The continued decline in crude oil prices and generally dismal 3QCY14 report card will suppress market sentiment in the near term due to the lack of positive leads. While the one-time favourite oil & gas sector is likely to come under more pressure, we believe investors will continue to snap up defensive stocks like TENAGA and the telcos. Technically speaking, the FBMKLCI is likely to consolidate further within the range of 1,810-1,840 with downside bias and possibly testing the 1,800-psychology level. This week, focus will be on brokers’ strategy report after the results season and with general expectations of index-target being toned down given the disappointing results thus far. On portfolio performance, we had a mix week but overall YTD performance still beat the FBMKLCI by 1,998-2,048bps with THEMATIC Portfolio replacing GROWTH Portfolio as the top performer.

Downside risk remains high. We are entering the supposedly seasonally more buoyant year-end period, but the overall market sentiment does not seem to be supportive, especially with the recent dismay 3QCY14 reporting season and the still-lacklustre commodities prices for crude oil and CPO. The last batch of earnings report cards released last week were generaly dissapointing across all sectors, which had not been seen for years. As such, more brokers are likely to cut their index-target this week post earnings revision. Not helping is the decision by OPEC not to cut oil production last week which will continue to suppress the already weakened oil & gas stocks of which many have already lost half their share price values in the past two months. As such, the FBMKLCI is likely to consolidate further within the range of 1,810-1,840 with downside bias of testing the 1,800-psychology level.

Strong start but sentiment turned gloomy at the end. The local market started the week with a bang as the benchmark index scored three straight days of strong showing as investors snapped up defensive stocks TENAGA (2.29%) and telco like TM (-1.39%), MAXIS (-1.84%) and DIGI (4.13%). However, the market pulled back sharply last Thursday as market participants locked in their profits after market sentiment turned gloomy as crude oil price plummeted to new lows after OPEC decided to maintain oil production level. As such, oil & gas stocks were the casualty of last week’s sell-down. This was especially so for SKPETRO (-9.97%) which was hit by a double whammy after it was removed from the SC’s Syariah List. Nonetheless, the FBMKLCI index still closed 11.76pts or 0.65% higher WoW, to settle at 1,820.89 last Friday, mainly led by TENAGA, DIGI and PETGAS (+5.19%). On Wall Street, despite the continued dip in crude oil prices, the Dow rallied to new record high just before the market closed for the Thanksgiving holiday last Thursday. In fact, oil price continued to fall with Brent settling at USD72/bbt as at last Thursday, which slumped more than 15% for its steepest monthly decline since Nov 2008.

DIVIDEND Portfolio the top performer. Except GROWTH Portfolio which posted a meagre 0.10% weekly loss in fund value, the other two portfolios namely DIVIDEND YIELD and THEMATIC Portfolios registered commendable weekly returns of 3.95% and 2.87%, respectively, as opposed to the barometer index’s weekly return of 0.65%. The strong performance of DIVIDEND YIELD and THEMATIC Portfolios were mainly driven by the defensive big caps like TENAGA and DIGI and small cap MITRA (+7.48%). Meanwhile, the decline in small cap PESTECH (-2.79%) pushed GROWTH Portfolio lower. Nonetheless, with the strong weekly gain, YTD total returns of 22.03% for DIVIDEND YIELD Portfolio is similar to THEMATIC (+22.53%) and GROWTH (+22.18%) Portfolios but far more superior than FBMKLCI’s 2.05%.

Source: Kenanga