The local market continued its progress in the early part of the week before mild profit-taking activities kicked in at the end of the last trading day due to worries over the future of US monetary stimulus policy as well as the poor Chinese economic data. The performance of our three model portfolios, however, continued to beat the FBMKLCI by 17-408 bps on a WoW basis. On a YTD basis, our portfolios continued to beat the benchmark index by 295-948 bps. In view of the increasing market volatility ahead, we have started to trim our portfolios’ holdings and lock in some of our earlier gains. Meanwhile, we have added 15k YEE LEE’s shares into our GROWTH portfolio. Technically speaking, the FBMKLCI has started to show some weakness. Should the 1765 immediate support be taken out, the index could potentially extend its losses towards 1750 next.  

Profit taking kicks in at the end of the week.  The strong buying interest in the local market continued to cheer investors in the early part of the week before profit taking activities kicked in on Thursday, no thanks to the worries over the future of US monetary stimulus policy as well as the weak China’s PMI data, which dented the global sentiment. Nevertheless, the benchmark index still managed to  climb 3.9pts or +0.22% to settle at 1,773.06. The key index leading movers were CIMB (+2.2%), PBK (+1.1%) and IOICORP (+2.1%). Out of the 127 companies under our stock universe, 69 companies have released their respective 1QCY13 report cards thus far. Within that, 68% or 47 of the companies’ 1QCY13 results came in within our expectations while 25% or 17 companies recorded lower than expected earnings.  

Our portfolios continue to beat the market. Despite the market closing relatively flat last week, all our three model portfolios continued to beat the benchmark index by 17-408bps. This was largely driven by the prior week’s underperformer – Hovid while our Alpha stock – REDTONE-LA continued to rise. On a YTD basis, the THEMATIC portfolio recorded the strongest return of +15.6% (based on the total allocated RM100k) followed by the GROWTH (+14.6%) and DIVIDEND (+9.1%) portfolios. As compared to the benchmark FBMKLCI, all our three model portfolios outperformed by 295-948  bps on a YTD basis. Note that for simplicity, we have changed all our three model portfolios total return calculation to base them on the total allocated amount, where we initially allocated RM100k capital in each portfolio, instead of the prior calculation that was based on the invested amount.

The Alpha stock continues to perform. Expectation of record high earnings (which is due to be released in July) continued to drive REDTONE’s share price higher. The market price of REDTONE-LA gained 8% over the week. Meanwhile, HOVID’s share price has started to play a catch-up post the cessation of its Rights trading, climbing 14% WoW.  Trimming our portfolios to lock in profits. In view of the hefty double-digit return YTD, we have decided to trim our portfolios to lock in some profits. For the THEMATIC portfolio, we have disposed 8k Faber shares at RM1.59 as well as 2k Gamuda shares at RM4.89, which translated into profits of RM1,280 (+11% gain) and  RM2,300 (+31% gain) respectively. Similarly, we have also locked in our RM2,300 gains in Gamuda under the GROWTH portfolio, where we have 2k shares in the company. We have also realised our profit in UOA Development shares at RM2.64 and recorded a total profit of RM3,640 or +53% gain under our DIVIDEND YIELD portfolio. 

Adding YEE LEE into our portfolio. We have added 15k YEE LEE shares into our GROWTH portfolio at RM1.11 last Thursday. YEE LEE, a local edible oil repacker, is deeply undervalued in our view (please refer to our On Our Radar report today for further details). 

Market is likely to take a pause. With the benchmark index experiencing a strong rally post the GE (+78.3 points or 4.6% within three weeks), there is a likelihood that the market may take a breather before trending higher. Meanwhile, the key earnings report cards to watch in the last reporting week are Genting, TM, SIME and MMC, where we do not expect any major negative surprises from these companies.  Technically speaking, the FBMKLCI immediate support level at 1,765 was briefly tested (when the index slipped by 18 points during the day) last Thursday although it managed to regain some losing grounds at the closing bell. This suggests that investors’ sentiments have become jittery and there are now tentative signs of a potential deeper pullback. 

Source: Kenanga