Fallen Blue Chips

The following graph shows the relative YTD performance for both FBMKLCI and FBM70 . We continue to see a performance divergence whereby the mid-cap stocks continue to outperform the larger cap stocks. One possible reason for such divergence could be possibly attributable to the recent intensification in the foreign funds outflow. These foreign funds have significant positions in larger cap stocks. As such, could there be value emerging in larger cap stocks? What is the possible first step in finding the ‘fallen blue chips’?

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So, who are the ‘fallen blue chip stocks’ of FBMKLCI?

Using historical prices:

  1. Benchmark its last done price (as of 30 Nov 2017) against 26W / 52W / 3Year High & Low of the security (in percentage form)
  2. A security may be considered as ‘fallen blue chip’ if its computed ratio is lower than the FBMKLCI median high / low ratio for the 3 time periods

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Which KLCI stocks could potentially be considered as ‘fallen blue chips’?

PetGas, RHB Bank, MISC, AmBank and Westports – these securities have achieved lower ratio than the median in all time periods

Which KLCI stocks could potentially appear on the higher side of valuation?

Tenaga, PetDagang, PChem and Hap Seng – these securities have achieved higher ratio than the median in all time periods

The above desktop analysis has been limited to analysis of historical prices of the securities without reference to any fundamental factor. Detailed fundamental analysis shall be required to ascertain whether a security is overvalued or undervalued. There are numerous  reasons as to why a stock price has fallen significantly. Kindly note that the above table has not factored the recent KLCI index adjustment of which Nestle / Press Metal will replace BAT / IJM as well as the de-merger of Sime Darby.

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