We expect the benchmark index to trade in a choppy manner but with upside bias this week between the range of 1,849-1,873. Meanwhile, the conclusions of the recent monetary policy meetings in both US and Malaysia have eliminated investors’ near-term concerns while the decision of Scotland rejecting independence in the referendum also helped to remove  nother major disruption in Europe. Such positive sentiment could stimulate demand for risky assets like stocks in coming weeks. Performance-wise, our three model portfolios outperformed the FBMKLCI marginally by 7-59bps last week and continued to outpace the benchmark index by 1,407-2,099bps on YTD basis with GROWTH Portfolio retaining its top performer status.

Upside bias. We believe the FBMKLCI is likely to trend upwards at between the 1,849-1,873 range after the conclusion of both the US FOMC and Bank Negara monetary policy meetings last week. The latest decision (to remain status quo on their respective interest rates) made by both central banks cheered the market last week which could potentially spill over to the coming weeks. Meanwhile, the global financial market appears to down play the ongoing Russia/Ukraine standoff while the decision of Scotland rejecting independence from Britain also helped to remove a potential major disruption in the European region. With the dusts settling down, this may stimulate demand for risky assets in the near-term.

A choppy week as expected. Local stocks experienced choppy trading last week with the FBMKLCI sinking to as low as 1,836.50 before ending the week at 1,849.49 (-0.33% WoW). The lack of re-rating catalyst coupled with poor trading appetite in blue chips prior to the BNM meeting were the main factors causing the benchmark index lacklustre performance last week. GENTING MALAYSIA (-5.0%) was the biggest loser among the index-link stocks, followed by ROTH (-4.3%) and CIMB (-1.0%). The decision of BNM to keep OPR unchanged at 3.25% helped to lift the FBMKLCI by 4.2 points on Friday. Despite the status quo for interest rate in September, we believe the OPR will be increased by another 25bps in the next meeting (on 6th of November), to stay ahead of the curve before the GST implentation. On Wall Street, both the S&P 500 and Dow Jones indices marked new record-highs last week as the Fed-driven rally continued. The decision of the U.S. Fed to keep interest rates near zero for a ‘considerable time’ eliminated the early concerns and stimulated demand for risky assets like stocks.

Marginally outperformed on a weekly basis. Our model portfolios have beaten the barometer index marginally by 7-59bps WoW, thanks to the higher performance of one of our small cap investments, namely Magni-Tech (+2.8% WoW) on the back of a good set of 1Q15 results coupled with 5.0 sen special dividend. DIVIDEND YIELD Portfolio was the top gainer last week with 0.26% weekly gain, extending YTD total returns to 16.96% against the FBMKLCI’s weekly loss of 0.33%, followed by the THEMATIC portfolio (+0.15% WoW to 22.48% YTD). GROWTH portfolio, meanwhile, posted YTD total return of 23.88% (vs. the FBMKLCI YTD total return of 2.89%) after it suffered a minor loss of 0.26% last week.

Magni-Tech reported a good set of 1QFY15 results. The group’s 1Q15 net profit of RM10.1m (+10.3% YoY) came in within expectations, accounted for c.24.6% of our full-year estimate. The decent result was mainly driven by higher revenue which was underpinned by both the garment manufacturing and packaging divisions. Its balance sheet continued to remain strong as of end-1Q15 with RM103m net cash (or RM0.95/share) and RM137m in reserves vs. market cap of RM340m. The group is currently merely trading at 8.4x FY15 PER with a dividend yield of c.4.8%. Although we have a TRADING BUY rating (TP: RM3.82, based on a targeted FY15 PER of 10.1x), its earning's visibility remains low due to the investment-shy approach adopted by management. We will revisit our investment strategy on Magni, where we have a total 16k share in the portfolios, post the dividends (3.0 sen final tax exempt + 5.0 sen special single tier dividend) which goes ex on 21 October.

Source: Kenanga