We expect the FBMKLCI to take a short breather, easing towards the 1,861 level this week due to lack of domestic catalyst and the generally uninspiring earnings season so far. Strong buying interest is expected to emerge if the 30-stock index retreats to the above-mentioned resistanceturn-support level and we will advocate investors to start accumulating although our ideal buying level remains unchanged at 1,835 and below. Our weekly view, however, may be scuttled should: (i) better-than-expected corporate earnings emerge during the final week of the reporting season and (ii) there is no major surprise in US. Federal Reserve’s policies post their annual meeting. Portfolio-performance-wise, all our model portfolios were badly hit by profit-taking in our small cap's stocks selection and thus underperformed the benchmark index by the 145-245bps. Despite the weak weekly performance, all our portfolios still outperformed the 30-stock index by a wide margin of 1,257-1856bps with GROWTH Portfolio still leading the pack.

Time to take a short breather. The FBMKLCI resumed its upward trend to climb 1.7% since 8-August. While the 30-stock index’s long-term uptrend remains intact, it is expected to take a short breather before the making the next move. With the current lack of domestic catalyst coupled with an uninspiring earnings season so far, near-term upside may be capped, and we expect to see the index re-testing its immediate support level at 1,861 this week. Again, the focus this week will remain on corporate earnings, being the final week of reporting season. We are expecting more than 50 results to be released under our core coverage. Some of these companies under our model portfolios are IJM (Tuesday); TM (Wednesday) and Maybank (Thursday). Thus far, 51 companies under our coverage have released their respective 2QCY14 report cards, of which 63% (or 32 companies) came in within, but 31% failed to deliver. On the external front, the interpretation of Federal Reserve Chair Janet Yellen’s speech in the Fed. annual meeting on last Friday is expected to determine the global financial market direction in coming months.

A record high in volume. Shares traded on the Bursa Malaysia hit a feverish 7.67b last Wednesday after heavy churning the previous day saw volume of shares reaching 5.1b. The remarkable strong trading sentiment in both the small caps & penny stocks led the 10 most-active stocks accounting for about half the traded volume with Globaltec Formation Bhd even hitting 1.01 billion shares last Wednesday. The penny stocks' fever has shifted investor's interest away from the big caps, sending the FBMKLCI marginally higher by 0.36% WoW and settled at 1,870.99 on last Friday. Last week’s main market movers were CIMB (2.9%), TNB (1.5%) and PBBANK (0.9%) while the laggards were IOI (-5.4%), GENT (-2.8%) and KLK (-3.3%). On Wall Street, US market ended higher last week with the S&P500 at a record high after a flurry of positive economic data. Investors were seen focusing less on geopolitical events and instead emphasis more on earnings as well as the underlying health of the US economy. The trading volume, however, remains light raising some skepticism on the sustainability of the rally.

All our three model portfolios performed badly and underperformed the benchmark index by the 145-245bps range last week due to profit-taking in some of our small cap's stocks selection (i.e. MITRAJAYA (-4.5% WoW; MAGNI-TECH (-2.8%); FIBON (-5.6%) and PESTECH (-2.4%)). Against the FBMKLCI which inched up by 0.36% WoW, the top weekly loser DIVIDEND YIELD Portfolio lost 2.09% of its fund value over the week while GROWTH and THEMATIC Portfolios shed 1.24% and 1.09%, respectively. Nonetheless, all the three model portfolios still outpaced the 30-stock index based on YTD total returns basis where GROWTH Portfolio still topped the gainer list with 22.5% YTD total gains vs. 3.94% of the FBMKLCI while THEMATIC Portfolio (+20.67%) came in second followed by DIVIDEND YIELD Portfolio (+16.51%).

Source: Kenanga