Despite investors locking in their profits after a fresh record closing high in the early part of the week, the bullishness of the overall market remains intact. We have also witnessed rallies in small cap and penny stocks. The performance of our three model portfolios was fairly good and they outperformed the FBMKLCI (-0.18%) by 214-331bps WoW. This has widened our portfolio gains against the benchmark index by 862-1,032bps for the YTD. Technically, the FBMKLCI chart appears well supported at the 1,743 level and we expect it to go through a consolidation phase before testing the 1,790/1,800 level. As such, any retreats in the near future should be viewed as buying opportunities.

The market was still bullish last week. The buying in the local market remained strong in the early part of last week with the FBMKLCI hitting an all-time closing high of 1,788.43 on Tuesday before profit-taking activities kicked in after BNM reported a disappointing set of 1Q13 GDP at 4.1%. On the other hand, buying interests were seen in small caps and penny stocks. At last Friday’s closing bell, the key index shed 3.22pts or 0.18% WoW to settle at 1,769.16. The key movers were IOICORP (-5.9%), GENTING (-1.6%) and YTL (-2.8%). IOICORP led the market down after it announced the re-listing of its property unit, which eceived lukewarm response from the market. On the  flipside, PETGAS gained 8.0% last week after the utility company confirmed the start  of the Melaka RGT by the end of this month. On the US front, the Wall Street continued its upward trend with the Dow and S&P 500 Index hitting fresh record highs due to continued good overall market sentiment, which had started since Nov-12, thanks largely to the better economic data and earnings numbers, which kept the sentiment rolling up.

Our portfolios continue to beat the market. Despite the market being in a consolidation phase last week, all our three model portfolios continued to beat the benchmark index by 214-331bps. This was largely due to our Alpha stock - REDTONE-LA, MPHB, PUNCAK, HOVID and UOADEV. The GROWTH portfolio was last week’s top gainer as the fund value gained 3.13% or RM2,295 as compared to the FBMKLCI, which  dipped 0.18% over the week, followed by THEMATIC portfolio (+2.57% or RM2,400)  and DIVIDEND YIELD portfolio (+1.96% or RM1,050). YTD, the GROWTH portfolio is now the top gainer with its portfolio value rising 17.26% (or RM12,669 in total return) vs. the 6.94% total return that of the benchmark index. The performance for THEMATIC portfolio remained convincing with its total fund value growing by 16.57% YTD (or RM15,477 in total return) while the fund value of DIVIDEND YIELD expanded by 15.56% for the YTD (or RM8,355 in total return).

The Alpha stock played a bigger role. Expectations of record high earnings (which is due to be released next month) and its well-received team-up with TM in wholesale Ethernet help to put up the share price of REDTONE higher. The price value for REDTONE-LA gained 8.6% in tandem over the week. This Alpha stock contributed a 8.57% WoW hike in value for each of the three portfolios where we have 40,000 units in the GROWTH portfolio, 57,000 units in THEMATIC and 28,000 units in DIVIDEND YIELD. The GE play, PUNCAK gained on the renewal of its water assets disposal story and re-rating play, MPHB gained substantially after it rolled out the timeline for the listing of MPHBC. These two stocks contributed the major gain for the THEMATIC portfolio, where they made up 10.08% and 8.57% of the WoW change in the portfolio value. Meanwhile, we sold the rights of HOVID-WA last Friday just before the cessation of the trading of the rights, which helped us to book in a realised gain of RM1,800 for the GROWTH portfolio. The trading of rights also helped to push up the stock price of the underlying share – HOVID, which contributed a 8.16% increase in the fund value of the GROWTH portfolio. 

Near term consolidation expected.  With the new cabinet line-up announced last week after the just concluded GE13, this should help to  boost investors’ confidence in the ETP project as it remains the PM’s top priority to transform the country’s economy. This will definitely benefit the ETP-related stocks. We are now entering the second last week of the busy reporting season. Key results to watch this week are the key index stocks like AXIATA, YTLPOWR and KLK. We do not expect any major downside earnings surprises this quarter as we had trimmed our forecasts on them the last quarter. On the other hand, technically, the index appears well supported at the 1,743 level and we expect it to go through a consolidation phase before testing the 1,790 level. As such, any retreats in the near future should be viewed as buying opportunities.

Source: Kenanga