We are now officially entering the 2QCY15 reporting season. As there is still a lack of catalyst, all eyes are likely to be focused on the corporate report cards. This is an interesting quarter which marks the first report card with impact of GST implementation, although the numbers could be softer as business activities and consumer consumption purchases could have been rushed ahead of the implementation. This week, the local market is likely to trade sideways within 1,685-1,745 with some upside bias due to its oversold condition. Portfolio performance-wise, we had a mixed weekly performance as CENTURY retreated from a previous strong rally while PESTECH continued to hit fresh record highs. Our portfolios continued to outpace the benchmark index by 798-2,863 on YTD basis with GROWTH Portfolio remaining the top gainer.

Still looking for better days. Market seemed neutral to last week’s cabinet reshuffle, which had a little impact on the overall market performance. With macro issues such as weak Ringgit and sluggish crude oil prices unlikely to improve in the near term, these will continue to cap the FBMKLCI from going higher. We are officially entering the 2QCY15 reporting season which may shed some light on the post-GST corporate performance. The numbers could be softer as business activities and consumer consumption purchases could have been rushed ahead of the implementation. As the market still lacks positive catalysts, investors may be kept at bay given the change in political scenario following the new lineup of the cabinet last week. Under such conditions, the local market is likely to trade sideways within 1,685-1,745 with some upside bias due to its oversold condition.

Still a lacklustre week. Last week, the local market opened lower and remained sluggish till Thursday with foreigners remaining as net sellers for a straight 11-day stretch. Heavyweight banks like MAYBANK (-0.33%) and CIMB (-2.18%) faced selling pressure while planters such as KLK (-2.31%) and PPB (+0.39%) also continued to trend lower on sluggish CPO prices. However, bargain hunting on MAYBANK and CIMB last Friday helped to push the FBMKLCI back to a positive territory with 2.38pts gain or 0.14% WoW higher to settle at 1,723.14. The weekly market movers were SIME (+2.83%), BAT (+4.48%) and PETGAS (+2.22%). Meanwhile, the weaker Ringgit led exporters like glove markers KOSSAN (+1.25%), TOPGLOV (-0.52%) and SUPERMX (+13.89%) making new highs again. On Wall Street, US stocks were mixed as investors tried to digest the on-going corporate earnings report card while 2Q15 US GDP came in slightly below expectations at 2.3% while the FOMC Meeting was generally a non-event. On the other hand, the US crude oil prices which lingered below the USD50/bbl-mark did not go well with the market sentiment.

aMixed portfolio performance. We have decided to close our position in REDTONE (-2.04%) following a disappointing 4Q15, which was released last Friday, due to the continued deferment of T3 Extension Project. Hence, based on last Friday’s closing price of RM0.72/share, we realised a loss of RM600 or 2.70% from our 30,000 REDTONE shares each for all our three portfolios. Excluding REDTONE, DIVIDEND YIELD Portfolio (-1.12%) was the only portfolio that underperformed the barometer index (+0.14%) WoW, as CENTURY retreated 3.60% from the previous week’s strong performance. However, PESTECH which had another strong rally with 4.75% gain which send the stock to a fresh record high, helped to mitigate losses at CENTURY which nudged GROWTH and THEMATIC Portfolios higher by +1.36% and +0.72%, respectively. On YTD basis, GROWTH Portfolio remained as the top performer with 28.42% gains, against the 30-stock index’s -0.12%, followed by THEMATIC (+16.78%) and DIVIDEND YIELD Portfolios (+7.77%) 

Source: Kenanga Research - 3 Aug 2015