The FMBKLCI along with the global financial markets jumped last week on relief over a U.S. fiscal deal. Nevertheless, the removal of the external uncertainty will leave investors the space to re-focus their attention domestic issue and this week we have the Budget 2014. We expect the market to trade range bound in between 1,775 to 1,820 ahead of the Budget announcement on 25th of October. Although we are expecting few game-changing factors (i.e. GST, subsidy cuts and tightening measures for the property sector) to be tabled in the upcoming budget, we may need to review our 4Q13 strategy should there be any surprises. All our model portfolios outperformed the benchmark index on both WoW and YTD basis.

Zooming in on Budget 2014. After the end of the U.S. political stalemate to raise the debt ceiling last week, investors will refocus the limelight back to the domestic issue – Budget 2014 this week. Apart from the widely expected GST implementation timeframe, a series of subsidy cuts could also be tabled under the upcoming budget given that the Prime Minister has previously mentioned that the core foundation of Budget 2014 will be focused on strengthening the domestic economy and reduce the fiscal deficit. Clear-cut losers would be the consumer (especially high-end retailers), property (but affordable housing players may benefit from the strong demand) and to a certain extent, the sin sector. Power and telco's sectors, on the other hand, may see neutral-to-positive impact from the GST implementation. Meanwhile, the conclusion of UMNO election over the weekend could potentially trigger a cabinet reshuffling in the next few weeks, in our view. All in all, we expect the market to trade within the range of 1,775 to 1,820 this week prior to the Budget announcement on 25th of October. However, the local benchmark indices (for big, mid & small cap stocks) are poised to stage breakouts technically speaking. Immediate strong support zone is seen at 1,750-1,760 while resistance zone is pegged around at 1,800-1,826.

4Q13 strategy may be reviewed post Budget 2014. While we remain our cautiously optimistic on the market underpinned by our seasonal and post-GE performance study, we may review our 4Q13 strategy next week given potential game-changing factors (as highlighted in the above paragraph) may arise from the upcoming Budget 2014. We continue to prefer to adopt a “Buy On Weakness” (B.O.W.) strategy for now, preferably below 1,745.

Market continues to cheers. Global financial markets including Bursa Malaysia cheered following Washington’s last-minute deal to avoid a U.S. default which ended a partial government shutdown last Wednesday. At the closing bell last Friday, the barometer closed +0.78% higher (or 13.84 pts gain) and settled at 1,799.59. Market movers were PBBANK (where share price improved by +1.4% WoW), SAKP (+3.9%) and PETGAS (+2.2%) while the lagging counters were MAYBANK (-0.7%), IHH (-1.4%) and TM (-0.2%). Over in Wall Street, major US stock indexes closed near at a record-high last week as investor confidence grew following the decision to reopen the government through January 15 and raise the debt ceiling until February 7. The political wrangling has led some investors to believe that the U.S. Federal Reserve will have no choice but to leave its fiscal stimulus measures in place for several more months, which could keep stocks rising for the rest of the year.

All our portfolios outperformed last week. GROWTH portfolio continued to be the top performer with total fund value gaining +3.1% WoW, against the FBMKLCI which increased by +0.78%, mainly fuelled by FIBON (fund value: +7.7%) and CENSOF (+3.8%). Meanwhile, the THEMATIC portfolio also gained by +1.4% WoW, driven by CENSOF (+3.8%) and TNB (+1.5%) while DIVIDEND portfolio improved by 0.84% WoW, thanks to the better share price performance in both FIBON (+7.7%) and DIGI (+1.3%). On a YTD basis, all our three portfolios’ total return continued to outperform the benchmark index, with GROWTH taking the lead, advancing by 23.8% followed by THEMATIC (+20.7%) and DIVIDEND YIELD (+16.3%) vs. FBMKLCI’s 9.4%.

Coming key economic data include; (i) September U.S. retail sales ex auto (on 21st of Oct.) and unemployment rate (on 22nd of Oct.), where the market expects numbers to come in at 0.4% MoM and 7.3%, respectively; and (ii) September Malaysia’s CPI, where consensus is expecting 2.3% (vs. 1.9% in August).

Source: Kenanga