Following the sharp decline last week, overall market valuation look fairly attractive, especially the heavily bashed down oil & gas stocks. On the other hand, investors may focus on export-oriented glove makers and tech stocks while resilient plays like TENAGA and telcos should also be on investors’ radar during this time of uncertainty. Technically, the FBMKLCI is now in oversold territory and poised for a rebound with an immediate resistance of 1,760-1,765, in our view. Nonetheless, the overall market’s direction is very much dependent of the movement of: (i) crude oil prices, and (ii) MYR against USD. Looking at our portfolios’ performances, we had a softer week but the overall YTD performance still beat the FBMKLCI by 1,486-1,840bps with THEMATIC Portfolio remained as the top performer.

Buy on weakness? The sell-down in the broader market does not seem to be abating which is in line with regional bourses’ performances. Thus far, there is no clear sign of the crude oil prices recovering which will continue to hit the local market given that we are a net exporter of oil. While the recovery of oil & gas stocks may take time; given the persistently falling crude oil prices, we believe investors may bottom-fish for stocks like DAYANG (-8.2% WoW), BARAKAH (-11.1%), PERDANA (-12.8%) and SKPETRO (-10.4%) as their valuations look attractive following the sharp price corrections. In addtion, investors may focus on export-oriented glove makers and tech stocks which are beneficiaries of the weakening MYR against the greenback. Technically speaking, the FBMKLCI is now in oversold zone and poised for a rebound with resistance at 1,760-1,765. However, the rebound of the overall market is very much dependent on crude oil prices and MYR movement.

A week of heavy sell-down. The local market started the week with tremendous sell-down and at one point the FBMKLCI even lost more than 50pts. This is not unexpected given the hugely disappointing 3QCY14 report cards season coupled with the continued decline of crude oil prices after OPEC’s decision not to cut oil production in the previous week. Not helping wasthe Petronas’ statement of: (i) cutting 15%-20  in its capex for 2015, and (ii) no more marginal oil fields to be awarded, sending oil & gas stocks plunging southbound. Since then, the overall market sentiment remained pessimistic. At the end of last Friday’s closing bell, the barometer index closed 71.52pts or 3.93% WoW lower to 1,749.37, mainly dragged down by SKPETRO (-10.4% WoW), FGV (-9.4%) and PPB (-9.3%). On Wall Street, despite the sharp decline in crude oil prices, the overall US market moved higher with key indexes hitting new highs thanks largely to encouraging economic data. Investors snapped up aviation and transportation stocks while bargain-hunted for energy stocks amid weakening crude oil prices. In fact, two influential policy makers from the Fed stated that falling oil price is good for economy growth as spending improved.

None of our Portfolios were spared the tremendous sell-down with DIVIDEND Portfolio registering the steepest WoW drop (-8.04%). Delving deeper, the main culprit was MITRA (-19.35% WoW), which suffered the heaviest selling impact with speculation of a cut in development expenditure by both the private and government sectors. While all Portfolios posted poorer WoW performances as opposed to the barometer index’s weekly losses of -3.93%, YTD total returns for all our PORTFOLIO namely THEMATIC (+20.32%), GROWTH (+19.51%) and DIVIDEND YIELD (+16.78%) are still far more superior than FBMKLCI’s -1.92%.

Source: Kenanga