HapSeng - "Burst" of the rumours / over speculated

Chart: Hap Seng daily chart (Source: tradeSignum)

Background

Hap Seng Consolidated Berhad is an investment holding company, through its subsidiaries, operates oil palm and cocoa plantations, trade heavy equipment and motor vehicles, fabricates and sells commercial trailers and tankers, provides leasing and money lending, and manufactures agricultural fertilizers, agro-chemicals. building materials, and plantation suppliers.

Recent stock movement and news

The company is financially strong with the business model and business perspective. The stock has been in a super bull run since Oct 2010 began with the price at around RM3.00 and consistently moving up till last week high of RM7.52. The main support of the uptrend was mainly due to the rumours of privatisation news which has succesfully created the excitement within the retailers. However, the company has announced a bonus and rights issue, and private placementof shares on last friday in order to collect about RM1.2bil fund for the business expansion purpose. This subsequently diluted the possibility of the privatisation case, and disappointed the shareholders immediately. It means that the shareholder has to pay extra money to subscribe the right issue in order to benefit from the whole bonus issue exercise, thus some of the shareholders have chosen to sell and take profit before the ex-date of the bonus issue so that they can avoid to pay extra money for the investment.

Comments on Hap Seng Stock Movement

1. The stock super bull uptrend was not really supported by the strong growth of the business revenue and profit generated in the past quarters.
2. The stock has shot up from RM3.00 to RM7.52 which is more than 100% in 3months time, without any major pull back or profit taking activity kicks in. The "Bull" may has exhausted after strong and long run.
3. The stock may trade in over value condition as the growth in stock price has way overrun the business growth.
4. The stock has been trading in the overbought zone in RSI data since Oct 2010 without easing off, a stock is not possible to continue staying in the overbought zone forever, thus, it has been in the very unhealthy condition.
5. The stock is over manipulated as it is not fundamentally sound anymore, it would be healthy to have some short term retreatment.

Conclusion
Hap Seng Bonus issue has way disappointed the investors as the privatisation case might not be happening in the near future anymore. Most investors have made handsome profit in Hap Seng, thus many of them still willing to sell and cut profit at current level, creating more heavy selling activity happening now.

Learning Curve
If a stock behave abnormally and price has changed directly suddenly and retreat more severe compare to normal condition, while majority of other stocks are still holding well or doing good. It shows that the stock is sending the message to the investors that "I AM SICK, PLEASE AWAY FROM ME!". In Hap Seng case, the smarter investors would have cut the profit on 10/1/11 or latest 11/1/11 just before it is too late!