The FBMKLCI is expected to find a temporary bottom near the 1,710-1,732 level (at between -1 SD and -2SD of the three-year discount to its consensus target band). While domestic and external uncertainties are expected to cast a long shadow over the market, we believe it is a good time to nimble on selective stocks, especially those in resilient and export-oriented sectors. Technically speaking, the benchmark index is expected to trade sideways in the range of 1,723-1,756 this week. On portfolio performance, thanks to HARTALEGA’s strong share price performance and a minor rebound in RIB, the THEMATIC and GROWTH portfolios outpaced the key index by 60-247bps while the DIVIDEND YIELD Portfolio underperformed by 7bps. In all, our three portfolios still outperformed the benchmark index by 728-1,849bps YTD.

GST – “Good Shopping Time”? While we believe the uncertainties, both external (i.e. US’ interest rate direction, Greece’s debt concern, etc.) and domestic (i.e. 1MDB saga, sovereign rating review) will continue to haunt the local equity market, the FBMKLCI could potentially find a temporary bottom near the -1SD level (at 1,732) of the three-year discount band, if not, the - 2SD level (at 1,715/10). Thus, we believe it is a good time to nimble on selective stocks, especially those in resilient sectors such as Telco, MREITs, Healthcare (i.e. pharmaceutical & gloves), Education, Consumer F&B, Consumer Packaging and Export-oriented OEM manufacturers as well transport logistics players (as we believe our earlier focus on exporters is still valid given that ringgit is back on a downtrend again). Amongh these sectors, we have OUTPERFORM / Trading Buy calls on Digi (TP: RM6.87), SUNREIT (TP: RM1.76), HARTA (TP: RM9.50), KOSSAN (TP: RM7.06), OLDTOWN (TP: RM1.79), SLP (OP, TP: RM1.27), CENTURY (TB, TP: RM1.19), TASCO (TB, TP: RM5.41), MMSV (TB, TP: RM0.95), VITROX (TB, TP: RM3.84), CAB (TB, TP: RM1.29) and PW (TB, TP: RM1.58). Meanwhile, we also believe that our earlier focus on exporters is still valid given that Ringgit is back on a downtrend again. Thus, apart from glove makers, we continue to like MPI (TP: RM8.90) and SLP (TP: RM1.27) in this space. Technically speaking, the weekly technical picture continued to remain bearish as the key index has yet to show any clear sign of reversal. Thus, we believe the key index is likely to trade sideways in the range of 1,723-1,756 this week while waiting for fresh catalysts to emerge. Notably, there could be some trading opportunities in the local Oil & Gas counters this week should the decision of last Friday’s OPEC summit in Vienna failed to meet the market expectations.

Cloudy sentiments remain. The on-going concerns on the 1MDB-related issues, the weak Ringgit and the persistent foreign funds' outflow have continued to weigh down the local market sentiment with the FBMKLCI closing at the five-month low of 1,745.33 (-0.13%% WoW) last Friday. Foreign institutional investors remained the net sellers for fourteen consecutive days, with a total net outflow of RM926m on last week – bringing the YTD net outflow to RM6.67b and marked for the 6th consecutive weeks of net selling. Apart from the relative rich valuations (in contrast to the regional equity markets), we believe, the continued weak Ringgit (against the greenback) has also lowered the foreign funds' appetite in the local equity market. On Wall Street, stocks remain choppy last week on fresh Greek debt drama and U.S. economic data that helped to make an interest-rate hike this year more likely.

THEMATIC Portfolio the weekly winner. Both the THEMATIC and Growth Portfolios outperformed the 30-stock index last week and recorded gains of 2.34% WoW and 0.47%% WoW, respectively, while DIVIDEND YIELD Portfolio declined by 0.2%, in-line with the broader market performance. The former two portfolios were mainly boosted by HARTALEGA (7.1% WoW, as a result of the MERS outbreak) and RIB (2.0%) while the latter was dampened by DIGI (-4.8%), which could be caused by the persistent foreign fund's outflow from Bursa Malaysia. On a YTD basis, GROWTH Portfolio continued to be the top gainer with total returns of 19.45% followed by the THEMATIC Portfolio (+9.0%) and the DIVIDEND YIELD Portfolio (+8.2%), clearly outpacing the 30-stock index's total return of 0.96% 

Source: Kenanga Research - 8 Jun 2015