The local equity market was trapped in a range-bound mode last week bucking the weaker trend in key regional markets reeling from poorer sentiment emanating from Wall Street. Although the local benchmark index managed to climb marginally by +0.5% WoW, our model portfolios turned in mixed performances due to some mild profit-taking activities. Nevertheless, on YTD basis, all our model portfolios’ total return continued to outperform the FBMKLCI by 408-1944 bps. Moving forward, we expect the market to experience a consolidation mode this week with some downwards bias. Technically speaking, the benchmark index appears to be losing momentum after failing to cross  over the 1,800 psychological level. Meanwhile, the technical indicators also continued to show mixed signals suggesting that investors are still cautious while awaiting for the next catalysts to emerge. Mild bargain hunting activities may emerge when the benchmark index fell to 1,766 while the key support is expected at 1,740. We reiterated our “Buy On Weakness” investment strategy when the index is below 1,720 and “Sell On Strength” when the index trades above the 1,810 level.

 

Trapped in the range-bounce mode. The local equity market was trapped in a range-bound mode last week bucking the weaker trend in key regional markets reeling from poorer sentiment emanating from Wall Street. We believe the relatively stable local market last week (as compared to the falling regional key markets) was supported by credit rating agency Moody maintaining its Malaysia’s sovereign rating at  A3 with stable outlook, despite raising its concerns over the growing budget deficit. At the closing bell last Friday, the FBMKLCI advanced by 8.92 pts or 0.50% WoW to close at 1779.32. Key index leaders last week includes CIMB (+2.3% WoW), IHH (+3.8%) and MAYBANK (+0.8%). On the US front, Wall-Street has a biggest one-day percentage drop since late June last Thursday following poor results and outlook from Wal-Mart, which market generally views as the economic bellwether and news on job cuts from Cisco. 

 

Coming key economic data/corporate events  include; (i) US initial jobless claim in the week ended 17-August (on 22nd of Aug.), where the market expects 330k claims, (ii) US July’s  FOMC meeting minutes (on 22nd of Aug.), (iii) China’s July FDI (on 16-20th of Aug.), where the market an improvement by 14.0% YoY; and (iv) Malaysia’s 2Q GDP, where we expect the growth  to  come  in  at  4.7%  YoY  vs.  4.8%  per  consensus.  On  the  corporate  front,  more heavyweights are going to release their respective 2QCY13 results this week such as AFFIN, MAYBANK, IOI, AIRASIA, and NESTLE. Thus far, 21% (or 26) companies under our coverage had released their report cards, out of which 19% came in above forecasts while 69% were within expectations. As compared to the consensus, 15% exceeded while 58% came in within the street estimates. 

 

Mixed performance last week.  The GROWTH portfolio posted another 2.1% WoW (or RM1,770) gain last week mainly fuelled by the strong performance in HOVID, which share price has improved by 8.3% WoW. Our THEMATIC portfolio performance, meanwhile, grew by 0.5% WoW, in-line with the overall  broad market performance. The DIVIDEND YIELD portfolio, however, recorded a nearly flat performance as a result of the lower share price performance in TM (-0.6% to RM5.27) but partially offset by better performance in MAYBANK (+0.1% to RM10.48). Despite a mix performance last week, all our portfolios’ total return still outperformed the FBMKLCI on YTD basis. The THEMATIC portfolio continues to lead the gain with 27.3% (vs. 7.9% YTD  in the FBMKLCI) followed by the GROWTH (+25.5%) and DIVIDEND YIELD (+12.0%).  

 

Market volatility is expected to rise this week  while we are entering into the last two weeks of the peak reporting season. The market outlook and sentiment could be negatively impacted should the heavyweights results disappoint. Hence, we expect the market to consolidate this week with some downwards bias.   

 

Source: Kenanga