We expect the FBMKLCI to trade sideways ahead of the U.S. FOMC meeting before consolidating at the 1,820-1,830 level in coming weeks. Message gleamed from the upcoming FOMC meeting is expected to provide more clues to the market direction moving forward. Having said that, the other external factors such as: (i) the Ebola outbreak, (ii) the on-going US corporate earnings season, and (iii) the weakening oil prices, will continue to remain wild cards affecting market gyrations. All our three model portfolios performed positively last week, in alignment with the benchmark index performance, and outperformed the 30-stock index by a whopping 1,404-2,096 bps YTD.

All eyes on U.S. policy makers’ tones, again. The upcoming U.S. FOMC meeting, which is scheduled to be held on 29th-30th of October, is expected to finish ‘tapering’ its extraordinary bond buying, or QE3. Nevertheless, in view of the recent weak economic data from US coupled with low energy prices, some Fed officials have suggested to delay tapering the QE programme. James Bullard, president of the Federal Reserve Bank of St. Louis, said last week that U.S. inflation is far below 2% which could lead the Fed to pause the tapering and wait until more data is out in December. The Fed’s latest monetary decision, will be no doubt be one of the key's main factors to determine the world financial markets' direction moving forward. Other key factors include: (i) the Ebola outbreak, (ii) the ongoing US corporate earnings season, and (iii) the weakening oil prices. All in all, we expect the local market to trade in a sideways band ahead the U.S. FOMC meeting before consolidating at 1,820-1,830 level in coming weeks. Technically speaking, the FBMKLCI has closed firmly above the 1,800 psychological mark and is marching towards to re-test its immediate resistance level at 1,820 and 1,839 level next should buying momentum persist. On the flip side, the immediate support levels for the benchmark index are located at 1,800, followed by 1,777 next.

Volatility remains. The FBMKLCI continued to face choppy trading last week, akin to the performance of other key equity benchmark indices globally, where the local benchmarked index oscillated between positive and negative territories nearly every other day. Still, the benchmark index managed to close higher by 30.55 points (or 1.7% WoW) to settle at 1,818.86 last Friday thanks to the improved trading sentiment. Key index movers last week included TNB (3.8%); SIME (3.4%) and GENTING MALAYSIA (5.5%).

Positive return on all portfolios with DIVIDEND YIELD portfolio leading the gains which recorded 4.6% WoW (vs. 1.7% WoW gain in the FBMKLCI) followed by GROWTH (2.0% WoW) and THEMATIC (1.5% WoW) portfolios. The good set of performance was mainly led by higher share price performance for all stocks in the portfolios, except Digi which weakened marginally by 0.6% WoW. Notable gains last week included MITRAJAYA (+9.6%); BTOTO (+6.7%) and TNB (+3.8%). On YTD basis, all three model portfolios continued to outpace the benchmark index by 1,404-2,096 bps with the GROWTH portfolio (+22.61%) remaining at its top position followed by the THEMATIC (+22.09%) and DIVIDEND YIELD (+15.96%) portfolios vs. +1.65% total returns in the FBMKLCI.

Dispose all our MAGNI-TECH shares at RM2.96/share. In view of the low earnings' visibility on our end, we have decided to dispose all our 16k MAGNI-TECH shares held in the three model portfolios last Friday. The disposal suffered a 6.6% loss in capital but partially cushioned by its recent 8.0 sen dividends that went-ex on 21st of Oct, narrowing the total return from our investment in MAGNI-TECH to –1.6%.

Source: Kenanga