The local market ended flat last week, mirroring the regional markets, as the US “government shutdown” issue weighed heavily on market sentiment. Investors were reluctant to take position, which resulted in the FBMKLCI basically unchanged over the week, up by 0.02%. All our three portfolios underperformed the market mildly on a WoW basis, but continued to outpace on a YTD basis by 757-1290bps. This week, we still expect the market to trade sideway but with correction risk due to the overhanging US government shutdown and debt issue. Technically, the FBMKLCI would find a strong support at the 1,750-1,760 level, its channel support level with resistance between 1,800 and 1,826.

A flat week. Last week, the local bourse open shop with losses, mirroring the regional mood ahead of the shutdown of the US government, before stabilising towards the end with the week on expectations that the shutdown would be short-lived. At the closing bell last Friday, the barometer closed flattish with a meagre 0.40 pts or 0.02% gain WoW to end at 1,776.56. Market movers were PBBANK (+0.67%), SKPETRO (+2.15%) and GENM (+1.64%) which were clawed by losses at CIMB (-4.6%), UMW (-3.33%) and AMBANK (-1.23%). IOICORP (+0.37%) advanced slightly after it launched a RM1b buyout of 39.55% stake in UNICO (-2.50%) during mid-week. Foreign fund flow was mixed at last week with most of the trading days recorded net inflow with an exception of Thursday, which saw foreigners took some money off the table and recorded a mild net outflow of RM65.2m. Over in Wall Street, the Dow and S&P 500 trading sessions were choppy due to the government “shutdown” issue.

Underperformed the market. All our three portfolios had a poor showing last week, underperformed the benchmark index, as the previous week’s top gainer, FIBON (share price -4.65% WoW) reversing its gains. Taking out this stock’s gyrations, the portfolios would have a better showing as our invested funds for this stock declined 7.69% in both the GROWTH and DIVIDEND YIELD portfolios. In all, GROWTH Portfolio is the biggest loser with fund value dipping 1.50% WoW, against the FBMKLCI’s 0.02% gain, followed by DIVIDEND YIELD portfolio (-1.15%) and THEMATIC portfolio (-0.13%). However, on a YTD basis, all our three portfolios continued to outperform the benchmark index by 757-1290bps. GROWTH Portfolio remains as the top performer with total return of 20.88%, followed by THEMATIC (+19.38%) and DIVIDEND YIELD (+15.55%). For the same period, the FBMKLCI posted a total return of 7.98%.

Still in line with market. Basically, besides FIBON, other invested stocks closed the week fairly flattish in line with the overall market. The other previous week’s winner MAGNUM (share price -1.53%) also faced profit-taking selling, with the fund values dipping 1.51% in THEMATIC portfolio and 1.40% in DIVIDEND YIELD portfolio. On the other hand, MPHBCAP (+7.53%) is the sole winner. The fund value of 2,000 shares of MPHBCAP in THEMATIC Portfolio gained 11.00% over the week. Going forward, our fund performance is expected to be volatile given that some of our stock selections have a slightly higher beta than the market. However, this should be mitigated by other index-link stocks.

To trade side way this week. Check out our 4Q13 Strategy which will be released today. As 4Q is traditionally a good quarter with decent upside, partly due to potential year-end window dressing activities, we believe some of the underperforming FBMKLCI component stocks (such as TM, YTLCORP, SIME and etc) are poised to play catch-up. We are also selective in small-&-mid-cap stocks with sound fundamentals and values, as these stocks are likely to attract retailer’s participation when the market finds its footing.

For this week, the market is expected to trade sideway with upward bias while risk of correction is there owing to external uncertainties, i.e. the US government shutdown and debt ceiling problem. Technically speaking, strong support is seen at 1,750-1,760 at the channel support level with resistance at 1,800-1,826. 

Source: Kenanga