Backed by the recovery of crude oil prices and MYR against the greenback, the local market is expected to trend on an upward bias this week within a range bound band of 1,800-1,850. This is further supported by fact that the downtrend line had already been broken while sentiment may be seasonally boosted by the Chinese New Year (CNY) festival which is just over one week away. Having said that, the sustainability of the recovery of both crude oil prices and MYR would set the tone for market direction while the earnings report card will be the key focus for the rest of the month as we enter the busy 4QCY14 results reporting season. Portfolio-performance-wise, all our three portfolios posted positive weekly returns last week but the GROWTH was the only portfolio that managed to beat the FBMKLCI, by 19bps only.

An early CNY angpow? The local market sentiment looks fairly positive following the recovery of crude oil prices which also helped to push the MYR higher. As such, the sustainability of the recovery of crude oil prices and the strengthening of MYR are key deciding factors as to the market’s direction in the coming week. With CNY roughly one week away, the local market is likely to experience a CNY rally as the key index had also broken out of its downtrend line, technically. With the improved outlook for crude oil prices and MYR, we believe the local bourse could trend an upward bias for the week within a range of beween 1,800-1,850. Having said that, market focus will be on earnings reports as we are now entering the busy 4QCY14 reporting season. Key earnings releases this week are DIGI (+0.94% WoW) and DIALOG (+2.47%) during the earlier part of the week, IOICORP (+1.70%) on Thursday while three Petronas companies are likely to release their results towards the end of this week. BNM is also set to announce its GDP statistics, and our economist is expecting a weaker 4Q14 GDP of 5.1% from 5.6% in 3Q14 while full-year 2014 GDP is projected at 5.8%.

Last week, the local market was on an uptrend. The local market started the shortened working week last Wednesday with a big bang as FBMKLCI soared as much as 50 points intraday following the strong rebound of crude oil prices (by as much as 20%) during the long weekend. In fact, the crude oil prices continued to remain resilient for the rest of the week at above USD50/bbl level, sending oil & gas stocks such as SKPETRO (+5.24%), COASTAL (+11.60%) and DIALOG (+2.47%) higher. In addition, PCHEM (+2.75%) also rebounded as higher crude oil prices are seen as positive for petrochemical prices. At last Friday’s closing bell, the barometer index gained 31.99pts or 1.80% WoW to settle above the 1,800 psychological level of 1,813.25. On Wall Street, US stocks had a February rally with the Dow surging more than 520 points or 4.19% for the first four trading days of the month. This was mainly driven by a sharp rebound in crude oil prices and betterthan- expected corporate earnings.

Our portfolios fared fairly well too. GROWTH Portfolio was the weekly gainer by adding 1.99% over the week which outpaced FBMKLCI’s weekly gains of 1.80%. On the other hand, despite two of our portfolios, namely THEMATIC (+1.54%) and DIVIDEND YIELD Portfolios (+1.24%) underperforming the benchmark index, the overall performances of our portfolios were fairly encouraging thanks largely to our positions in TENAGA (+2.21%), SKPETRO and PESTECH (+4.48%). However, the slightly weaker performance of our portfolios was because of the lack of position in last week’s key market movers, namely PBBANK (+3.53%) and CIMB (+5.45%). On a YTD basis, GROWTH Portfolio continued to be the top gainer with YTD total returns of 6.97% followed by THEMATIC Portfolio (+5.30) while DIVIDEND YIELD Portfolio (+3.16%) underperformed the 30-stock index (+3.49%) by 33bps. All in, we remain optimistic that the well-balanced exposure between heavyweights and small caps in our portfolios should weather the volatile market conditions and maximise returns.

Source: Kenanga