The local market managed to rebound to above the 1,800-psychological support level last week despite the jittery mood last Monday. Nevertheless, we believe investors should focus on domestic news-flows driven stocks and consistent performers under the prevailing market volatility. At the same time, investor should also pay close attention to the current earnings' reporting season where most companies will release full-year CY14 results. Our Dividend Yield portfolio was the only outperformer last week while the remaining two portfolios underperformed the FBMKLCI by 3-95bps WoW. Following the strong rebound the prior week, we believe the FBMKLCI may continue to extend its gains towards the 1,821 level before taking a breather.

Focus on domestic news-flows driven stocks and consistent performers. Moving forward, while we believe that the volatility will likely continue, at least in the short term, investors should go back to the basics and focus on domestic news-flows and development driven blue-chip counters, such as TENAGA, SKPETRO and RHBCAP. Meanwhile, for conservative investors, defensive stocks or consistent performer stocks (such as NESTLE; AMWAY; and TSH Resources) may proved ideal core holdings. Having said that, we believe a good mix of big and small caps could also provide moderate returns under the current scenario. Meanwhile, investors should also focus on the current reporting season where companies will release their respective 4QCY13 earnings report cards over the next three weeks. Key results to watch for this week include Maxis (where its result will be released on Tuesday) and MISC (Thursday). Timing wise, while we believe the ideal ‘Buy On Weakness’ level is below 1,770 (or 6% discount to our FY14 index target of 1,890), we do not discount that the market could continue extending its gains further towards 1,821 judging from the healthy rebound on last week. The immediate overhead resistance is at 1,821 while the key support levels are at 1,800 followed by the 1,778 level next.

A roller coaster week. The global as well as the local market experienced one of the highest volatile trading weeks last week amid signs of slowing growth in China and as the Argentinean government’s decision to allow the peso to devalue triggered a rout in emerging-market currencies. Meanwhile, the stimulus cut imposed by U.S. Federal Reserve to reduce its monthly bond purchases by another USD10b to USD65b coupled with manufacturing gauge retreating more than estimated raised concern over the strength of growth in the world’s largest economy. This negative news dented the global as well as the local market in the early part of last week which managed to rebound towards the week-end after U.S. jobless claims fell for the first time in three weeks and hopeful signs that the upcoming U.S. payroll report could put some global growth concerns to rest. At the end of the Friday trading section, the FBMKLCI closed the week up by +0.25% WoW to 1,804.03 while Dow Jones index climbed by 0.61% WoW to 15794.08.

Dividend Yield portfolio – the only outperformer last week. Given the sizeable mid-small caps exposure in our model portfolios, performances of these funds were more volatile during this uncertain phase. Dividend Yield Portfolio was the only outperformer last week, gained +0.7% WoW while Thematic and Growth portfolios recorded +0.22% WoW and -1.2% WoW, respectively, as opposed to +0.25% WoW gain in the FBMKLCI. On a YTD total return basis, Dividend Yield portfolio continued to outperform and recorded -0.43% (vs. -1.43% in the FBMKLCI), followed by Thematic (-2.13%) and Growth (-2.35%) portfolios.

Adding Digi into the portfolios. Over the week, added 3k Digi shares each into our Thematic and Dividend Yield portfolio at RM4.85 per share. The group reported its 4Q13 result last Thursday where its full-year net profit soared 42% YoY to RM1.7b as a result of stronger uptake of mobile internet services, better-than-expected cost efficiencies and lower depreciation charges. It also declared a fourth interim NDPS of 7.0 sen which is scheduled to go ex 19 Feb. Moving forward, we believe the stock’s key re-rating catalyst is the unveiling of its business trust structure, albeit no timeframe guidance was provided by the management at this juncture. Meanwhile, we also understand that DIGI may consider outsourcing its backoffice services, following its parent company Telenor’s footstep, to further enhance its operational efficiency. Should this materialize, we believe it could continue to attract market eyeballs.

Source: Kenanga