The FBMKLCI hit another fresh record high last week following the end of the political uncertainty after the 13th General Election results were announced. All our model portfolios outperformed the key index by 230-340bps on a WoW basis given the positive trading momentum last week. On a YTD basis, the three portfolios recorded double-digit growth in their returns for the first time, and outperformed the benchmark index by 629-790bps. Moving forward, we continue to recommend investors to adopt an aggressive approach with the key focus being on high beta stocks or sectors. Technically speaking, the benchmark index is due for a short-term correction following the stronger-than-expected rallied last week. Nevertheless, in view of the strong liquidity in the market, the index should be well supported above the immediate support area of 1745/20 level. As such, any retreats in the near term should be viewed as buying opportunities.

Political uncertainty removed. The end of the political uncertainty post the 13th General Election sent the FBMKLCI surging by as much as 131 points to 1,826.22, the intra-day high level on last Monday’s trading session. However, the benchmark index later pared some of its earlier week gains and ended the week at 1772.38, rising 4.6% over the week. The rally was mainly led by a strong Ringgit (against the dollar) and foreign buying interest, which recorded more than a RM3.1b net inflow over the week (vs. RM2.1b a week ago) according to Bursa’s daily trade statistics. CIMB (+8.9%), GENTING (+9.5%) and AXIATA (+5.0%) were the key index movers last week.

All the model portfolios recorded double-digit growth for the YTD. All our model portfolios outperformed the market by 230-340 bps last week with THEMATIC portfolio gaining the most at +8.0% WoW followed by the 6.9% WoW gain each in both the GROWTH and DIVIDEND YIELD portfolios. On a YTD basis, all our portfolios for the first time recorded double-digit growth simultaneously. The THEMATIC and DIVIDEND YIELD portfolios recorded YTD gains of 13.8% and 13.6% respectively, where the former’s total unrealised profit stood at RM12.9k and the latter at RM7.3k. Meanwhile, the GROWTH portfolio recorded a YTD gain of 12.2% or a total unrealised gain of RM9.0k. Note that we had only invested 93.4%, 73.4% and 53.7% of the total allocated amount of RM100k each to date in the THEMATIC, GROWTH and DIVIDEND YIELD portfolios respectively.

Most of our stocks recorded at least a mid-single digit week-on-week growth except for TM and Hovid. TM closed flat WoW at RM5.51 (after the final dividend of 12.2 sen went ex on 8 May) while Hovid was mainly dragged down by its proposed warrant rights issue that went ex-entitlement last week. Hovid’s share price contracted 6.5% over the week, no thanks to the group’s 1-for-2 proposed rights issue of warrants (issue price: RM0.02/warrant) that went ex-entitlement on 8 May. Our GROWTH portfolio had 60k Hovid shares as of last Friday. The portfolio is entitled to have 30k Hovid warrant rights that will commence trading from 13 May until 17 May 2013. Should an investor decide to go through the exercise, he will need to need to fork out RM0.02/share to subscribe for one warrant, which will expire in five years’ time with an exercise price of RM0.18 per ordinary share. We have no intention to subscribe for the warrants and will sell our warrant rights next week.

Strong liquidity-driven rally may continue. With the incumbent BN continuing to be the ruling party albeit the cabinet has yet to be formed at this juncture, the on-going ETP program is likely to remain relatively unchanged. We understand that some institutional investors are still under-invested and together with a strong liquidity in the market, there is a likelihood that the current bullish momentum may continue to persist. As such, we continue to recommend investors to adopt an aggressive approach with the key focus being on high beta stocks or sectors i.e. gaming, property, construction, oil & gas, etc. as well as on laggards stocks given the likelihood of a potential continuously liquidity-driven rally. Meanwhile, investors also need to pay attention to those companies that are scheduled to release their respective 1QCY13 results this month. Technically speaking, the benchmark index is due for a short-term correction following the stronger-than-expected rally last week. Ideally, we are hoping to see the correction reach the 1,700 level. However, in view of the underlying strong liquidity condition, we believe the index could probably be well supported above the immediate support area of the 1745/20 level. That said, any retreats in the near term should be viewed as buying opportunities.

Source: Kenanga