The local market is expected to consolidate further this week as lack of fresh catalyst is leading the market nowhere with the FBMKLCI likely to trade within the range of 1,800-1,830 technically. Meanwhile, the US saw its key equity market indices posting new all-time-closing highs in the past two weeks albeit declining trading volume. Nevertheless, the technical charts currently look toppish with signs of pullback. Even then, as the year-end is drawing closer, oil & gas laggard stocks like PETDAG, SKPETRO and PCHEM could be potential window dressing stocks should oil prices rebound from the current downtrend. This week, focus will be on the final leg of 3QCY14 earnings report season. On portfolio performance, we had a mix week but overall YTD performance still beat the FBMKLCI by 1,583-2,007bps with GROWTH Portfolio remaining as top performer.

Still range-bound with downward bias. Given that fresh catalyst is unlikely to emerge anytime soon with the earnings reporting season coming to an end with likely surprises on the downside, especially for oil & gas stocks judging from the weaker performance as reported by the earlier batch of oil & gas players, the overall local market is likely to remain in the consolidation mode with downward bias of testing the 1,800-psychology level. As key technical indicators are pointing to bearish downtrend, the FBMKLCI is likely to trade within the range of 1,800-1,830 next week. However, we are still not ruling out year-end window dressing activities. With this, we believe investors may focus on oil & gas stocks such as PETDAG (-1.02%), SKPETRO (+1.30%) and PCHEM (-7.47%) which are the key YTD losers which saw their share price plunging 38.23%, 36.33% and 21.24% YTD, respectively. This is on the basis that crude oil prices may rebound to USD80/bbl or higher due to its highly oversold position with signs of bullish divergence. Thus, any rebound in oil prices is likely to spur buying interest again in this sector.

The local market trended lower last week as expected. The local market started the week with a positive note thanks largely to overwhelming US economy data as well as fresh stimulus in Japan and EU at the end of the previous week. However, the local market since then had turned lerthagic despite rosy sentiment in US market as their key indices hit several fresh highs. Heavy selling was seen on oil & gas stocks, such as ALAM (-20.08%), PERISAI (-12.27) and PCHCEM, after oil prices continued to fall to its 4-year low of below USD80/bbl that gloomed sector’s prospect. Meanwhile, foreign funds started the week with net buying but turned net seller last Thursday with a total net outflow of RM70m. At last Friday’s closing bell, the benchmark index closed 10.40pts or 0.57% lower WoW to end at 1,813.79. On Wall Street, US stocks generally closed higher with both Dow and S&P 500 making several new all-time-highs despite falling oil prices with Brent ending at USD77/bbl as at last Thursday. Investors chased transportation stocks while energy stocks fell on falling commodities prices.

Cut loss on SUPERMX. Last Friday, we decided to close our position of 8,000 SUPERMX shares each in both THEMATIC and GROWTH Portfolios, which resulted in a loss of RM2,160 or 11.74% in both portfolios. Our divestment in SUPERMX is due to its dismay 3Q14 results on lower sales volume and margin compression. In last week alone, SUPERMX’s share price contracted 12.88% which hit our investment with a loss of RM2,400. In all, we had a mix week with GROWTH (+0.79%) and THEMATIC (+0.06%), with the help of TENAGA (+4.00%), outpaced the barometer index (-0.57%) while DIVIDEND YIELD (-0.91%) was the only weekly underperformer. YTD, all our three portfolios still outperformed the FBMKLCI (+1.56%) with GROWTH Portfolio retaining its top performance of 21.63% YTD total returns followed by THEMATIC (+20.46%) and DIVIDEND YIELD Portfolios (+17.39%)

Source: Kenanga