still greater than the buying interest. In other words, as long as the price is still trading below the falling dynamic resistance, the downtrend is likely to continue.
(Chart 2): Weeky chart of Public Bank.
As shown on Chart 2, price of Public Bank broke below the 14, 21, 31 Weely EMA on 20th of June, 2008, entered its downtrend. Despite a few attempts to break the downtrend, price of Public Bank remained resisted by the falling 14, 21, 31 weekly EMA which serves as the dynamic resistance. Theoretically, whenever stock price started to retreat after being resisted by the dynamic resistance or downtrend line, share-holders will be losing money, and therefore, they would unconsciously have a stronger memory as the resistance level, and this has indirectly increased the selling pressure at the resistance level.
Fundamental of Public Bank:
Major Share Holders:
1 EMPLOYEES PROVIDENT FUND BOARD 284,904,906 shares (8.50%)
2 SEKURITI PEJAL SB 201,394,686 shares (6.01%)
3 KEPUNYAAN CHINTAMANI SB 84,482,031 shares (2.52%)
4 CONSOLIDATED TEH HOLDINGS SB 79,479,687 shares (2.37%)
5 SELECTED SEC SB 76,116,562 shares (2.27% )
Latest Financial Results as at 31/12/2008:
| P.E. Ratio | 10.26 times | Dividend Yield (%) | 7.33% |
| Dividend (Sen) | Dividend Yield (%) | Net Profit Ratio | |
| 2008 | 55 | 6.29% | 24.5% |
| 2007 | 80 | 6.82% | 22.22% |
| 2006 | 60 | 7.79% | 22.89% |
| 2005 | 55 | 8.66% | 24.50% |
| 2004 | 90 | 12.68% | 25.11% |
(Table 1):
Based on the major share holders list, the majority share holders are mainly Tan Sri Teh and the EPF. Table 1 shows that the dividend yield for the the past 5 years has an average of 8.4%, which means that Public Bank is considered a high dividend yield stock, this is usually a favorite of long-term investors or high-yield stocks investors. In addition, its Net Profit Ratio is also consistently high, suggesting its business is stable and consistently profitable.
If the stock price of Public Bank should continue to fall, its Dividend yield would be higher, which would make it even more attractive. But still, despite its higher yield, the major market sentiment is still weak, coupled with the financial sector is highly sensitive at this particular moment, it is still very risk if investors should buy Public Bank now and go against the trend.
With no signs of any reversal patterns, the best strategy for Public Bank is still wait and see, but investors should be looking at the price closely to see if it forms any of the following reversal patterns.
Chart 3a: Higher Low
Stock price rebound at a level higher than the most recent low, breaking above the downtrend line with volume significantly increasing.
Chart 3b: Double Bottom
Stock price rebounded at the same level as the most recent low and then breaking above the downtrend line with significant increased of volume.
Chart 3c: Rounding Bottom
When stock price stopped declining as started to move sideways, investors slowly regain their confident as the share price started rising gradually. Generally, the formation of Rounding bottom takes longer and price usually breaks above the downtrend line before an obvious rally. Best confirmation of the rounding bottom would be a significant increased of volume during its rally.
The above 3 patterns are the classic reversal patterns, and if the price of Public Bank should form any of the reversal patterns together with the market recovery, chances for investor to catch the right trend is significantly higher.
Currently, price of Public Bank is falling drastically, it has its biggest fall of two weeks in history. Nevertheless, price of Public Bank formed a Harami Cross last Friday, which is a signal suggesting a possible short term rebound. Therefore, short term or aggressive investors might be taking chances to catch a possible rebound.
In conclusion:Public Bank is a fundamental strong counter, suitable for long-term, conservative, high-yield, or bottom-fishing type of investors. Despite the price is getting lower, it is not the best timing yet, and the best strategy for investors is still to wait and see, until a formation of a reversal pattern.
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