The last few days, I was tracking the share price of Litrak very closely, with a view for calling a trading BUY on the stock. On closer study & much reflection, I became somewhat concerned. I began to compare the long-term chart of Litrak with PLUS (see Chart 2 & 3 below) as well as comparing these two stocks with the movement of our interest rate (see Chart 1 below). From these studies, we can make the following observations:
1) From April 2007 to August 2008, the rate of 10-year Government Bond increased from 3% to 5% (see the gray line on the top chart of Chart 1). At the same time, the price of Litrak & PLUS peaked & dropped (see the middle & bottom charts on Chart 1).
2) From September 2008 to December 2008, the rate of 10-year Government Bond dropped from 5% to 3%. This coincided with a strong recovery in the price of Litrak & PLUS which persisted until today.

Since the indications are interest rate is expected to normalize (read: move higher) in 2010, there is a good chance that Litrak & PLUS may decline in the months ahead (see BNM Governor, Zeti's comment here). With this insight and guided by the charts, I think this is a good time to take profit on Litrak & PLUS.


Chart 1: Malaysian interest rates & monthly charts of PLUS & Litrak from 2007 to Feb 2010 (Source: The Edge)


Chart 2: PLUS's monthly chart as at Feb 24, 2010 (Source: Tradesignum)


Chart 3: Litrak's monthly chart as at Feb 24, 2010 (Source: Tradesignum)