We believe the focal point this week will be on brokers’ post-results strategy, which could see some downwards adjustments on the index target due to the uninspiring 1QCY15 report cards. Buy-on-Weakness on selective blue-chips and the resilient sectors (i.e. Telco, Pharma, Glove, REITs, F&B sectors as well as the consistence performers) remain our preferred strategy under the current market uncertainties. Technically speaking, the benchmark index closed at the crucial support level at 1,747 last week, failing which, the index could potentially extend its losses to the -2 standard deviation regression support line at the 1,700 level. Portfolio-performance-wise, all our model portfolios deteriorated in value last week, in-line with the overall weak broad market performance. Having said that, all our portfolios remain resilient on YTD basis and outpaced the FBMKLCI by 623-1811 bps.

Back to defensive stance. With the 1QCY15 results concluded last Friday, we believe the limelight will be on the brokers’ post results strategy this week. We see brokers potentially reviewing their index targets given that there were more underperformances (31) than outperformances (11) as of last Thursday; with 91 results within expectations. We continue to advocate investors to adopt a “Buy-on-Weakness" strategy on selective blue-chips as well as the resilient sectors (i.e. Telco, Pharma, Glove, REIT, F&B and consistence performers) to navigate through the current uncertain market. Technically speaking, the weekly technical picture appears bearish as the key index has shown signs of weakening for the past five weeks consecutively. The index has also dipped below the mean regression line support early last week and closed at the crucial 1,747 support level. If this support fall, the benchmark index could extend its losses to the -2SD regression line support at 1,700 level.

A bleak week. The local stock market remained mired in a malaise with foreign institutionals remaining net sellers for eight consecutive days, with a total net outflow of RM730m (as of last Thursday) –the largest weekly outflow since mid-March 2015. We believe the lacklustre market mood was mainly dampened by the concerns on the 1MDB-related issues, the weak Ringgit as well as the uninspiring 1QCY15 corporate report cards. At last Friday’s closing bell, the FBMKLCI closed lower by 2.2% WoW (or -40 points) to 1,747.52 level. On Wall Street, stocks remain choppy last week on continuing worries about Greece, concerns about potential U.S. interest-rate hikes and a slide in Chinese stocks.

None of our portfolios were saved from the topsy-turvy market which was caused by the heavy foreign selling activities. GROWTH portfolio suffered the most with its fund value weakened by 4.57% which narrowed its YTD total return to 19.08%, vs. the FBMKLCI’s YTD total returns of 0.97% after the 2.2% WoW loss last week. Delving deeper, TENAGA was the main culprit (-2.48% WoW) which dragged down overall GROWTH portfolio performance. Meanwhile, THEMATIC and DIVIDEND YIELD portfolio suffered less, with values reduced by 3.85% and 3.22% respectively, lowering their YTD gains to 7.20% and 7.28%, which still outpaced the FBMKLCI’s performance during the same period. 

Source: Kenanga Research - 1 Jun 2015