Dear all

This week, Sinopec (00386.HK) caught my attention with its 33% fall since 21 May 2018. With its sharp fall, it has become extremely oversold with RSI at 15.1.

Given the basis below, my personal view is that Sinopec may be presenting a favourable risk reward setup for a long trade. Do take a look at the basis and more importantly, the risks inherent in such trades.

 

My personal basis

a) Attractive valuations

At HKD5.63, Sinopec is trading at approximately 10.3x current PE and 0.8x P/BV. These valuations are attractive as compared to its 10-year average PE and P/BV 11.2x and 1.1x respectively.

b) Extremely oversold RSI

Sinopec has fallen 33% from an intraday high of HKD8.35 on 21 May 2018 to close HKD5.63 on 14 May 2019. RSI closed at an oversold level 15.1. At 15.1, there is only one occasion since late 2000 where RSI is