The local market is expected to continue to be trapped in a sideway consolidation mode of between 1,840 and 1,869 this week due to lack of key catalyst. Having said that, our bullish longer-term view remains unchanged as we believe continued foreign fund inflow and ample domestic liquidity would provide sustained support to the market. Last week, all our three model portfolios outperformed the FBMKLCI by 28-190bsp WoW, mainly driven by the better performance of mid-and-small-cap stocks. On YTD basis, THEMATIC (+522bsp) and GROWTH portfolios (+412bsp) outpaced the benchmark index, but DIVIDEND YIELD underperformed the market by 52bsp.

Finding way to break the trap. The FBMKLCI is expected to continue to be trapped in the sideway consolidation mode at between 1,840 to 1,869 level this week, while awaiting for a new catalyst to emerge. A clearer technical picture can only be observed when the barometer index break out from either side of the range. Having said that, our long-term fundamental view on the FBMKLCI remains unchanged as we believe the underlying liquidity position should remain supportive for the local market. As we are approaching the 1QCY14 corporate earnings result season, analysts will start to roll over their valuation base years to 2015, which could provide more capital upside from here. However, we do not rule out a possible scenario of quieter months in June and July as a result of the fasting month and FIFA World Cup.

A flattish week as expected. The local market experienced another flattish trade last week as the broader market continued to favour rotational plays on the small-cap and penny stocks rather than the big-cap counters. At last Friday closing bell, FBMKLCI finished relatively flat at 1,852.69 points (+0.03% WoW). The top three index leaders include PUBLIC BANK (+1.7% WoW); MAYBANK (+0.7% WoW); and PCHEM (+1.2% WoW) while the laggers were AXIATA (-1.4% WoW); IOI (-1.4% WoW) and PTG (-0.1% WoW).

Wall Street, on the other hand, ended a holiday-shortened week with a strong rebound last week after some blue-chip companies, such as Coca-Cola, Johnson & Johnson, Morgan Stanley and General Electric, posted earnings that topped expectations. For the week, the Dow rose 2.4%, the S&P 500 added 2.7% and the Nasdaq advanced 2.4%. From the less than onefifth of S&P 500 companies which have reported results so far, about 63% topped expectations, according to Thomson Reuters data, exceeding the 56% average over the past 4 quarters.

All portfolios outpaced the benchmark index last week with GROWTH portfolio taking the lead with +1.9% WoW gain (vs. 0.03% WoW gain in the FBMKLCI) followed by THEMATIC (+1.8%) and DIVIDEND YIELD (+0.3%). The better performance was mainly led by the investment in mid-and-small-cap stocks such as PESTECH (+7.3% WoW); TSH (+2.8% WoW), REDTONE-WA (+3.0% WoW) and RHBCAP-CR (+4.7% WoW). On YTD comparison, THEMATIC (+6.80%) and GROWTH Portfolios (+5.70%) still registered good returns as opposed to the 1.58% total returns of the 30-stock index. Nonetheless, DIVIDEND YIELD Portfolio still lagged behind the market with only 1.06% YTD total returns.

Source: Kenanga