The local market drifted in a consolidation mode within a tight five points range for the whole of last week. Not helping was the earnings reporting season which churned out more disappointing results towards the end of the week and hence keeping players at bay. Although foreign fund flow was relatively neutral for the past two weeks, this development did not help to recharge the tepid market sentiment. At the end of last Friday, the FBMKLCI ended 4.92pts or 0.27% WoW higher, bringing YTD total returns to 0.38%. Two of our portfolios, namely THEMATIC and GROWTH Portfolios are still ahead of the benchmark index by 3-193 bps while the DIVIDEND YIELD still lagged behind. We saw some profit taking activities on small caps REDTONE-WA and FIBON but heavyweight DIGI continued its uptrend following the lacklustre prospects of rival, AXIATA. This week, we expect the market to continue trading sideways despite the fact that key index closed above the 1,833-mark, with the next resistant at 1,850. However, the directional bias is expected to gravitate downwards due to the string of disappointing results from the recently concluded reporting season which could lead to a downgrade in the key index target and/or market valuations.

Still in consolidation mode. Given the lack of catalyst coupled with corporate earnings downgrade from the just concluded reporting season last week, the local market is expected to continue its consolidation phase. Not helping is the upcoming FOMC meeting this 20th which would likely keep market participants in a “wait-and-see” mode. For this week, we expect the local market to trade sideways despite the FBMKLCI closing above the 1,833-mark last Friday, with the next resistant level at 1,850. Nonetheless, the downward biased trend is likely to remain in the near-term, given the generally disappointing earnings season last week which could lead to index target downgrade and/or market corrections.

Market traded in a tight range. As expected, the 30-stock index traded within a tight range of five index points last week. Market sentiment was capped by the generally disappointing earnings reporting season which prompted investors to lock in profits in some blue-chip stocks. At last Friday’s closing bell, the FBMKLCI settled at 1,835.66 which was 4.92pts or 0.27% WoW higher. Key movers last week were CIMB (+1.27%), TM (+2.71%) and SIME (+0.99%). Over to the US market, the indexes there closed mixed with the S&P500 reaching new high while the Dow Jones endured seesaw sessions on mixed signal from the economic front.

DIVIDEND YIELD Portfolio is the weekly top performer, with weekly return of 0.75% mainly fuelled by the two telco stocks namely DIGI (+6.19% WoW in fund value) and TM (+2.78%). The THEMATIC Portfolio (+0.29%) also outperformed the barometer index (+0.27%) with GROWTH Portfolio (-1.18%) being the sole underperformer as losses in REDTONE-WA (-3.57% in fund value) and FIBON (-1.85%) tilted the balanced portfolio into losses WoW. YTD, the weekly winner DIVIDEND YIELD Portfolio came in last as the weakest performer with a negative YTD total of 0.11%, no thanks to accumulated losses in FIBON. THEMATIC is the top performer with YTD total return of 2.31% compared to FBMKLCI’s 0.38 and GROWTH Portfolio’s 0.41%.

Small cap stocks faced profit taking activities. Investors continued to switch into DIGI (+0.78%) after its rival AXIATA (unchanged) reported a disappointing set of results and guided a lacklustre outlook. TM also benefited from investor switching from AXIATA. On the other hand, after a decent run in the previous week, our invested small caps namely REDTONE-WA (-3.37%) and FIBON (-1.96%) faced some profit taking activities. However, we remain optimistic on these investments which promises good investment returns on the back of excellent prospects.

Source: Kenanga