Overall, global indices saw an improvement in sentiment in April as Japan’s stimulus move sparked a big sentiment shift and the better-than-expected US corporate earnings kept the markets upbeat. Notably, the Nikkei 225 surged 11.8% in April to a five-year high while the Dow Jones Industrial Average notched yet another all-time high earlier in the month before settling off-best at 14,839.80, still up by 261 points (+1.79%) for the month. Similarly, the European Stoxx 50 index (+4.50%) was quick to regain its footing after renewed concerns in Cyprus caused a brief sell-down in commodities and precious metals towards the mid-month. Closer to home, the Asian MSCI Asia Ex Japan ended the month (+1.60%) higher.

FBM KLCI’s April Performance. On the local front, continued foreign buying interest in Malaysian blue chips sent the FBM KLCI to another record high this month. The 30-stock index added +46.02 points or +2.75% this month and this came in stark contrast to the broader (and more reflective of the local investment sentiment) FBM Small Cap index, which saw profit-taking intensified over the same time period (-64.9 points or -0.54%). During the month, the FBM KLCI managed a breakout above the 1,700 psychological barrier as well as the December’s high of 1,699. However, there was a lack of follow-through buying beyond the 1,700-point mark and the FBM KLCI now appears to be stuck within a 1,700-1,720 congestion zone.

Technical Watch Monthly Review. We have remained very selective in our technical recommendations since the inception of our new technical tracker in January, and the April month was not an exception. Of the 30 technical stock highlighted by us in the month, just two of them were outright BUY recommendations (KSL & BRIGHT) while the remaining 28 stocks were NOT RATED even though technically, these stocks stood a decent chance to move higher. Our cautious approach has boded well for us this month, and even though neither of the recommendations in KSL nor BRIGHT were profitable, we were able to avoid deeper losses amid the heightened occurrences of false breakout signals and elevated volatility leading up to the 13th General Election.

Tracker Performance Review… Following stellar gains a month earlier, the April performance of our realised tracker gave us fewer reasons to shout about. Our realised tracker registered a marginal gain of +0.54%, which underperformed the benchmark FBM KLCI by 1.5 percentage points for the month. Gains on the tracker were recorded by MISC (+25.6%) and MBSB (+5.8%), which fortunately enough were more than sufficient to offset the collective losses on BRIGHT (-10.9%), KSL (-7.9%), KSENG (-7.6%) and CCM (-1.7%).

May Technical Strategy. Since our last Monthly Technical Review, the parliament has been dissolved and the long-awaited General Election date has been announced. With the polling date just days away, we anticipate an increase in volatility in the days leading up to the election. Nevertheless, the past few months have shown us that investors were willing to jump in on major dips, and barring any unforeseen circumstances, we expect any declines to be very temporary at best. As such, our technical strategy post-election will likely be less risk averse than the prior months, and we will be on a close look-out for definitive bullish reversal patterns once the market shows some clarity and stability.

Source: Kenanga