Will We See A Better December?

KUALA LUMPUR (Nov 30): The FBM KLCI fell 2.52 points or 0.1% after a sharp drop in the last few minutes of trade, weighed down by Genting Bhd, Petronas Gas Bhd and Public Bank Bhd share losses. At 5pm, the KLCI closed at 1,717.86 points. Genting declined 13 sen to RM8.80, Petronas Gas dropped 28 sen to RM15.88 while Public Bank fell 36 sen to RM19.90. Public Bank and Petronas Gas were Bursa Malaysia’s fifth and ninth largest decliners respectively. Across Bursa Malaysia, 2.47 billion shares worth RM6.03 billion were traded. Decliners outpaced gainers at 461 to 340 respectively. Yesterday, the bourse registered a volume of 1.96 billion shares valued at RM2.8 billion.

Today, analysts said banking stocks were in the spotlight. “There may be some added concern over the (financial) results of banks,” said Kenny Yee, head of research at Rakuten Trade Sdn Bhd. Yee said this as Malaysia’s corporate financial reporting season for the July-to-September quarter concludes today. Tomorrow (Dec 1), Malaysian markets will be closed for a public holiday in conjunction with Prophet Muhammad’s birthday.

So, will we see a better December?

I have done a quick desktop analysis and make a very wild guess as to the year end number for the FBMKLCI.

My thoughts are as follows (I may be wrong):

  • Historically, >90% of the December months registered a m-o-m positive movement (since 2005)
  • Average m-o-m movement for December is approx. 1.75%, with max of 4.85% and min of negative 3.28%
  • My wild guess: Based on a probability of 90.9% of achieving a positive m-o-m movement (historical average of +1.75%) and probability of 9.1% of negative m-o-m movement (negative 3.28%, being the lowest historical m-o-m movement %), I expect that FBMKLCI to record approx. 1.30% positive m-o-m movement for the month of December. With that, I expect the FBMKLCI to end around 1,740 for 2017. Upper bound: 1,801 and lower bound: 1,661.

Dec 17 - seasonality & analysis.png

Using the Macquarie warrants website, I simulated one of the listed structured call warrant s(underlying FBMKLCI) based on my wild guess, of which the expected warrant price ($0.035) is expected to be relatively higher than the current warrant price ($0.03) (strictly for illustrative purpose only):

Simulated Results.png

The implied volatility used in the simulation is relatively lower than the historical volatility of FBMKLCI.

HVOL_KLCI_30 Nov 2017.png

 

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE STRICTLY 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.