The local market is expected to trade in a flattish fashion this week within the range of 1,820 and 1,858 while awaiting new catalyst to emerge. Having said that, should the Ringgit and the crude oil prices continue their upward momentum, the FBMKLCI may extend higher rather than staging a pullback as suggested by the technical studies. On portfolio performance, thanks to PHARMA’s strong share price performance, the GROWTH and DIVIDEND portfolios registered impressive weekly gains and outpaced the key index by 106-225bps while the THEMATIC Portfolio underperformed by 189bps. In all, all our three portfolios still outperformed the benchmark index by 333-1,520bps YTD.

Trading sentiments improved. The broad market trading sentiment is expected to improve gradually should the Ringgit and crude oil prices continue to strengthen this week. Besides, the People's Bank of China (PBOC) has also lowered the reserve requirement ratio (RRR) by 100 bps to 18.5% over the weekend could probably improve sentiment indirectly. On top of that, the upcoming Invest Malaysia 2015 (to be held on 23rd and 24th of April) could provide a much-needed catalyst to the market should positive surprises are announced by the government and/or corporate sector. We believe the benchmark index would continue to be trade in a flattish fashion this week while waiting for new catalyst to emerge. Meanwhile, the local Oil & Gas stocks are expected to remain in the limelight this week should crude oil prices continue to rebound. Technically speaking, while we believe a healthy pull back is imminent, the FBMKLCI is poised for another flattish week and trade at between the 1,820-1,858 range.

A flattish week. The local market continued its sideway trading mode last week despite persistent foreign buying as well as a rebound in crude oil prices, where the Brent and WTI hit their 4-month highs to above USD60/barrel and USD55/barrel, respectively. At last Friday closing bell, the FBMKLCI ended 1.55 pts or 0.08% WoW higher to settle at 1,845.86. The top three weekly index movers were SAKP (16.2%), PBK (2.1%), and MAYBANK (1.3%) but they were largely offset by the weaker performance of GENT (-5.0%), CIMB (-1.3%), and IOI (-1.8%). On Wall Street, trading remained choppy as investors continued to digest a mixed batch of economic reports and Federal Reserve statements as well as a stream of better-than-expected earnings results. Of the 51 companies (as of last Thursday) in the S&P 500 that have reported earnings, 76.5% exceeded expectations, well above the long-term average of 63%. Having said that, first-quarter revenue and earnings for S&P 500 companies are expected to have declined by 2.8% YoY and 2.6% YoY, respectively, according to Thomson Reuters data, hurt by low oil prices, a strong Dollar and extreme weather in the eastern United States.

DIVIDEND YIELD Portfolio the weekly winner. Both the DIVIDEND YIELD and THEMATIC Portfolios outperformed the 30- stock index last week and recorded gains of 2.33% WoW and 1.14%% WoW, respectively, while THEMATIC Portfolio declined by 1.97%, in contrast to the FBMKLCI (0.08%). The former two portfolios were mainly boosted by HARTALEGA (14.4% WoW) and CAB CAKARAN (8.6%) while the latter was dampened by PESTECH (-11.4%) after the group’s dividend went ex last Tuesday. On a YTD basis, GROWTH Portfolio continued to be the top gainer with total returns of 21.2% followed by the THEMATIC Portfolio (+11.0%) and the DIVIDEND YIELD Portfolio (+9.3%), clearly outpacing the 30-stock index's total return of 5.96%. 

Source: Kenanga Research - 20 Apr 2015