This week, the key market direction will hinge heavily on the outcome of the U.S. FOMC meeting. Although we and the consensus do not expect the Fed to scale back its stimulus programme by this month, any timeline variance will have an adverse impact to the global financial market. Technically speaking, the FBMKLCI’s positive technical picture still appears intact; any near-term downside will be very much temporary should the Fed maintain its easy-money policy. A strong support could emerge at the 1,826 level followed by the 1,800 psychological level next. The performances of our three portfolios were mixed as the rebounds in our small caps were partially offset by losses in some big caps. Nonetheless, YTD, our portfolios are still ahead of the FBMKLCI index by 986-2,155bps.

Window dressing activities are expected to continue this week but with thinner volume. Although the FBMKLCI trading momentum remains positive; the key market direction will be very much dependent on the outcome of the U.S. FOMC meeting where it's scheduled to conclude on December 18. While a number of Federal Reserve bank presidents have suggested in their recent speeches that the central bank may start paring back its easy-money policy as early as this month following a series of better-than-expected economic data released, many market participants are still expecting the Fed to only start tapering in March next year. As a result, any timeline variance will have an adverse impact to the global financial market, in our view.

Cheered by window dressing activities. The local benchmark index closed at an all-time high at 1,843.85 on last Tuesday, in tandem with global equity markets, underpinned by the betterthan-expected economic data from U.S. and continued window dressing activities. Meanwhile, the sustained surge in TENAGA’s share price (as a result of the recent tariff hike announcement) as well as renewed buying-interest on plantation counters (that was mainly led by improved CPO price's outlook) also helped to support the market last week. The FBMKLCI, somehow lost some grounds in the latter part of last week, dampened by profit-taking activities and renewed concerns that the U.S. Fed could begin scaling back its stimulus programme by this month. Meanwhile, the persistence selling by foreign funds also led the Ringgit to continue to weaken against the US Dollar to USD3.236 from USD3.208 as recorded last Monday. At the close, the FBMKLCI went up by 13.40 points or 0.73% WoW to 1,840.35.

Wall Street slide as investors locked in gains. On the external front, U.S. stocks started to show some weakness in the latter part of last week, following a record-high closing in the major indices, as investors looked to cash in on some of the year’s strong gains and weighed the potential impact of reduced Federal Reserve stimulus. Meanwhile, the U.S. House of Representatives also approved a two-year federal budget bill last week, further avoiding the spectre of another government shutdown. The deal, reached on last Tuesday and aiming to reduce the federal deficit by up to USD23b, was met with overwhelming cross-party approval in the Republican-led House despite initial attacks from conservative activists.

Mixed performances for the model portfolios. The rebound of our small caps like FIBON (where share price has advanced by +3.5% WoW); REDTONE-WA (+3.5% WoW) and CENSOF (+1.8% WoW) had helped to push the GROWTH portfolio higher by +2.1% WoW, outpacing the key index which rose 0.73% over same the period. Nevertheless, the weakening of MAGNUM’s share price (-5.8% WoW), which we believe, to a certain extend, was led by fund reshuffling, caused the other two portfolios to underperform the benchmark index. The THEMATIC portfolio fund value was merely up by 0.5% WoW while the DIVIDEND YIELD portfolio closed flat WoW. On a YTD basis, all our three model portfolios continued to perform well with the GROWTH portfolio maintaining a leading position and recorded a total return of +33.9%, followed by THEMATIC (+24.7%) and DIVIDEND YIELD (+22.2%), outpacing the FBMKLCI that rose +12.3% during the period.

Source: Kenanga