The local market is expected to trade in a sideways mode ahead of the Budget 2015 announcement, which should provide some clues for market direction moving forward, especially the post GST implementation period. Having said that, investors should keep a close eye on the on-going geopolitical tensions in Iraq/Syria as well as the ‘umbrella revolution” in H.K., which could lead the market volatility to spike and subsequently lower investors’ risk appetite. Moving into 4Q14, we believe the benchmark index will continue to trade in a range-bound mode at between 1,830 and 1,890, thus a highly selective stock picking strategy (please refer to our 4Q14 strategy dated 1st of October for the stock pick) will be the key success factor. Inline with the weak performance of the broader market in September, our OR tracker only recorded a marginal gain of 0.7% but still outpaced the total return of -0.65% posted by the 30-stock index. The average total returns between realised OR portfolio and unrealised OR tracker since inception is 41.7%, which outperformed the barometer index’s total returns of 20.4% for the same period.

Adding two new buy calls in September. We have issued a total of seven OR reports, which consists of two new Trading Buy calls (namely, PRESS METAL and DELEUM), three Take Profit ratings – ASIA FILE, TASCO and BERJAYA AUTO (where we switched the stock to our core coverage list followed by an initial coverage report dated 30th September). Meanwhile, we also issued two NOT RATED pieces on BERJAYA FOOD and I-BHD at last month. Notably, out of the three Take Profit calls, BERJAYA AUTO has performed tremendously well with a total return of 102.1% within a nine-month investment horizon followed by ASIA FILE (72.2%) and TASCO (71.7%).

Flattish return in September amid choppy trading sentiment in the FBMKLCI. Thus far, there remains twenty-five stocks in our OR portfolio tracker list with Trading Buy recommendation. The overall portfolio recorded a total return of 0.7% MoM in September, vs. the -0.65% return in the FBMKLCI during the same period. The outperformers for the month were VSI (+19.9%), KSL (+18.5%) and FIBON (+15.7%) while PRESS METAL (-14.3%), HO HUP (-10.1%) and ENCORP (-7.8%) were the top three stocks that recorded the highest negative returns. On YTDSeptember basis, our OR tracker portfolio which comprised of stocks with Trading Buy ratings recorded a total return of 16.7% in contrast to the -1.11% return in the 30-stock index.

All eyes on Budget 2015; escalating geopolitical tensions could spur risk aversion. The benchmark index was lower by 19.8pts (-1.06% MoM) to end the month at 1,846.31. Selective rotational plays in the small caps and penny stocks continued to draw some investors’ eyeballs and led the FBMSC index rising 61pts (+0.3% MoM) to settle at 18,665.61 last month. Market sentiment swung between positive and negative in September, amid a combination of factors in the markets namely: (i) BNM meeting, (ii) U.S. FOMC meeting and (iii) on-going geopolitical uncertainties in Ukraine and the Middle East as well as civil unrest in Hong Kong. Moving forward, the local market is expected to trade in a sideways mode before the Budget 2015 announcement (on 10th October), which should provide more clues to the market, especially the post GST implementation period. Having said that, the escalating geopolitical tension in Iraq coupled with the “umbrella revolution” in H.K. could potentially lower investors’ risk appetite for the riskier assets, i.e. stocks. Meanwhile, investors are also struggling for direction as the U.S. Federal Reserve’s monthly asset buying program is expected to officially end by October.

Realised tracker list remains sound. We have realised trades in forty-one counters in our OR realised portfolio tracker list thus far, of which c.68% or 27 stocks’ total realised returns have exceeded >20% between recommendation and closing position. I-BHD, FABER, PESTECH, MKH, GADANG, INARI, and BERJAYA AUTO were the top performers which recorded more than 100% total realised return. On the flip side, there were seven stocks or 18% in our realised portfolio tracker list, which recorded negative total return of between -2% to -14%.

Source: Kenanga