E&O, SP Setia Bhd, Sime Darby Bhd and Eco World Development Group Bhd are local property developers who had gambled their fortune on the island nation but are caught in the Brexit conundrum.
From RHB research note, markets are already predicting slower property sales in the UK as local and foreign buyers will take a more cautious stand and delay their property purchases due to the uncertainties. The UK’s property market was already stalling before the Brexit referendum. News reports suggested property prices are already down 3.5% post-Brexit. Oversupply, driven by a surge in interest by foreign investors, had contributed to the stalling of the market.
So I do not think those local property developers who claimed they will not affected negatively is true. Here is a brief analysis through technical analysis on these 4 companies: Eco World, Sime Darby, SP Setia and E&O.
ECO WORLD
This chart is a typical head and shoulder pattern. Once the neckline has been broken, this is a bearish signal. But there is a one thing need to bear in mind is the neckline cannot be break. This mean when price break the neckline (RM1.6 in this chart) and below neckline. This neckline is still valid if price do not rally and stand above the neckline. In other words, price cannot rally and stand above of RM1.6. We assume that this head and shoulder pattern is not breakable, the target price of Eco World is drop to RM0.9. There is nothing 100% in both fundamental analysis and technical analysis but we can our own assessment.
Sime Darby
There is no any pattern for this company yet, but i dont think there is any buy signal too. Instead, I found there are 2 necklines and 1 have broken (the red colour arrow) and price still stand above another one (the blue colour arrow). If price fall below the blue arrow neckline, this is even worse.
SP Setia
There is a neckline (about RM 2.5) and this is crucial. I believe the possibility of share price decline is higher than rally. Hence the pattern is forming now. If the price have fall below RM 2.5, then price will be fall to RM 1.6 eventually.
E&O
This is an interesting chart. I am bearish for E&O in the long term outlook but bullish in the short term. Why is that? Because there is a head and shoulder pattern and the price is seems unlikely stand above the neckline again. If this pattern is valid, the price of E&O will fall to RM 1.00. This is bearish in the long term.
However why I said bullish in the short term is because of there is a smaller bullish signal pattern, we call it W pattern. W pattern which have start forming from July 2015 and the price have break the resistant neckline, this is a bullish signal when price break above the resistant neckline. This W pattern will be invalid if price drop below the resistant neckline. If valid, the target price will be around RM 2.1.
**This blog only serves as reference information and does not constitute a buy or sell call. Make your own assessment before deciding to buy or sell any stock.
