The local market endured another lacklustre week on lack of fresh catalyst while to the just-concluded earnings results season was generally uninspiring. The persistence selling of foreign investors, albeit tapering, in the past 20 trading days had capped the FBMKLCI from reaching higher levels. Two of our portfolios reversed their two-week of poor showing to outperform the key index last week while all the three portfolios are still ahead of the benchmark index by 1,164-2,224 bsp on a YTD basis. This week, the barometer index is set to repeat past weeks’ trading pattern which is to trade in a range bound band of 1,765-1,826 which is at 3%-6% discount to the consensus’ FBMKLCI target of 1,880. Technically, the key index is expected to be well supported at 1,770-1,780 with 1,822-1,826 acting as the major resistance levels.

Still in a range-bound mode. After the just-concluded busiest result season last week, the strategy notes from various research houses are expected to be released in the coming weeks which should give a better feel on the market direction over the next 12 months. With the key index-linked companies mainly reporting results which matched market consensus and coupled with the year-end festive season, the overall market is likely to remain lacklustre. The only spark of excitement if any is the possibility of year-end window dressing activities. Overall, more disappointing set of results were released toward the end of last week, mainly from mid to small cap stocks while results from the thirty composite stocks were generally within expectations. We still expect the market to trade in a range bound mode of between 1,765 and 1,826, which is at 3%-6% discounts to the consensus’ FBMKLCI target of 1,880. Technically speaking, the key index is expected to be well supported at 1,770-1,780 with 1,822-1,826 as the major resistance levels.

Another lacklustre week. Last week, the barometer index started the week with small gains on a more positive sentiment from the US market but persistent selling by foreign funds poured cold water on the market. Last Thursday witnessed the 20th consecutive day of net selling by foreign funds but net outflow narrowed to RM34m from RM109m seen at the beginning of the week. Not helping was the S&P’s downgrade on the local financial institutions, namely CIMB, AmBank, RHB Bank and RHB Investment Bank during mid-week, lowering their outlook from stable to negative which further dampened market sentiment. At last Friday’s closing bell, the FBMKLCI advanced 18.80pts or 1.01% WoW to settle at 1,812.72. TENAGA (+3.03% WoW) led the gainers’ list, after the government mentioned that the long awaited tariff hike which will not be more than 20% will be effective in January, followed by MAYBANK (+1.98%) and CIMB (+1.88%). On Wall Street, the Dow and S&P 500 continued to make fresh highs cheered on by encouraging economic data and strong earnings reported by Hewlett Packard.

Our portfolios improved after two-week of weak showing. Thanks largely to the recovery of small caps like FIBON (+2.56%) and CENSOF (+0.87%) and the strong rally of heavyweight TENAGA, all our three portfolios posted WoW gain last week. In fact, two of the portfolios, namely GROWTH and THEMATIC Portfolios reported 1.60% and 1.21% WoW gain respectively which beat the FBMKLCI’s gain of 1.01% while the DIVIDEND YIELD Portfolio only registered 0.43% gain over the week. The GROWTH Portfolio remained as the top performer with YTD total return of 32.86% as opposed to the YTD total return of 10.62% for the benchmark index, while DIVIDEND YIELD Portfolio remained as number two with 22.34% YTD total return as compared to 22.29% YTD total return recorded by the THEMATIC Portfolio.

Big caps may take centre stage in year-end rally. While we have a sizeable exposure to small caps like FIBON and CENSOF, the potential year-end rally may benefit our portfolios as we also have big caps like TENAGA, MAYBANK and TELEKOM (-0.19%) in our portfolios. As such, any window dressing activities are likely to push these stocks higher. In fact, we have made 42.84% gains on TENAGA alone in our GROWTH and THEMATIC Portfolios since the inception of these portfolios on 4th Jan this year. Going forward, a well balance stock selection between big and small caps in our portfolios should be able to help us weather volatile market conditions to maximise return.

Source: Kenanga