EDUSPEC (0107) Eduspec Holdings Berhad - WHAT THE INVERTED YIELD CURVE MEANS FOR YOUR MONEY AND WHAT STOCK TO LOOK INTO?
Disclaimer: The article here does not not contain recommendation nor cornering the stock. It is just purely author's opinion based on the facts from the announcement and the news. Therefore, the author will not responsible for any your action on the stock.
Please thoroughly and finish read the article to the end, before make a judgement.
The inverted yield curve explained
If you’ve been gleaning financial headlines, you may be asking, what is this “inversion of the yield curve” thing and why is it so scary?
An inverted yield curve marks a point on a chart where short-term investments in U.S. Treasury bonds pay more than long-term ones. When they flip, or invert, it’s widely regarded as a bad sign for the economy.
Getting more interest for a short-term than a long-term investment appears to make zero economic sense.
One reason inversions happen is because investors are selling stocks and shifting their money to bonds. They’ve lost confidence in the economy and believe the meager returns that bonds promise might be better than potential losses they could incur by holding stocks into a recession. So demand for bonds goes up and the yields they pay go down.
First off, it may depend on how long the inversion lasts. A brief inversion could be just an anomaly. In fact, some inversions have not preceded recessions.
The curve may also have inverted because of the Federal Reserve. The market may be saying the Fed has kept the benchmark short-term rate it controls too high and that the central bank should cut rates further because the economy is slowing.
Also, some market observers have said that this time around the yield curve has been distorted by more than USD15 trillion worth of foreign bonds that pay negative interest rates — negative interest rates being another trend that seems to make zero economic sense.
An inverted yield curve, like most other indicators, is not perfect and doesn’t mean a recession is imminent. However, between that and the rising amount of negative-yielding debt in the world, strange things are happening with the bond market these days, and that’s what’s got investors on edge.
What stock to look into?
Either recession or expansion, sector wise for equity market, education, healthcare and utilities have always been the safer bet.
People won't stop taking education, medicine or operation and stop using electricity or water.
My focus here is more on education, which is basically the beneficiary is Eduspec.
It is explained in part 1 here: https://klse.i3investor.com/blogs/fatprofitstock/218378.jsp
Someone also shared and highlighted how good Eduspec is now and the future:
(1) Eduspec - Fastest growth of new online education system in Msia: https://klse.i3investor.com/blogs/share4u2019/218579.jsp
(2) Eduspec, riding the GOOGLE CLOUD WAVE-Specialization Partner Status: https://klse.i3investor.com/blogs/techfullybrewed/218582.jsp
(3) What is GOOGLE CLASSROOM?: https://klse.i3investor.com/blogs/techfullybrewed/219003.jsp
Apart from being in (1) the recession-proof sector, (2) improving financial and (3) its growth story, its proposed free warrants, which recently gotten approval from EGM should be another catalyst for Eduspec.
Eduspec is giving out free money to its shareholders! Eduspec has recently proposed bonus issue of up to 550.9m free warrants in Eduspec on the basis of 1 Warrant B for every 2 shares in Eduspec
The company is giving out free cash that investors need in this current market where you can’t get it elsewhere and in any other stocks right now (besides dividend)!
Eduspec's share price is likely to see the rally to 10sen - the psychological level for free warrants.
The TECHNICAL Target Price of 25sen is based on Fibonacci projection. Not a made up story.
For now, resistance stands at 10sen, followed by 11.5sen and 15sen.
Eduspec’s share price has broken the resistance level of 5sen and 6sen and close at 6.5sen last week. This breakout would see the share price to move higher.
Although the share price has made a correction in the last few days and today to flush out contra players (pulling contra players or traders out from queue sell orders at high price to force selling it at 5.5sen-6sen), the BULLISH signal remains intact as it has maintained above 5sen level.
In fact; the share price is still above (1) ichimoku cloud, (2) 20/50/200-day SMA and (3) RSI indicator has yet reached overbought level.
Also, if the RSI has reached overbought level but at the same time, the share price make another breakout of resistance level of 10sen, the RSI can continue to stay in overbought level for some time and share price will continue move higher!
It is now on the way up towards 10sen. The share price will continue to rally above this level until the ex-date for free warrants.
Remember this! The beginning of a rally is always the hardest part, flushing out contra players and traders, who trade for a half or a 1sen. Momentum will gain traction when these people are out of picture. Look at the recent ones - Focus, KNM etc. Nobody believed it would be traded at the current price 1-2 months ago.