KENANGA (KNNK:KL) sees opportunity to pick up consumer stocks in 3Q

KENANGA (KNNK:KL) sees opportunity to pick up consumer stocks in 3Q

KENANGA (KNNK:KL) sees opportunity to pick up consumer stocks in 3Q

Kenanga research said the forecast weakness in retailers’ performance in 3Q due to an absence of festivities is an opportunity to position for a better 4Q and beyond.

“Retailers usually fare the worst in 3Q19 due to the absence of festivities that typically spur consumer spending.

“We believe that investors could use this opportunity to buy into 3Q weakness while expecting better growth in 4Q19 from year-end and Christmas festive season sales, as well as Visit Malaysia 2020,” said Kenanga.

Kenanga maintained its neutral rating on the consumer sector on the expectation that consumer sentiment will remain resilient due to Bank Negara’s overnight policy rate cut and sticky demand for consumer staples.

This is despite a step back for discretionary spending due to the weaker ringgit.

The research house also noted that the excise sugar tax should not be overly detrimental to demand due to the low quantum of price increase on the affected products.

Moving into 2020, the research house said the government’s allocation of RM1bil through the Tourism Infrastructure Fund for Visit Malaysia 2020 could be utilised by retailers to build around their existing infrastructure to cater for tourism activities and increase footfall into their stores/malls.

Meanwhile, government measures to lessen the financial burden of the B40 group such as the BSH, minimum wages and targeted fuel subsidies are expected to continue supporting consumer spending on basic necessity items.

For its top pick in 3Q, Kenanga has an outperform call on MyNews with a target price of RM1.55 due to new store openings and the introduction of ready-to-eat food and the new Maru Cafe offerings.

In the F&B space, Kenanga highlighted Power Root with an outperform call and target price of RM1.75 for its anticipated strong growth numbers.

Overall, the bias in prices is: Upwards.

The projected upper bound is: 0.61.

The projected lower bound is: 0.54.

The projected closing price is: 0.58.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 3 white candles and 3 black candles. During the past 50 bars, there have been 18 white candles and 14 black candles for a net of 4 white candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 11.1111. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 18 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 56.11. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 41 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 13. This is not a topping or bottoming area. The last signal was a sell 3 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 3 period(s) ago.

Rex Takasugi – TD Profile

KENANGA INVEST closed up 0.005 at 0.575. Volume was 80% below average (consolidating) and Bollinger Bands were 76% narrower than normal.

Open High Low Close Volume___
0.570 0.575 0.570 0.575 19,600

Technical Outlook
Short Term: Oversold
Intermediate Term: Bullish
Long Term: Bearish

Moving Averages: 10-period     50-period     200-period
Close: 0.57 0.57 0.60
Volatility: 12 39 32
Volume: 53,460 107,918 128,080

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

KENANGA INVEST is currently 4.5% below its 200-period moving average and is in an upward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of KNNK.KL at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on KNNK.KL and have had this outlook for the last 4 periods.

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