Although the benchmark index managed to break out from the multi-month downtrend resistance of 1,820 last Friday, we deem the breakout unconvincing given the subdued trading volume. Not helping is the uninspiring 4QCY14 results season; we may likely see more brokers lowering their index-target due to more disappointments than positive surprises despite stronger rebound in crude oil prices. As such, we expect the local market to trade within a sideway range of 1,780-1,835. On the other hand, all our three portfolios performed extremely well last week, thanks largely to our positions in the small to mid-cap stocks, which outpaced the barometer index by 263-617bps WoW or 218- 1,054bps on a total YTD returns basis.

Let’s focus on fundemental. With the 4QCY14 reporting season ending last Friday, all eyes will be focused on brokers’ post-results strategy view this week. Given that there are more results coming below consensus (37) than above (21) as of last Thursday with 44 results within expectations, we may likely see brokers lowering their index target. Likewise, we saw more disappointing results (35) against our forecasts than earnings surprises (24) with 42% (43/102) meeting our estimates. Howdever, O&G stocks could be supported by the recent rebound in crude oil prices.

Uptrend remained after the CNY break but volume was subdued. Chart-wise, although the benchmark index managed to break out from the 1,820 multi-month downtrend resistance last week, we deem the breakout to be unconvincing given the subdued trading volume. With lack of fresh catalyst, the local market expected to trade sideways between 1,780-1,835 with downside bias this week. The local market started the first day of trading after the long CNY break with a small gain. However, the anticipated CNY rally failed to take off as the key index traded within a tight range of 20 points with subdued trading volume for the remainder of the week. At last Friday’s closing bell, FBMKLCI rose 13.34pts or 0.74% WoW to settle above the 1,820 multi-month downtrend resistance level of 1,821.21, thanks to a final hour’s rally. TENAGA (+3.95%) was the weekly’s market mover, followed by MISC (+11.52%) and IHH (+6.10%). On Wall Street, after retreating mildly from the previous week’s record high, the Dow soared to fresh highs again last Tuesday and Wednesday as market was cheered by Fed’s statement that interest rate hike would likely come later rather than sooner. However, as of last Thursday, the Dow retreated as investors took profit as prices of crude oil remain volatile.

Strong portfolio performance. Despite overall market’s flattish performance, all our three portfolios performed extremely well, thanks to our positions in small to mid-cap stocks, such as PESTECH (+13.14%), PHARMA (+11.35%) and REDTONE (+6.08%). In addition, last week’s index mover TENAGA also contributed positively to our portfolios. All in, GROWTH Portfolio remained as top gainer with total YTD returns of 14.35% after 6.91% weekly gain, as opposed to FBMKLCI’s weekly gain of 0.74% and total YTD returns of 3.81%. Meanwhile, THEMATIC Portfolio’s total YTD returns rose to 9.94% after 3.10% weekly gain while DIVIDEND YIELD’s total YTD returns grew to 5.99% with a WoW change of +3.75%. PESTECH is the top invested stock in which we have 3,500 shares in THEMATIC Portfolio and 5,000 shares in GROWTH Portfolio with an average investment cost of RM3.50/share. Last week alone, the stock surged 13.14% following our price target upgrade to RM5.04/share, from RM4.36/share previously, last Wednesday as we expect a price rerating on its strong contract flows in the near-term. So far, our investments in PESTECH have risen 41.43% in fund value. 

Source: Kenanga