The local market was mixed last week as the market sentiment was affected by the lacklustre regional performance and some profit taking activities ahead of last Saturday’s nomination day for GE13 candidates. Nonetheless, some buying continued to be seen in election plays. Although only the THEMATIC portfolio beat the FBMKLCI on a WoW comparison, our three portfolios still beat the benchmark index by 298-820bps on a YTD basis. The THEMATIC portfolio continued to be the star performer thanks largely to the election stocks in play such as TENAGA and PUNCAK. This week, we continue to recommend investors to adopt a “Buy on Weakness” strategy below our buy-on-weakness zone of below 1645 points with the preference on higher beta stocks to capitalise on any rebounds/rallies post-GE. Opportunities are also seen in the sectors as well as big cap laggards that had underperformed the FBMKLCI.
A choppy week. The weak market sentiment across the region affected the performance of the local market last week, which experienced a see-saw trading pattern. Renewal concerns on the GE13 results also added volatility to the market. For the week under review, the FBMKLCI advanced 7.75pts or +0.45% to close at 1,706.28 last Friday. TENAGA (+2.9%) was the top market mover last week as investors picked up the election play before its 2Q13 earnings release, which beat expectations. Market participants also chased after the laggards such as IOICORP (+2.7%) and SIME (+1.6%) with the KLPLN Index having underperformed the benchmark index by 309bps YTD. On the international front, equity markets in the US and Europe faced pressure on the disappointing China GDP numbers while corporate earnings in the US were also somewhat disappointing. Besides, commodities prices such as gold and oil prices also plummeted last week.
THEMATIC portfolio remains as the top gainer. On a WoW comparison, our portfolios had a mixed performance last week as only the THEMATIC portfolio beat the FBMKLCI (by 24bps) while the other two model portfolios underperformed the benchmark index. The continued buying interest in election plays helped to add RM575 or a 0.69% WoW gain to the THEMATIC portfolio NAV, bringing it YTD total unrealised profit to RM8,066 or 9.68%. Although the DIVIDEND YIELD (-0.22% or -RM120) and GROWTH (-0.29% or –RM195) portfolios underperformed the FBMKLCI index (+0.45%) last week on a WoW basis, their YTD total unrealised profits of +5.49% (or RM2,789) and +4.46% (or RM2,969) were still far more superior to that of the +1.48% YTD total return in the benchmark index.
Election plays still in focus. While some of our invested stocks faced profit-taking activities, election plays such as TENAGA and PUNCAK (+2.3%) were the top gainers. Some profit-taking activities took place in TENAGA in the early part of the week after the stock hit a new high since Dec-07 on its rerating story the week before. Upgrades in its target price from foreign brokers like Nomura and UBS in the mid-week further sent the stock to close with gains for a seven straight week. Last week, TENAGA contributed RM440 in unrealised profit each to the THEMATIC and GROWTH portfolios, bringing its YTD total unrealised profit to RM1,980. The YTD unrealised profit for our 8,000 PUNCAK units in THEMATIC portfolio meanwhile increased to RM4,880 or 51.26% last Friday after gaining RM320 over the week. The Alpha stock – REDTONE-LA was the main loser as it reduced the fund value of the THEMATIC portfolio by RM285 or -2.94% WoW and RM200 or -2.86% each for both the GROWTH and DIVIDEND YIELD portfolios as its price declined 2.9% over the week.
All eyes on the election campaign. The market is likely to consolidate this week with election plays to continue being in the limelight. Meanwhile, as we are approaching the 1QCY13 earnings reporting season, some focus will also be on the companies that are releasing their results this week, which will also give some earnings indications for the respective sectors. Top of the list will be PBBANK and DIGI, where we are expecting their results to be within the street estimates. Strategy-wise, we continue to recommend investors to adopt a “Buy on Weakness” strategy if the index dips to our current buy-on-weakness zone (below 1645 points) with preference towards the higher beta stocks to capitalise on any rebounds/rallies post-GE such as in the sectors of: 1) banking, 2) non-bank financials, 3) construction & property and 4) oil & gas. Should the index prove to be resilience, investors can also target laggards that have underperformed the FBMKLCI such as YTL, DIGI, KLK, TM and YTLPOWR.
Source: Kenanga