With the 11MP already unveiled and uninspiring 1QCY15 results report card so far where 73% of companies meeting expectations, it’s back to the drawing board for investors; what are the fresh catalysts that could prop the index to the next level? To recap, market sentiment was fairly bearish last week. First, we have the well-expected 11MP and then concerns of the possibility that the government may approach TENAGA to bail out 1MDB thumped the market lower. Having said that, we believe buying support will emerge at the current level (1,780/90) as investors start to nibble on weakness and this is also at our ideal “Buy-on-Weakness” level of 1,790. At such, we continue adhering to our “Buy-on-Weakness” strategy for this week with trading range of 1,780-1,821. On portfolio-performance-wise, despite weaker market sentiment, all our portfolios still managed to outpace the FBMKLCI by 65-297bps WoW and 622-1898bps YTD.

Still buy on weakness. With 11MP failing to excite the market, players are searching for new catalysts. On the other hand, the two macro issues namely the weakensess in MYR and oil prices are not much an issue now as they have fairly stabilised. As such, the only focus for this week will be the results season which is now into the final leg. Key results to note are: MAYBANK (- 0.64%), TM (0.41%), GENTING (-1.69%) and AIRASIA (-9.65%). On the market, although general sentiment remains weak, buying support could emerge at current level of 1,780/90 as investors start to nibble on weakness. As such, we continue to adopt a “Buy-on-Weakness” strategy this week, which coud lead to a possible rebound play from here, with trading range of 1,780-1,821.

A lacklustre week. Despite anticipating a technical rebound, the market went the opposite way last week. The strong start last Monday was mainly due to an 11th hour buying of PETGAS (+1.28%) which sent the key index higher by 0.91%. However, subsequently news of another RAPID project being delayed dragged the barometer index lower mainly led by Petronas-linked counters, such as PCHEM (-1.26%), PETGAS and PETDAG (+0.30%). Market sentiment worsened last Thursday after PM unveiled the 11MP which failed to boost sentiment. In fact, construction big caps like GAMUDA (-2.88%) and MMCCORP (-1.54%), and small caps such as ULICORP (-3.50%), MITRA (+6.04%), GADANG (-3.13%) and HSL (+5.41%) all closed flat following the announcement of 11MP. At last Friday’s closing bell, the FBMKLCI closed 24.42pts or 1.35% lower to settle at 1,787.50. TENAGA (-2.42%) was the biggest loser last week followed by CIMB (-3.52%) and AXIATA (-3.40%). On Wall Street, US stocks generally had a good run in the first two trading days but drifted lower toward the end of the week as investors tried to digest the FOMC Meeting Minutes and sluggish economic data. In fact, the Dow consecutively closed on new record highs for two days when the market started last week, partly helped by some acquisition news in the pharmaceutical and apparel sectors.

Small caps outshined in this bearish times. As usual, our well-balanced big and small caps exposure helped us to sail through last week’s lacklustre market with GROWTH Portfolio as top performer with 1.62% weekly gain followed by THEMATIC Portfolio (+1.49%). Even though DIVIDEND YIELD Portfolio posted a 0.70% weekly decline, it was still better than FBMKLCI’s -1.35%. The poorer income portfolio was basically due to the decline in TENAGA and DIGI (-3.15%). This is especially so for TENAGA which faced heavy selling pressure last Friday that saw its share price tanking by more than 4% following news report that it may be asked to bail out the problematic 1MDB. On the positive note, small caps like PESTECH (+4.73%) and CENTURY (+5.20%) helped to push up the other two portfolios. PESTECH rebounded after the announcement of USD60.6m EPC job for the Cambodian BOT project while the newly included CENTURY attracted buying interest following our Trading Buy call on the On Our Radar series last Monday. In all, on a YTD total returns basis, GROWTH Portfolio remained at top gainer with 22.15%, as opposed to the 30-stock index’s 3.17%, followed by THEMATIC (+10.07%) and DIVIDEND YEILD Portfolios (+9.39)

Source: Kenanga Research - 25 May 2015