As expected, the local market drifted into a consolidation mode towards the end of last week after a moderate 2.3% rally in the previous two weeks. Despite net outflow of foreign funds, the FBMKLCI managed to inch up 0.62% WoW, which was mostly gained in the beginning of the week. Two of our portfolios, namely THEMATIC and GROWTH Portfolios continued to perform strongly last week, reversing their YTD losses and outpacing the FBMKLCI by 106-275 bps on YTD basis. This is largely thanks to the small cap stocks such as REDTONE-WA and FIBON coupled with gains from heavyweight DIGI. On the other hand, DIVIDEND YIELD Portfolio also returned to the black which is now underperforming the key index by 1 bps only. For this week market outlook, the technical indicators showed that the consolidation mood is expected to continue with the key index trading within a tight band between 1,813 and 1,833.

Still to trade sideways this week. Last week’s consolidation mode is expected to spill over into this week as technical readings indicated that the benchmark index is now stuck within a tight range of 1,813-1,833. The near-term movement of heavyweights would mainly be driven by news flow and earnings announcements, especially this week, which will be the end of the reporting season while small caps and lower liners will likely remain the key trading focus. Key corporate earnings release this week will be IOICORP (Tuesday), CIMB & HLBANK (Tuesday), AASIA (Wednesday), GENTING & TM (Thursday), SIME (Friday) and etc.

As expected, market consolidated last week. The 30-stock index turned sideways towards the end of last week as market sentiment was less bullish after the Fed FOMC Minutes indicated that the stimulus cut would likely continue. The FBMKLCI traded within a 5-index pts range most trading days after starting the week with a 0.44% gain on Monday. Foreign investors turned net seller again last Thursday with net outflow of RM108m as the Wednesday’s net buying, which ended the 28-day period of net selling, was short-lived. Thanks to the Monday’s gain, the barometer index closed the week higher by 11.37pts or 0.62% WoW to settle at 1,830.74. Key index’s movers were IOICORP (+5.56%), GENTING (+1.96%) and PETGAS (+2.17%). On Wall Street, the US market endured choppy sessions in the shortened trading week where the possibility of stimulus cut kept investors at bay mid-week but an encouraging US manufacturing report later sent stock prices higher.

THEMATIC Portfolio remained as the top performer. After a strong rebound in the previous week with 3.16% WoW gain, the THEMATIC Portfolio continued to be the best performer with a higher WoW again of 4.38% last week. Likewise, the other two portfolios also outpaced FBMKLCI’s total weekly gain of 0.96% with GROWTH Portfolio gaining 4.38% while DIVIDEND YIELD Portfolio extending its gain by 1.17%. All these were largely attributable to the strong performance of small caps like REDTONE-WA (+17.10%) and FIBON (+2.00%), and the telcos heavyweight DIGI (+5.36%). On a YTD basis, all our portfolios have returned to the black with THEMATIC Portfolio being the top gainer (+2.87% YTD total return), followed by GROWTH Portfolio (+1.18%) and DIVIDEND YIELD (+1.17%). The YTD total return for the benchmark index also turned to 0.12% from -0.84% in the previous week.

The alpha stock REDTONE-WA took the lead, where its warrant price surged 17.10% over the week as market rumour had it that a prominent personality may emerge to acquire a stake in the company. On the other hand, DIGI rallied as investors switched their funds to this counter after its rival AXIATA (unchanged) reported a disappointing set of FY13 results, which missed consensus forecast by 7%, with challenging earnings prospects. On another stock, despite its share price rising 2.00% over the week, FIBON still registered -5.56% YTD total returns. However, we remain optimistic on this stock, which promises good investment returns on the back of its excellent prospects. Going forward, the well-balanced stock selection between big and small in our portfolios should help us weather the volatile market conditions to maximise returns.

Source: Kenanga