The recent strong rebound in the FBMKLCI could be short-lived in view of the unfavourable macro factors. While the fundamentals and trading sentiment have improved essentially in the U.S., the other gloomy factors (i.e. lower crude oil prices and weak Ringgit against USD) still provide a greater challenge to the country’s economy in 2015. In view of the higher volatility ahead, we have liquidated all our model portfolios on last Friday, which have outperformed the FBMKLCI total return by 1,798-2,445 bps, marked the second consecutive year of outperforming (2013: 740-1,954 bps). Moving forward, we will unveil our 2015 model portfolios on 5th of January with a limelight focus on (i) GST play, (ii) M&A, and (iii) export-oriental sectors/stocks.
Sustainability is the key. We believe the recent strong rebound in the FBMKLCI could be short-lived in view of the unfavourable macro factors. With the crude oil prices continue to stay low coupled with a persistent weak Ringgit (against USD) and the upcoming GST implementation; the country’s economy outlook appeared challenging in 2015. Meanwhile, the relatively steep FBMKLCI’s valuation (against the regional peers) coupled with hostile economy/currency outlook in Russia may continue to led the foreign investors to reassess their investments in the local equity market. As of last Friday, foreigners continued to be a net seller for 18th consecutive days with a total net outflow of c.RM3.1b (since 26th of Nov.). Having said that, while we believe the FBMKLCI may have found some supports followed the recent strong rebound, there is a risk of further earnings downgrading (should we adopted a more conservative view on our banking, plantation, and oil & gas sectors), and thus, could limit the potential upside from here. Technically speaking, the benchmark index immediate resistance levels are at 1,727 (R1) and 1,759 (R2) while its key support levels are located at 1,707 (S1), followed by 1,691 (S2) next.
Santa Rally. After taking a beating earlier this month, investors have finally been getting Santa Claus rally that they wished for. U.S. Fed in its final policy statement on last week stated that it ‘can be patient in beginning to normalise the stance of monetary policy’, which led Wall street forecasters to interpret the authority won’t hike short-term rates any earlier than the middle of next year and could even wait until later in 2015. On top of that, the Fed also reiterated more optimistic projections for the country’s economy for 2015 and believes the unemployment will drop further. These generous statements have cheered the US as well as the global equity market to rebound strongly on last week albeit the volatility of Russian Ruble and crude oil prices continued to remain low. At the end of last Friday’s closing bell, the barometer index rebounded strongly and narrowed the losses to 17pts or -1.0% WoW to 1,715.99, mainly dragged down by PBBANK (-2.3% WoW), SIME (-2.6%) and FGV (-14.2%).
Celebrate our Christmas holiday early. In view of the recent high volatility coupled with unfavourable macro factors, we have decided to close all our model portfolios on last Friday (based on their respective closing price). With that, we have recorded a second consecutive of outperform year and beat the FBMKLCI total return by 1,798–2,445bps (2013: 740-1,954bps with a total returns of 21%-33%). THEMATIC portfolio (20.96%) was our top performer followed by GROWTH (16.39%) and DIVIDEND (14.49%) portfolios vs. -3.49% total returns in the FBMKLCI. Our strong portfolios’ performances in 2014 were mainly due to (i) the absence of Oil & Gas counters, (ii) higher return recorded in the telecom stocks, (iii) decent dividend received, as well as (iv) strong performance in some alpha stocks' selection. On top of that, our passive investment strategy adopted in the 2H14 also helped us to prevent any trading trap that arises during the volatile market, especially in the 4Q14.
2015 model portfolios are set to unveil on the 5th of January. In view of the current unfavourable macro factors, we believe ‘’focused theme plays’’ will be the key to success in 2015. A part of the usual blue chips' selection, our stocks pick will be also focused on GST play, M&A, and export oriented counters/sectors. Meanwhile, bottom-fishing in the Oil & Gas sector could also provide some trading opportunities, we believe.
Source: Kenanga