The FBMKLCI is expected to face a challenging time with crude oil prices continuing to remain depressed coupled with weak Ringgit. This week, we expect the local benchmark index to trade in a sideways bound mode at between 1,757 to 1,810 range with the limelight still fixated on the corporates’ earnings report cards and foreign fund flow trend. Meanwhile, we have added 30k Redtone shares each into all our model portfolios last Friday encouraged by its positive catalysts going forward. Portfolio-performance-wise, all our three portfolios continued to outperform the FBMKLCI by 57-378 bps on YTD basis, albeit with the DIVIDEND YIELD portfolio being the only underperformed portfolio last week.

Sideway consolidaiton mode. The local equity market is expected to trade in a sideways mode between 1,757 to 1,810 during this shortened trading week, in view of the lack of favourable catalysts. With the crude oil prices continuing to remain depressed coupled with weak Ringgit (against the USD), the trading sentiment of the FBMKLCI is expected to face a challenging time with foreign investors likely to remain net sellers. The direction of the local benchmark index this week will be very much dependent on: (i) the on-going local corporates' earnings report cards, and (ii) the foreign fund flow trend. Thus far, 9.4% (or 13 out of the 138 companies) under our stock universe have turned in their 4QCY14 results, out of which 31% (or 4 companies) came in above expectations while 13% failed to deliver. Technically speaking, the FBMKLCI is still trapped in a downward trend with immediate resistances seen at 1,791, followed by 1,810. On the flip side, the key immediate support levels are located at 1,770, followed by 1,750.

Volatility remains. The FBMKLCI continued to face choppy trading last week, akin to the performance of other key equity benchmark indices globally, where the local benchmark index oscillated between positive and negative territories and finally closed 21.8 points lower (or -1.21% WoW) to settle at 1,781.26 last Friday. The key index losers last week included TENAGA (-4.0%), MAYBANK (-3.1%), and PCHEM (-7.4%). On Wall Street, the key major indices went on a roller coaster ride last week, hammered by the Federal Reserve’s latest policy statement but lifted by some encouraging corporate earnings news. With just over 140 S&P500 companies reporting last week, Wall Street is seeing a fair number of companies pinning their lowered earnings guidance on the dollar’s strength and lacklustre overseas demand. These suggested that the US market is in a reset mode, which created additional volatility, sending the Dow gyrating by triple digits changes over the past few sessions.

Adding 30k Redtone shares into portfolios. We have added 30k each Redtone share @ RM0.74/share into all our portfolios last Friday. The group is expected to resolve the qualified opinion expressed by its external auditor for the FY14 accounts in coming weeks. The amounts (RM15.6m) are recoverable following a series of project awards, and we believe this could be a POSITIVE catalyst in the near-term. Meanwhile, we also understand that the group will seek a transfer to the Main Board listing subsequently.

Gain some lose some. Both THEMATIC and GROWTH portfolios outperformed the 30-stock index last week and recorded gains of 0.7% WoW and 0.4% WoW, respectively, in contrast to the FBMKLCI (-1.21% WoW). The former was mainly boosted by HARTA (4.0% WoW) and PESTECH (5.8%) while the latter was driven by PESTECH and PHARMANIAGA (1.0%). DIVIDEND YIELD portfolio return, meanwhile, was lower by 2.3% WoW, no thanks to the weak performance in BJTOTO (-4.8%), TENAGA (-3.9%) and SKPETRO (-4.6%). On YTD basis, all three model portfolios continued to outpace the benchmark index by 57-378 bps with the GROWTH portfolio (+5.4%) taking the lead followed by the THEMATIC (+4.2%) and DIVIDEND YIELD (+2.2%) portfolios vs. +1.66% total returns in the FBMKLCI.

Source: Kenanga