With crude oil prices remaining depressed at below USD50/bbl and the MYR unlikely to recover from its new low level in near-term, we believe that last week’s strong rally presents investors with an opportunity to take profit. This is further supported by the Current toppishness of the benchmark index technically. As such, the local market is likely to pull back this week into sideways consolidation range of 1,770-1,810. Focus will likely be on BURSA and PBBANK as they will be the first two heavyweights to kick-start the 4QCY14 reporting season this week. Portfolio-performance-wise, all our three portfolios continued to outperform the FBMKLCI by 107-383bps WoW and 71-225 on YTD basis, respectively.
Market to pullback this week? After a strong showing last week, the million dollars question now; Is the bull back? Thus far, there have been not much changes in the fundamentals. Oil prices have remained depressed, MYR is still weak and not to mention the current 4QCY14 reporting season which is seen to face earnings underperformance risk. BURSA (+1.10%) and PBBANK (+3.30%) will be the first two heavyweghts to kick-start the reporting season this week. In addition, the just revised Budget 2015 has nothing much to excite the market. Chart-wise, the key index is toppish with strong resistance seen at 1,810. With these key issues yet to settle, we see more reasons for investors to take profit at current level. As such, we expect the local market to consolidate this week with sideways range of 1,770-1,810. Key event to watch this week will be the BNM’s 2-day Monetary Policy Committee Meeting starting this Wednesday which would see the Central Bank setting the tone for the interest rate outlook for this year. So far, our economist expects the OPR to remain unchanged.
The best weekly performance in months. The local bourse started the week on a positive note and the momentum grew stronger towards the end of the week in line with the stronger regional market following the expanding QE stimulus package in Europe as the European Central Bank would make EUR60b monthly bond purchases, higher than the EUR50b expected earlier. TENAGA (+5.01%) was the biggest gainer last week following its sterling 1Q15 results released last Thursday which beat forecast substantially. SKPETRO (+12.00%) was the biggest beneficiary in the oil and gas sector as bargain hunters snapped up heavily bashed down stocks like COASTAL (+16.54%), BARAKAH (+20.25%) and UZMA (+20.81%). On the flipside, CIMB (-5.98%) was the main loser following brokers’ rating downgrades. At last Friday’s closing bell, FBMKLCI had rallied 3.41% or 59.51pts WoW to close at 1,803.08. On Wall Street, stocks rebounded strongly on hope that the ECB QE program could support the European financial system for a sustainable economic recovery. Buying interests were also seen in transportation stocks as oil prices remained low.
A good performance for our portfolio too. We decided to cut loss in our position in CIMB which we added 2,500 shares @ RM5.92/share into the THEMATIC Portfolio on 14 Jan, following several rating cuts by brokers last week. In fact, our banking analyst also downgraded the stock to MARKET PERFORM last Thursday given the bleak outlook going forward. With this disposal, we realised a loss of RM840 or 7.09%. CIMB was the only loser, but the rest of our invested stocks posted commendable gains which were in line with overall market performance. In fact, all our three portfolios outpaced the barometer index on a weekly basis with GROWTH Portfolio being the top weekly gainer with 7.24% weekly gainer, against the 30-stock index’s +3.41%, followed by THEMATIC Portfolio (+4.88%) and DIVIDEND YIELD Portfolio (+4.48%), thanks to our position in the index-linked stock TENAGA and SKPETRO. All our portfolios also outperformed the benchmark index on a YTD basis with GROWTH Portfolio topping the gainers list with YTD total returns of 5.16% based on the total allocated amount as opposed to FBMKLCI’s +2.91%. Although we exited CIMB with a loss, the THEMATIC Portfolio still managed to rank #2 with YTD total returns of 3.67% followed by DIVIDEND YIELD Portfolio at 3.62%.
Source: Kenanga