While the FBMKLCI is expected to trade sideways this week, the limelight is expected to shine on the local Oil & Gas sector. Our recent crude oil price volatility study suggested that there is a fair chance for the Brent Crude Oil to test USD70/barrel over the near-term should the current positive momentum persists. Hence, we have added 15k ALAM MARITIM shares into our THEMATIC portfolio last Friday to ride on the positive oil price trend. In terms of portfolio performance, THEMATIC was the only portfolio which posted positive weekly returns last week and beat the FBMKLCI by 89bps.

Chinese New Year mood. The local market is expected to trade sideways, during this shortened trading Chinese New Year week, at between 1,782 and 1,832. Having said that, we believe the local Oil & Gas (O&G) sector could continued to shine over the short-term given that crude oil prices appear to be temporarily bottoming out based on our recent volatility study. Meanwhile, the current upwardly biased crude oil prices' trend could also continue to be stimulated by the industry’s spending cuts and weaker dollar where the global energy giant Shell last Thursday indicated that the crude oil supply might not be able to keep up with growing demand after oil companies slashed budgets following a near-halving of oil prices since June 2014. Should these trends persist, it augurs well to the local O&G sector (over the short-to-mid term) as well as the overall broad market (strengthening of MYR against USD).

KLCI closes in the red on last week, TNB weighs. Bursa Malaysia ended on an easier note last week with the benchmark FBMKLCI down 12.30 points (or -0.68% WoW) to 1,800.95 despite a better-than-expected 2014 GDP growth. The drop was mainly led by the government’s decision to cut electricity tariffs (by 5.8% or 2.25 sen per kWh for consumers in Peninsular Malaysia) last Wednesday afternoon, which caused TNB to plunge by as much as c.9% before it narrowed the losses to 5.3% (to RM13.64) at the closing bell. On a positive note, S&P rating agency has reaffirmed its ‘A-‘ long-term and ‘A-2' shortterm foreign-currency sovereign credit ratings last Monday with stable outlook on Malaysia. On Wall Street, benchmark indices have all jumped back into the black for 2015 following a series of encouraging corporate earnings as well as a rebound in crude oil prices.

Adding ALAM into the THEMATIC portfolio. We have added 15k ALAM MARITIM shares @ RM0.79/share into our THEMATIC portfolio last Friday. While we believe that upcoming 4Q14 results may disappoint the market, ALAM as an O&G player will benefit should crude oil prices continue its upward trend. We are taking a trading stand on our ALAM and plan to take profit at c.RM0.96 level with a strict cut loss set at RM0.70.

Mixed performance. THEMATIC Portfolio outperformed the 30-stock index last week and recorded gains of 0.21% WoW while both GROWTH and DIVIDEND YIELD Portfolios declined by 0.27% and 1.33%, respectively, in contrast to the FBMKLCI (-0.68%). THEMATIC was mainly boosted by HARTALEGA (3.7% WoW) and PESTECH (3.9%) while the other two portfolios were dampened by TNB which share price sank by 5.9% WoW due to the tariff cut. On a YTD basis, GROWTH Portfolio continued to be the top gainer with total returns of 6.76% followed by THEMATIC Portfolio (+5.47%) while DIVIDEND YIELD Portfolio (+2.16%) underperformed the 30-stock index (+2.79%) by 63bps. 

Source: AmeSecurities