The local market is expected to continue with its consolidation mode in the near-term with the benchmark index range-bound technically between 1,840 and 1,880, while awaiting new catalysts. As we are entering the 1QCY14 reporting season, the upcoming corporate report cards should provide a clearer clue on the market direction for the next few months. Having said that, we expect the local market to experience a quiet trading period in June and July due to the fasting month and World Cup tournament. To recap, the FBMKLCI was trapped in a sideways consolidation mode in April, fluactuating between1,840 to 1,869 amid for want of of fresh catalyst. Despite lacklustre trading on index-linked counters, rotational play in the small caps and penny stocks shined during the month as retail investors jumped aboard the speculative bandwagon. Notably, on a monthly basis, April also marked as the first month of foreign funds net buying with a cumulative net inflow of RM718m, after six consecutive months of net selling earlier on. Although the FBMKLCI’s total return added 1.2% MoM to settle the month of April at 1,871.52, thanks to the renewed foreign net buying in the mid-to-late April period, our On Our Radar (OR) tracker continued to outperform and recorded a 7.5% gain over the month. Last month, we have introduced four Trading Buy stocks, two Take Profit as well as Not Rated calls.

Four buy calls in April. In April, we issued a total of eight OR reports, which consists of four Trading Buy calls (namely, SCGM, SBCCorp, INARI, and GLOMAC); two Take Profit ratings - MKH and GADANG, as well as Not Rated (HDBS and HOMERIZ) reports each. Notably, out of the four Trading Buy stocks, SCGM has performed tremendously well with a total return of more than 30% in one month. Meanwhile, in view of the limited capital upside, we have closed two of our trading buy positions in MKH and GADANG in late-April and recorded total returns of 85% and 136% gain, respectively.

Positive return in April despite sluggish performance in the FBMKLCI. Thus far, there are still twenty-one stocks in our OR portfolio tracker list with Trading Buy recommendation. The overall portfolio recorded a total return of 7.5% MoM in April, outperforming the FBMKLCI by 631 bps in the same period. The outperformers for the month were SCGM (+31.3%), GOB (+27.0%) and PINTARAS (+24.6%) while FIBON (-7.9%); PIE (-4.9%) and INARI (-2.6%) were the top three laggards. On YTD basis (as of 7th of May 2014), our OR tracker portfolio, which comprised of stocks that we still have trading Buy ratings recorded a total return of 23.3% in contrast to the -0.35% return in the 30-stock index.

Continued to outperform since inception. Our OR tracker portfolio has continued to outpace and recorded 32.8% total return vs. 20.2% in the FBMKLCI during the same period. The top three best performers (in terms of total return) in our OR tracker portfolio up to yesterday (7th of May) for which we still have Trading Buy ratings on are PIE (+88.9%), SBCCorp (+80.1%) and ASIA FILE (+70.4%). Meanwhile, RUBBEREX (-20.1%); BJFOOD (-10.4%); and PROTASCO (-1.1%) are the top three worst performers in our OR tracker.

Best and worst of stocks sold. Thus far, we have realised thirty-one counters in our OR realised portfolio tracker list, of which 58% or 18 stocks’ total realised returns have exceeded >20% since recommended and closed our trading positions. FABER, PESTECH, and GADANG were the top three performers which recorded more than 100% total realised return. On the flip side, BONIA, GUAN CHONG, and MK LAND were the top three worst performers and recorded a negative total return of -11% to -17% range.

Source: Kenanga