Buying interest in the local market is re-emerging after two weeks of consolidations, which pushed the FBMKLCI higher slightly by 0.36% WoW while the regional bourses were generally in the red last week, especially the Nikkei 225, which lost 18% in two weeks. For the first time in  four weeks, all our three portfolios underperformed the benchmark index by 29-79bps WoW, attributable to the decline in the price of REDTONE-LA. Nonetheless, on a YTD basis, all our three portfolios continued to beat the key index by 339-1223bps. The THEMATIC portfolio remained the top performer with the fund value gaining 18.95% YTD. Technically, the downside risk of the FBMKLCI is limited, which should be capped at 1,763. As such, it is time to “buy on weakness” in line with our investment strategy released last week which called for a “Sell Leaders and Buy Laggards” tactical plan.

The consolidation phase should have ended.  The FBMKLCI index edged up slightly by 6.37pts or +0.36% WoW to close at 1,775.59 last Friday. This is despite the regional markets being spooked by the economy uncertainty in Japan, which sent the Nikkei 225 to lose 18% over the past two weeks. We suspect the consolidation phase of the local market should have ended if not at the tail-end as buying interest have re-emerged in blue chips while investors have also continued to pick up oil & gas related stocks. Last week’s market movers were MAYBANK (share price +2.6%), IOICORP (+4.1%) and GENTING (+3.2%). On the USA front, investors took profits in the early part of week, with the DOW having seen a strong run since December last year. Even then, Wall Street rebounded in the second half of week, which showed that investors’ optimism on the US economy remained high. 

All portfolios underperformed the market.  After four straight weeks of commendable performance post GE13, all our three model portfolios underperformed the benchmark index,  dragged down by the Alpha stock REDTONE-LA as the loan stock price dipped 2 sen or 7.1% WoW. While the FBMKLCI index inched up by 0.36%, the GROWTH portfolio posted the biggest lost in value WoW with a drop of 1.15%, followed by the DIVIDEND YIELD (-0.82%) but THEMATIC portfolios inched up slightly by 0.07% WoW. This was driven by the decline in the invested fund value in REDTONE-LA by 11.43% for all the three portfolios. Nonetheless, all our three portfolios still beat the benchmark by 339-1223bps on a YTD basis. The THEMATIC portfolio remained as the top performer with a YTD total gain of 18.95% compared to that of the FBMKLCI of 6.72%. The GROWTH portfolio came in  second with a YTD total return of 16.78% while the DIVIDEND YIELD portfolio total fund value grew by 10.11% for the YTD.

The Alpha stock is the culprit. Contrary to the previous week where REDTONE-LA was the driving performer, the Alpha stock was the main dampener last week as the loan stock price lost 7.1% WoW. This was due to profit-taking activities after the loan stock had a strong rally of 39.0% WoW in the previous week, buoyed by the news of the Royal family of Johor taking a stake in its subsidiary, Redtone Network Sdn Bhd. On the flipside, PUNCAK continued to rise higher by 5.6% WoW, benefiting from the ongoing water assets restructuring in the Selangor state. This has increased our invested fund value in PUNCAK by 7.21% WoW. On the other hand, the trading of MPHB-OS ended last Thursday and we are now officially subscribed to the 2,000 shares of MPHB Capital at RM1.00 a share. The new shares will be listed on 26 Jun. 

Time to buy on weakness. With the consolidation phase of the local market likely to have concluded if not at its tail-end phase already, the downside risk is now hence limited. The technical charts are show that the key index has a strong support at 1,763. As such, it is time to “Buy on Weakness” in line with our investment strategy released last week, which called for a “Sell Leaders and Buy Laggards” tactical plan. Meanwhile, our Top 5 big cap leaders with only MARKET PERFORM or UNDERPERFORM calls are UOADEV (MP; TP: RM2.60), AEONCR (MP: TP: RM15.90), CARLSBG (UP; TP: RM15.53), BURSA (MP; TP: RM7.20) and MEDIA (MP; TP: RM2.72) while DIGI (OP; TP: RM5.60), TM (OP; TP: RM6.48), MAXIS (OP; TP: RM7.17), IJMP (OP; TP: RM3.38) and PCHEM (OP; TP: RM6.97) are the Top 5 laggards with OUTPERFORM calls. 

Source: Kenanga