PARKSON Observations

At lunch time, Parkson HK closed at HKD50. This is very close to its key support level at HKD 49.45. The stock is currently trading below its 200 day EMA for over 6 weeks now - the longer it trades below this, I believe the harder it will be to recover.

Interestingly, PARKSON KL has broken its key support $5 much earlier. The low for today is $4.24. It appears that Parkson local expects Parkson HK to break its support.

From a Sum of Parts valuation, Parkson HK at HKD50 is worth $5.58. This assumes a NIL value for Parkson Vietnam and NIL value for Parkson Malaysia. At 20% discount, it is worth 80% x 5.58 = $4.46.

I must say I am deeply amazed at how Parkson KL price fell faster and ahead of Parkson HK price. It is as if the traders in KL markets knew what Parkson HK will do next. Of course, this is a small sample, since my observation is based on recent fall, and perhaps it can also be explained by other factors as well.

Parkson HK is now at a critical level. If the support breaks, we could see more falls ahead. On the other hand, if in the less likely event that it recovers, the buy at $4.24 this morning might turn out to be very cheap indeed.

To me, this market is more suited to a trader with a successful sell stop discipline, than an investor, due to the high level of uncertainty surrounding Parkson HK's future prospects over the rest of this year and quite possibly the next year.