We expect the FBMKLCI to trade in a range-bound mode in the near-term between 1,765 and 1,825 (representing 6% to 3% discounts to the consensus FBMKLCI target of 1,880). Meanwhile, remaining corporate earnings results to be announced in the final week of November are generally expected to meet with expectations. Although the US market was bullish last week and Moody upgraded its Malaysia's outlook, the local market remained uninspired last week. This is because the continued lack of meaningful fresh catalysts and uninspiring earnings results released so far have generally kept investors at bay. All our three portfolios underperformed the key index for the second consecutive weeks as small caps continued to be hit by profit-taking activities. Nevertheless, these portfolios still outperformed the benchmark index by 1,169-2,156bps since introduction.

Expecting range-bound trading mode. This week, corporations will be rushing to release their respective quarterly results as this is the last week for the 3QCY13 reporting season. Key index-link companies’ results to watch out for include AXIATA, TM, SIME, PPB, FELDA, HLBANK, and RHB and we generally do not expect any major surprises. Moving forward, we expect the market to trade in a range-bound mode from 1,765 to 1,825 (at 6% to 3% discounts to the consensus FBMKLCI target of 1,880) if there are no major earnings revisions to the index-link counters. Technically speaking, the FBMKLCI is expected to be well supported at 1,770-1,780 with 1,800-1,810 acting as the major resistance levels. Meanwhile, key economic data to monitor this week include: (i) US November’s consumer confidence index (on 26th of Nov.) and initial jobless claim in the week ended 23 Nov. (on 27th of Nov.), where the market’s expectations are at 72.1 and 330k, respectively; and (ii) Germany’s October’s retail sales (on 27th of Nov.) and November unemployment rate (on 28th of Nov.), where consensus is expecting the number to come in at 0.4% and 6.9%, respectively.

Record high in Wall Street last week but….. The Dow Jones Industrials Index closed above 16,000 for the first time last Thursday after economic data pointed to a slowly improving labor market amidst subdued inflation. Although investors remain unsure about the timing of the Federal Reserve’s scaling back its stimulus program, the current trading sentiment is set to be sustained should no stronger evidence of U.S. economic growth emerges in the near-term which may lead the central bank to review its massive bond-buying program. Despite the latest Federal Reserve’s meeting minutes hinting of a taper in the next few months, economists generally believe that the earliest the Fed could begin reducing its USD85b monthly bond purchases would be March 2014, according to the recent Reuters poll.

….failed to cheer the local market. Meanwhile, the local market experienced a mini rollercoaster ride last week where the FBMKLCI soared by as much as +21.1 pts to an intra-day high of 1,813.51 last Tuesday before profit-taking activities kicked-in and settled the index at 1,807.16. The rally was mainly led by the renewed buying interest in the plantation counters as a result of the more positive CPO prices' outlook in 2014. Nevertheless, the persistent foreign selling coupled with the somewhat uninspiring corporate earnings release saw the FBMKLCI failing to sustain its momentums in the latter part of last week, albeit Moody’s raising its Malaysia’s outlook to positive. At the close, the FBMKLCI merely inched up marginally by +0.26% (or 4.65 points) to settle at 1,789.87, led mainly by IOI (where its share price advanced by +2.2%), MISC (+5.8%), and TNB (+1.5%). Corporate earnings-wise, 75 (or 57%) of our 131 core coverage companies had released their respective 3QCY13 result as of last Friday, of which 19% (or 14 companies) outperformed our expectations while 21% came in below.

Our portfolio underperformed WoW, again. All our three portfolios posted a second consecutive week of losses last week in contrast to the fairly flat overall market performance, no thanks to the profit taking activities in some of our small caps, i.e. Fibon (-2.5% WoW), CENSOF (-5.7%) and REDTONE-WA (-2.3%). The GROWTH Portfolio was the key loser in which the fund value retreated 2.3% WoW to end at YTD total return of 31.0% against the barometer index’s YTD total return of 9.4%. The THEMATIC and DIVIDEND YIELD portfolios, meanwhile, contracted by 0.9% and 0.4%, respectively but still outpaced the market and had gained 21.1% and 21.6% on a YTD basis.

Source: Kenanga