Falling Ringgit, Rising Crude

Deutsche Bank Research has downgraded low-cost carrier AirAsia Bhd to “sell” from “hold” in view of higher jet fuel prices, weaker ringgit and impact on passenger yields due to capacity growth from competitors. DB Research has a target price of RM1.75 for AirAsia Berhad. In view of falling ringgit and rising crude, what is the forecast statistical indicative price range for AirAsia?

Technical Perspective

AA_TA.jpeg

The trend for this Company does not appear too “optimistic” as both 20D MA and 50D MA are both sloping down as well as the 20D MA is closing below the 200D MA. In fact, the share price of AirAsia has fallen below the 200D MA. Based on the Fibonacci projection, we may possibly expect some support points at RM2.04, RM1.74 and RM1.32.

Statistical Perspective

If we look at the inter-relationships between the share price of AirAsia / USDMYR exchange rate / Brent (USD), the relationship is rather mixed. When the crude fell by end 2014, the share price of AirAsia did not go up but fell (which may be possibly due to a  prevailing rumor read more).

AA_TimeSeries.png

As expected (consistent with  mixed relationships), the predictive power r of the multiple regression (shown below) is only 0.286.

AA_results.png

Nevertheless, the current price of RM2.20 is fairly close to the predicted share price of RM2.34 with a 95%-confidence interval of RM1.27 and RM3.41.

AA_Forecast.png

In a nutshell, at current brent / exchange rates, there could be potential trading opportunity if AirAsia’s share price hovers around RM1.27 – RM1.32. 

THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES

Author: Ken Utau

Markets Observer + Food Lover

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