The market continued to cheer last week and the benchmark index recorded a +0.55% WoW gain on sustained positive market sentiment. Despite the modest increase in FBMKLCI, our model portfolios saw mixed performances last week due to some mild profit-taking activities. Nevertheless, on YTD basis, all our model portfolios continued to outperform the FBMKLCI, by  264-2186 bps. Notably, the THEMATIC portfolio, which hit another milestone last week by recording a total return of 30.7%, thanks to the continued re-rating play in REDTONE Berhad. In the global economic scene, investors should pay close attention to several crucial US and China economic data scheduled to be released this week that may cause heightened market volatility. We expect the local market to experience some consolidation this week before trending higher. There is no change in our investment strategy where we continue to recommend investors to adopt “Buy On Weakness” when the index is below 1,720 and “Sell On Strength” when the index trades above the 1,810 level.

Bullish sentiment sustained.  The local market continued its uptrend last week, which was generally in line with regional markets, mainly fuelled by improved market sentiment. The FBMKLCI advanced by 9.87pts or 0.55% WoW to end at another new weekly closing high of 1,807.61 last Friday. Key index leaders last week were PBBANK (OP, TP: RM18.20) (where share price improved by +1.4% WoW); GENM (+3.6%) and PTG (+2.5%). We believed the better share price performance in PBBANK last week was triggered by its 1H13 result that came in within ours as well as the street estimates. Meanwhile, the 1st higher interim single-tier dividend of 22 sen (vs. 20 sen in 1H12) also provided another solid reason for investors to accumulate. On the US front, the DJIA and S&P 500 indices also continued to hit fresh highs as investors continue to remain optimistic on the market outlook coupled with better corporate earnings. Thus far, 50% of the S&P 500 companies have reported their earnings, of which 69% (vs. the historical average 63%) have topped market forecasts. 

Coming key economic data/corporate events include; (i) US July’s consumer confidence index (on 30 th of July) and 2Q GDP YoY growth (on 31 of July), where the market’s expectations are at 81.0 and 1.0% respectively, (ii) US FOMC rate decision (on 1st of Aug.) to maintain at 0.25%, and July’s unemployment rate (on 2nd of Aug.) to come in at 7.5% (vs 7.6% in June); and (iii) China’s July PMI (on 1st of August). Consensus is expecting the country’s manufacturing number to weaken to 49.8 from 50.1 a month ago. On the corporate front, key event to watch for is MAS announcing its 2QFY13 result on Friday, and consensus as well as ours is expecting MAS to narrow its losses.

Mixed performance last week.  The THEMATIC portfolio posted another 1.6% WoW (or RM1,365) gain last week mainly fuelled by the continued re-rating in REDTONE Bhd, which share price has improved by another 4.4% WoW following the news of Berjaya’s Vincent Tan raising his stake in the company, thus leading its warrant price to close at RM0.58 (+4.5%WoW). We understand that the group is set to announce a record 4QFY13 result this week. Our DIVIDEND YIELD slightly underperformed the benchmark index last week and recorded +0.52% gain vs. +0.55% in the overall market. The GROWTH portfolio, however, recorded a negative return of 0.44%, no thanks to the poor share prices' performance in both YEE LEE (-3.6% to RM1.36) and HOVID (-0.4% to RM0.24).   

Double-digit return on YTD basis. All our portfolios continued to outperform the market by 264-2186bps on YTD basis. THEMATIC portfolio remained our top performer and recorded +30.7% total returns YTD, followed by the GROWTH (+27.9%) and DIVIDEND YIELD (+11.5%) portfolios in contrast to the FBMKLCI’s increase of +8.9% during the same period. 

Expecting the market to consolidate before moving higher.  With the FBMKLCI experiencing a one-month upward trend since 21st of June, we believe the benchmark index is likely to take a breather this week before marching upwards to the 1,826 key resistance level. Initial support, meanwhile, is likely to emerge at  the 1,800 psychological level, and strong buying interest could appear at the 1,770 level.  Moving on to the earnings reporting season, we believe the market volatility is likely to be increase given that most of the companies, which financial year-end is December, are due to release  their respective 2QCY13 report cards in August. 

Source: Kenanga