With improving macro environment with crude oil prices recovering steadily amid a more stable MYR, the recent sell-down represents a bargain-hunting opportunity at current level after a two-week correction where the FBMKLCI tumbled to the vicinity of our ideal Buy-on-Weakness level of 1,790. In addition, the first batch of 1QCY15 results was satisfactory. All these are the right sentiment mix for the market in the near-term and we expect the market to trade in the same range as last week between 1,790 and 1,845. On portfolio performance-wise, despite weaker market sentiment, all our portfolios still managed to outpace the FBMKLCI by 49- 117bps WoW, thanks mainly to the exposure in small caps CAB and REDTONE. YTD, our portfolios still outperformed the benchmark index by 577-1,849bps with GROWTH Portfolio remaining the top performer.

Time to bargain-hunt? After two weeks of correction, the FBMKLCI is now near to the ideal Buy-on-Weakness level of 1,790 and we expect market participants to start bargain hunting. In addition, the continued recovery of crude oil prices and a more stable MYR should inject some positive sentiment into the market. Furthermore, the first batch of 1QCY15 results announcement was satifactory too. All these are a perfect mix for the market in the near-term. Technically speaking, this week’s expected trading range remains the same as last week, which is 1,790-1,845. The week’s key corporate events to watch are PETDAG (+1.31%), PETGAS (+0.26%) and IOICORP (-3.23%) where their quarterly earnings will be released during the week.

Second week of correction. After the sharp contraction in the previous week, the local market started the week higher after a long week-end break as investors bargain-hunted for index-link counters. However, the overall market failed to hold up over the subsequent next two days before some buying finally kicked-in in the last trading day of the week. TENAGA (- 2.65%%) faced heavy selling pressure after one of the foreign brokers downgraded the stock to SELL on concerns of the risk of TENAGA overpaying for 1MDB asset. At last Friday’s closing bell, the FBMKLCI closed the shortened trading week lower by 0.58% or 10.62pts to close at 1,807.65. TENAGA was the biggest loser last week followed by MISC (-6.23%) and PBBANK (-1.03%). On Wall Street, US stocks generally closed lower last week as rising crude oil price raised concerns again of escalating costs. However, the Dow was traded within a tight range of 230-index-points of first four days of last week while poor economy data such as domestic data did not help the overall market sentiment.

Small caps led the pack. Despite the overall weak market sentiment, all our three portfolios beat the benchmark index last week, thanks largely to our exposure to selective small caps which bucked the market sell down. In fact, only THEMATIC Portfolio posted a small loss of 0.09% WoW as opposed to the barometer index’s -0.58%, while GROWTH and DIVIDEND YIELD Portfolios registered decent weekly gains of 0.59% and 0.22%, respectively. Small caps CAB (+6.19%) and REDTONE (+1.90%) were the main gainers which contributed positively to all three portfolios. On a YTD basis, GROWTH Portfolio remained as the top performer with total returns of 22.60% in contrast to benchmark’s 4.11%, while THEMATIC Portfolio retained its second position with YTD total returns of 9.93% followed by DIVIDEND YIELD Portfolio’s 9.88%. We remain optimistic with our portfolio performance given the well-balanced exposure between the big and small caps which is designed to sail through the ups and downs of the market cycle. 

Source: Kenanga Research - 11 May 2015