The local market has been sluggish over the past few months while rebounds were merely technical in nature. Nevertheless, with the FBMKLCI currently in oversold level, a technical rebound is still likely. This week, the market is expected to trade in the range of 1,725- 1,750 and with a strong support at around 1,705. However, we remain cautious on the persistently weak MYR, which is now close to the historical peg-level of RM3.80 to USD. Further weakening of the MYR against the greenback may lead to further erosion in the key index to retest its 52-week low of 1,670. Having said that, we adhere to our Buy-on- Weakness strategy to nibble on exporters like MPI, HARTA, VITROX and MMSV. On portfolio performance-wise, with almost all invested stocks closing lower, only THEMATIC Portfolio managed to outpace the benchmark index by a meagre 14bps, thanks solely to the sole weekly gainer, HARTA. Nonetheless, our portfolios still outperformed the benchmark index by 629-1,787bps.

At the crossroad. The local market did not perform to our expectations for the past one month, in which we were expecting a rebound, as 2Q is seasonally a decent quarter albeit weaker than 1Q & 4Q. Instead, the key index headed deeper south. Nevertheless, the FBMKLCI is now in oversold territory where it could potentially find a footing at the current level in preparation for a rebound. With the slight improvement in oil prices, we think the Ringgit’s direction is the only factor currently to chart and guide the market outlook. As the MYR hit new low close to the previous RM3.80 to greenback peg-level, the overall market sentiment would be negatively impacted should the ringgit weaken further. Technically, this week’s expected trading range is from 1,725 to 1,750 with a strong support at around 1,705. However, the MYR could potentially weaken to RM3.95 versus the USD, if and when the expectation of a "Flag" formation materialise. Under such circumstances, FBMKLCI could retrace further and retest the recent 52-week low of 1,670. In all, we adhere to our Buy-on-Weakness strategy to nibble on export-oriented stocks such as MPI (OP; TP: 8.90), HARTA (OP; TP: RM9.50), VITROX (TB; FV: RM3.84) and MMSV (TB; FV: RM0.95).

Still heading south. The local market started last week with continuous losses before the key index managed to reverse its 3rd straight week of losing streak last Wednesday, which was in line with recovery in Asian markets. In fact, there were strong rallies in the European as well as the US markets largely due to positive development over the Greece issue as the German government was agreeable to release more funds for the troubled Greek government. Nonetheless, the local market failed to hold up in the subsequent two trading days. Apart from a fast-weakening MYR against USD, the 1MDB fiasco also continued to dampen market sentiment, which partly led to foreign funds’ selling. As of last Thursday, foreigners marked their 18th straight day with a total net outflow of RM244m. YTD, the total outflow stood at RM7.2b. At last Friday’s closing bell, the FBMKLCI closed 10.96pts or 0.63% lower to settle at 1,734.37 with MAXIS (-0.4.06%) the biggest loser followed by TENAGA (-1.19%) and KLK (-4.44%). On Wall Street, US stocks generally started the week with losses, which were mainly dampened by the sharp rising bond yield. However, stock prices rebounded strongly last Wednesday following the positive development from the European zone while encouraging economic data kept the market sentiment positive as of last Thursday.

Weak portfolio performance, in line with the overall market performance. In fact, exporters, such as glove maker HARTA (+3.37%) is the sole gainer among our invested stocks, which led the THEMATIC Portfolio (-0.49%) outperforming the benchmark index (- 0.63%) slightly on a weekly basis. The other two portfolios namely DIVIDEND YIELD and GROWTH Portfolios did badly, which saw their fund values contracting 2.11% and 1.84% over the week, respectively. Nonetheless, all our portfolios continued to outpace the barometer index (+0.34%) on a YTD total returns basis with GROWTH Portfolio remaining as the top gainer (+18.21%) followed by THEMATIC (+8.63%) and DIVIDEND YIELD Portfolios (+6.63%).

Source: Kenanga Research - 15 Jun 2015