The local stock market is expected to continue its consolidation mode with downside bias in the near-term with the benchmark index range bound between 1,850 and 1,889, while awaiting new catalysts. As we are entering the 2QCY14 reporting season, the upcoming corporate report cards should provide a clearer clue on the market direction for the next few months. Having said that, the lack of fresh local catalyst and growing geopolitical tension in the Middle East and Ukraine may continue to weigh down the already weakened trading sentiment. Our On Our Radar (OR) tracker continued to outperform and recorded 6.2% MoM total capital gain vs. -0.6% in the 30-stock index. Last month, we have introduced two new Trading Buy stocks, one follow-up report, three Take Profit as well as Not Rated calls.

Adding two new buy calls in July. In July, we issued a total of seven OR reports, which consists of two new Trading Buy calls (namely, MAGNI-TECH; and PPHB), three Take Profit ratings – SKP Resources; SCGM and GTRONIC, as well as a Not Rated report for SCC Holdings. Meanwhile, we also issued a follow-up report on PINTARAS, where we continued to like the stock and place a Trading Buy rating with higher target price of RM4.78. Notably, out of the three Take Profit calls, SCGM has performed tremendously well with a total return of 94.6% within a three-month investment horizon. SKP Resources, meanwhile, also performed reasonably well and recorded 22.4% total return within a one-month investment horizon trading position.

Continued to record positive return in July despite sluggish performance in the FBMKLCI. Thus far, there are still twentyfour stocks in our OR portfolio tracker list with Trading Buy recommendation. The overall portfolio recorded a total return of 6.2% MoM in July, vs. the -0.6% return in the same period. The outperformers for the month were VS Industry (+22.1%), EKOVEST (+20.4%) and GLOMAC (+15.4%) while PROTASCO (-7.1%), PINTARAS (-2.7%) and MAGNI-TECH (-0.3%) were the only three stocks that recorded negative returns. On YTD basis (as of 4th of August 2014), our OR tracker portfolio which comprised of stocks still with Trading Buy ratings recorded a total return of 29.6% in contrast to the 2.1% return in the 30-stock index.

FBMKLCI’s July performance remains sluggish. The benchmark index was lowered by 11.35pts (-0.6% MoM) to end the month at 1,871.36. Rotational plays in the small caps and penny stocks remain in the limelight for investors and thus, stimulated the FBMSC index rallying 1,134.50 (+6.3% MoM) to settle at 19,066.40 by end-July. The local benchmark index, however, continued to trade within a tight sideways range of 1,862 to 1,892 during the fasting month. Market sentiment swung between positive and negative last month, amid a combination of factors in the markets namely: (i) the 25bps interest rate hikes by BNM, (ii) potential CIMB-RHB-MBSB mega-banks merger, (iii) MH17 tragedy, and (iv) on-going geopolitical uncertainties in Iraq and Ukraine.

Strong returns since inception. Our OR tracker portfolio has continued to outpace and recorded 39.4% total return since 13th August 2012 vs. 21.1% 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 (4th of August) for which we still have Trading Buy ratings are INARI (+103.5%), PIE (+100.6%) and SBCCorp (+86.0%). Meanwhile, RUBBEREX (-6.8%), LONDON BISCUITS (-3.3%) and MAGNI-TECH (-2.2%) are the top three worst performers in our OR tracker.

Best and worst of stocks sold. We have realised trades in thirty-six counters in our OR realised portfolio tracker list thus far, of which 61.1% or 22 stocks’ total realised returns have exceeded >20% since recommended and closing positions. PESTECH, GADANG, MKH and FABER were the top performers which recorded more than 100% total realised return. On the flip side, there are a total of 9 stocks or 25% in our realised portfolio tracker list which recorded negative total return of -2% to -14% range.

Source: Kenanga