TTNTK raised an interesting question between 1512hrs and 1525hrs yesterday.

Let me address them now. I’m sure all of you recall the curious event that took place on Monday morning (1/6/2015) the sell volume registered under 7.5 sen per share was fast depleting indicating demand was surging. Instead of appreciating to 8 sen per share which would ordinarily be the case in a normal rally, a group of sellers decided to make an about turn when market was clearly headed north and settle for a lower price of 7 sen per share while transactions for 7.5 sen per share was nearing the finish line.

It was a split second move as if the market decided to deliberately slow down all at once. The lower price queue volume commenced after a large block of transactions were executed within a fraction of second – the volumes were broken up into chains of varying lengths (perhaps the operators wanted to disguise the fact they’re acting in concert to manipulate the price). To key all transaction within a fraction of second is humanly impossible unless they had the aid of a fancy algorithm to run an automated trade.

I have noticed this price backpedalling patterns emerge in other counters too. Not just Xinghe. But this kind of price manipulation only works when operators have the upperhand against retail investors who are less informed or have yet to fully digest the facts reported.

The aim is to accumulate shares on the cheap. When the price doesn’t go any lower they will keep replenishing initially so as to get others to sell too.

When the market has stopped selling low, it’ll be easier for the remaining stockholders including those who have engineered a price pullback since Monday to push for a rally.

But for a rally to climb higher and sustain, existing investors must either remain invested or demand a better price reflecting current PE level.

The Chinese fear factor is overblown. None of the Chinese companies listed on klse were delisted. The only thing that came closest to spooking the market is CSL. That’s because they did not fully insure the plant. It’s poor risk management.

That’s one thing investors should be asking at AGM at Xinghe – in fact for all companies listed on klse – are the key business assets fully insured?

But otherwise, we should stick with known and published facts. Xinghe was covered by MIDF report and its proposed joint venture with Asfar and their being the 6th biggest edible oil manufacturer were reported in The Star and The Sun publications. 

For the benefit of those not acquainted with what took place in early 2014, Key West shareholders voted to pass the reverse takeover of the company by Testa Holdings Ltd, China which saw the latter injecting its edible oil business into the listed concern i.e. Henan XingHe Oil and Fat Co. Ltd that according to The Star ranks among the top six edible oils companies in China. The said RTO would allow Key West to assume all 91.15% stake held in Henan Xinghe through a HK subsidiary. The remaining 8.85% stake in Henan XingHe is owned by the Chinese Government-linked Henan Finance Bureau through its unit, Henan Agric Synthesis Exploitation Co. Following the RTO exercise, Key West is currently known as Xinghe. You may read on the rest of the report dated 26 March 2014 here http://www.thestar.com.my/Business/Business-News/2014/03/26/China-Testa-to-inject-edible-oil-business-into-Key-West/?style=biz

Unless investors demand and stick to a fair stock price of between 24 sen per share and 95 sen share (which translates into a corresponding price for warrants between 14 sen per warrant and 85 sen per warrant), market operators will continue to bottom fish.

                                                                                                                                                 Ezra, 3 June 2015