With the market appearing toppish after the recent run-up amid the absence of follow-up catalyst, we believe a short-term correction towards 1,820 is likely. This is despite improving crude oil prices and MYR, due to the lacklustre consumer sentiment post GST implementation. Hence, “sell into strength” is our strategy this week with a projected trading range of 1,810-1,885 but with ideal Buy-on-Weakness level of 1,790 on market dips. Last week, we locked in 59% profit in PHARMA after it ran ahead of valuation. Adjusting for this disposal, GROWTH and DIVIDEND YIELD Portfolio still outperformed the strong weekly performance of FBMKLCI. All our three portfolios still outperformed the benchmark index by 295-1,529bps YTD.

Short-term correction to 1,820 is likely. After seven weeks of uptrend with the key index rising to a 7-month high, the local market appears to be topping, which led to profit-taking activities in the latter part of last week. We believe investors will continue to sell into strength this week given the lack of catalyst to compel investors to continue buying higher as the FBMKLCI is currently overbought, based on techincal readings with low trading volume and value. Although the two key fundemental factors, namely crude oil price and MYR, are improving encouragingly, the generally lacklustre consumer spending pattern since GST implementation would continue to suppress market buying sentiment. As such, the barometer index is likely to trade within the range of 1,820-1,885 with downward bias, but the ideal Buy-on-Weakness level is 1,790 on market dips. However, 1,820 should act as a strong support. The week’s key corporate events to watch are TENAGA (+1.11%), MAXIS (-0.69%) and DIGI (+0.48%) where their quarterly earnings will be released later today.

A see-saw week. The local market started the week with a big-bang last week after market participants snapped up big caps like GENTING (+3.53%) and PCHEM (+7.81%) which sent the FBMKLCI to a new high since last September last Tuesday. Since then, investors locked in their profits over the next two days before ending the week higher at less than 1-index-point below Tuesday’s close. Petronas-linked stocks such as PCHEM, PETGAS (+0.26%) and PETDAG (+5.26%) were the key focuses following crude oil prices improvement. At last Friday’s closing bell, the FBMKLCI ended 16.72 or 0.91% higher to settle at 1,862.58. The top three weekly movers were PCHEM, PBBANK (+1.23%) and GENITNG. On Wall Street, US stocks generally rose higher last week with the Nasdaq at a 15-year record high while the S&P 500 was near its new high as at last Thursday. This was helped by better-than-expected corporate earnings, despite earlier fears of weaker earnings on strong USD. In addition, the firmer crude oil prices sent energy stocks higher.

Locked in 59% profit in PHARMA. At a glance, all our portfolios underperformed the benchmark index by 145-200bps on a weekly basis. However, this excluded the realised position of PHARMA (+9.26%) which we sold 3,500 shares and 3,000 shares at RM7.30/share last Wednesday from the GROWTH and DIVIDEND YIELD Portfolio where we netted in RM9,520 and RM8,160 profits, respectively. This was after the share price had risen 59% and exceeded our target price of RM6.95/share. Adjusting for this, our GROWTH and DIVIDEND YIELD Portfolios posted 1.79% and 1.57% weekly gains, respectively, as opposed to FBMKLCI of +0.91%. THEMATIC Portfolio was the only loser with 1.09% loss in weekly value, no thanks to the decline in HARTA (-2.42%) and REDTONE (-2.44%). On a YTD basis, GROWTH Portfolio remained as the top performer with 22.57% gain in contrast to the 30-stock index’s 7.28%, while DIVIDEND YIELD Portfolio (+10.35%) overtook THEMATIC (+10.23%) as first runner-up winner.

Source: Kenanga Research - 27 Apr 2015