We expect the FBMKLCI to trade sideways ahead of the U.S. FOMC meeting before consolidating at the 1,756-1,810 level in coming weeks. Message gleamed from the upcoming FOMC meeting is expected to provide more clues to the market direction moving forward. In addition, looming US rate hike, weak crude oil prices and Ringgit are also influencing market sentiment. Portfolio-performance-wise, bucking the weak FBMKLCI’s performance (-1.4% WoW), all our three portfolios advanced by 3.0%-3.4% last week, bringing the total returns to its highest level for 2015 and beating the 30-stock index by 440-1417bps on a YTD total returns basis.

All eyes on U.S. policy makers’ tones, again. The upcoming U.S. FOMC meeting, which is scheduled to be held on 18th-19th of March, is expected to lay the groundwork for a rate rise as soon as June by dropping the pledge to be “patient” before lifting rates. While the US Fed is preparing the roadmap for its first interestrate increase in nearly a decade, it is going to be constrained by the strength of the dollar. The strong value of the greenback has triggered concerns among big corporates, especially the exporters and companies with international operations. With all these uncertainties, we believe the FBMKLCI is likely to trade sideways at between 1,756-1,810 level ahead of the U.S. FOMC meeting. Crude oil and Ringgit movement, meanwhile, will continue to influence the market direction over the short-to-mid term. Technically speaking, the immediate support for the FBMKLCI is seen at 1,776 followed by 1,756 level next, while the key resistances are located at 1,800 and 1,810.

Failed to sustain at the psychological 1,800 mark. The local market closed lower on a 2nd consecutive week last week as investors continued to grapple with the prospect of coming US Federal Reserve rate hikes, a weak MYR (against USD) and renewed weakness in the crude oil prices. The FBMKLCI started the week with a weak note as MYR continues to depreciate against USD and hit a 52-week low at RM3.704 last Tuesday. The index, however, managed to regain some grounds in the latter part of last week, spurred by persistent buying momentum in heavyweights. At last Friday’s closing bell, the FBMKLCI slumped 25.2 points or 1.4% to settle at 1,781.75. PBBANK (-1.7%) was the weekly top index loser followed by GENT (-3.8%) and PCHEM (-4.2%). On Wall Street, the market shed more than 332 points on Tuesday following the release of largely positive job-opening figures for January, which effectively erased all gains the market had made so far in 2015. The slide, however, was neutralised by the 260 points rally in the DOW last Thursday and put the major indexes back into the black for 2015. The rally got a boost from banks after the Federal Reserve said that 29 of the 31 top U.S. lenders passed stress tests, and banks responded with a flood of stock buybacks and dividend increases.

Remove SKPETRO from the portfolio. To recall, the reason that we included SKPETRO into our portfolios in January was to ride on a potential oil price rebound and alpha play. Nevertheless, in view of our recent change in oil price's stance (where we believe it will likely to trade sideways now rather than with an upside bias) and coupled with a potential earnings disappointment in its upcoming 4QFY14 results, we have decided to trim our positions. With that, we incurred a minor loss of 1.0 sen or RM30 each in all our portfolios.

Strongest portfolio performance YTD. Against the weak overall market’s sentiment, our portfolios have performed sturdily last week and recorded the best returns YTD, underpinned by REDTONE (+7.1% WoW) and CAB (+3.9%). The former was mainly due to the potential shareholders’ structure changes while the latter continued to be driven by capacity expansion news. THEMATIC Portfolio was the highest weekly gainer last week (+3.45%) in contrast to the FBMKLCI’s 1.4% loss, followed by the GROWTH (3.42%) and DIVIDEND YIELD Portfolio (3.04%). On YTD basis, the GROWTH portfolio continued to rank the top and recorded 16.4% total return, followed by THEMATIC (9.76%) and DIVIDEND YIELD Portfolio (6.59%), clearly outperformed the 30-stock index of 2.19% during the same period.

Source: Kenanga