The local market is expected to consolidate further this week within a sideway range of 1,855-1,882 given the lack of fresh leads overshadowed the focus by the FIFA World Cup which is currently hotter than stock market tips. However, we believe the rotational small cap plays seen last week will continue this week as retailers are betting for pocket money during this quiet period. Portfolio performance wise, all our three model portfolios beat the benchmark index handsomely by 242-351bps WoW, thanks largely to the newly included Alpha stock, SKPRES-WA, which rallied 25%. On YTD basis, all our portfolios still outperformed the FBMKLCI by 356-1004bps. As we are now entering the 2H of the year after this week, we are looking forward to publish our 3Q14 Strategy report next week, which should offer investors a better guidance on where to put their money for the next three months. Stay tuned!
Still a range-bound week ahead. With no upcoming key corporate/economic events this week and the expected Fed’s decision to cut its monthly asset purchase by another USD10b to USD35b starting in July and lower long-term federal funds rate to 3.75% from 4.0%, the overall local market is expected to continue to be trapped in the sideway range of 1,855-1,882. However, despite the flattish trading volume for the 30-index stocks last week, the increase in trading volume for the broader market indicated that buying interest for the mid-to-small caps. As such, a follow-through rotational play on second and third liners is possible this week. We are entering the 2H of the year after this week and our 3Q14 Strategy report is scheduled to be released next week. We should be able to give investors a better guidance on where they could put their money for the next three months. Stay tuned!
As expected, the local equity market still cannot beat the World Cup fever. While the world had yet to recover from the shocking defending champion Spain’s humiliating lost to Netherlands over the previous weekend, the FBMKLCI started the week lower on geopolitical uncertainty over the rising tensions in Iraq. However, the key index managed to close higher as foreign investors turned net buyers last Tuesday. Since then, the 30-stock index climbed slowly each trading day before settling at 1,885.72, up 8.98pts or 0.48% over the week. While big caps, led by CIMB (+1.95%), SKPETRO (+4.44%) and TENAGA (+1.37%), posted small gains, buying interest was seen in mid-to-small caps. Water plays again became the focus as market talks had it that GAMUDA (-0.66%) is accepting Selangor State Government’s water assets takeover offer. Other water counters PUNCAK (+12.42%) and KPS (+11.24%) also benefited from this market talks. On Wall Street, US stocks had a mixed week as the equity market there started slow amid the Iraqi tension but better economic data and the market friendly FOMC’s decision outcome helped to spur market sentiment. In fact, S&P500 hit a fresh record again last week.
Our model portfolios had an impressive week, beating the barometer index by 242-351bps WoW. This was mainly attributed to the newly acquired Alpha stock SKPRES-WA (+25.00%) which was included in all our model portfolios in the previous Friday. In addition, two other small caps namely PESTECH (+4.07%) and REDTONE-WA (+2.04%) which also had a good run, attributed positively to our THEMATIC and GROWTH Portfolios. GROWTH Portfolio was the top gainer last week with 4.14% weekly gain, extending YTD total returns to 13.07% against the FBMKLCI’s weekly gain of 0.63% and YTD total returns of 4.26%. The YTD total returns for THEMATIC Portfolio rose to 14.30% after adding a 3.90% weekly gain last week while DIVIDEND YIELD posted YTD total return of 7.82% after a 3.05% WoW gain last week.
SKPRES-WA the superstar. Last Tuesday, we closed our position on RHBCAP-CR which we had 50,000 units in both THEMATIC and GROWTH Portfolios, raking in RM1,500 or 13.6% profit for each portfolios as we believe it has limited upside following the rally of the underlying mother share. On the other hand, the Alpha stock SKPRES-WA was the star performer last week with the warrant price rallying 25.00% over the week. SKPRES is set to record strong earnings growth on capacity expansion. As such we believe SKPRES-WA is a better leverage to the underlying share to capitalise on the group’s growth story. Based on Black Scholes model, SKPRES-WA is fairly valued at RM0.17.
Source: Kenanga