After two weeks of strong rebound, the local market is likely to pull back this week as profit taking activities would likely emerge as the market is now fast approaching overbought territory. Technically, the benchmark index is likely to pull back to its immediate support level of 1,825-1,830 before testing the 1,800 psychological level. Even then, we believe the pull-back could be just a temporary affair as the market is likely to be boosted by the seasonally strong 4Q factor. Meanwhile, upbeat external factors, especially strong corporate US earnings report card and encouraging economic data should also lend support to the local market. On portfolio performance, all our three portfolios beat the FBMKLCI by 29-86bps on a weekly basis or 1,357-2,107bps on YTD basis, thanks largely to our well-balanced exposure in big-and-smallcapstocks.

Market to pull back this week. Given two weeks of strong rebound after the sharp correction, the local market is likely to face profit-taking activities this week. Technically, the FBMKLCI is likely to pull back towards its immediate support level of 1,825-1,830 as the key index has surpassed its key resistant level of 1,849. In fact, the local market is no longer in oversold position but fast approaching overbought territory while the overall market is still within the downtrend zone. On a positive note, the pull-back is likely to be short-lived as the market could be supported by the seasonally strong 4Q factor while external factor for the past two weeks had remained positive. 3Q14 US corporate earnings report card is so far has been exceptionally strong while the first batch of Malaysians PLC earnings are satisfactory, which should lend support to market sentiment. In the coming weeks, focus will likely be on corporate earnings.

The local market rebounded for the second week. The upbeat US corporate earnings and economy data kept the overall market sentiment overwhelmingly positive. This gave local investors good reasons to snap up value stocks, which were bashed down heavily during the recent correction. Overall, the benchmark index was on an uptrend for the whole of last week. In fact, foreign funds turned into net buyers in the midweek with total net inflow of RM100m as at last Thursday. Apart from some bargain hunting in heavyweight banks and telcos, buying interest was also seen in some planters, including TSH (4.69%), RSAWIT (12.62%) and FGV (5.56%), on the back of improved CPO prices. At last Friday’s closing bell, last minute’s buying pushed up the barometer index to close the week with 36.29pts gain or 2.00% higher to settle at 1,855.15. DIGI (+5.45%) was the main market mover followed by TENAGA (+2.76%) and GENTING (+5.17%). On Wall Street, US stocks generally trended upwards thanks largely to corporate earnings, which so far turned out strong and beat consensus which was expecting generally weaker earnings. The stronger-than-expected US 3Q14 GDP of 3.5%, against consensus’ 3.0%, released last Thursday kept nudging the market which pushed stock prices higher.

Big caps took the lead this round. We had a good week as all our portfolios performed fairly well and outperformed the benchmark index on a weekly basis. This was largely on account of last week’s market movers, DIGI and TENAGA, which are also in our portfolios. In addition, our invested mid to small caps, such as IJM (+5.16%) and MITRA (+4.39%), also rebounded solidly from the recent weakness. As such, the YTD total returns for GROWTH Portfolio, last week’s top performer, rose to 24.9% after a 2.86% weekly gain while THEMATIC Portfolio’s YTD total returns extended to 23.57% after a 2.29% weekly gain. Even then, the weakest performer DIVIDEND YIELD still outpaced FBMKLCI as its YTD total returns grew 2.63% WoW to 17.40% while the key index’s YTD total returns gained 2.00% last week to register 3.83% gain. Again, we remain confident with our portfolios; the well-balanced exposure between big caps and small value stocks could weather any market conditions to optimise returns.

Source: Kenanga