We believe the focal point this week will be the brokers’ post-results strategy, which could see some downwards adjustments on the index target due to the uninspiring 2QCY15 report cards. On top of that, the recent concluded "Bersih Gathering" could lead to some knee-jerk reactions but expected to stabilise towards the end of the week. With the prolonged concerns over the 1MDB saga, weak Ringgit and sluggish crude oil prices, the benchmarked index is likely to trade in a zigzag mode and capped its nearterm upside at the 1,650 level. Portfolios performance-wise, we did not benefit much from the market rebound last week due to our limited equity exposure post the recent disposals. Indeed, we suffered a mild weekly loss of <1% for all our portfolios but continued to outpace the benchmark index by 638-2,751 on YTD basis.

Can the rebound be sustained? While the macro environment has improved slightly following China’s decision to support its beleaguered equity market, the prolonged domestic political issues and weak MYR have yet to show any sign of solid improvements. Thus, despite the FBMKLCI appearing to have rebounded sturdily from its recent low, the benchmarked index may likely be capped by lingering issues. Meanwhile, the recent concluded "Bersih Gathering" could lead to some knee-jerk reactions but likely to stabilise towards the end of the week. On top of that, another focus this week is the brokers’ post results strategy. We see brokers potentially reviewing their index targets given there were more underperformances (44) than above (9) as of last Thursday, with 56 results within expectations. Technically speaking, the FBMKLCI managed to stage a strong rebound last week and stay above its psychological resistance level of 1,600. With the strong buying momentum as showcased by the Stochastic and RSI reversing strongly from their respective oversold regions, there is a likelihood the 30-stock index may trade in a zigzag mode and marchs towards its immediate resistance level at 1,650 in the near term.

The BULL is back? After experiencing a global selloff last Monday, the long-awaited bargain hunting on heavyweights and bluechips finally kicked-in. China’s central bank cut its key lending rate by 0.25% to 4.6% last week, the fifth interest rate cut since November, in an effort to stabilise the country’s stock markets. On top of that, China also reduced its statutory reserve requirement to increase liquidity in the financial market. These investor friendly policies have lifted sentiment, which led investors to start re-accumulating selected bluechips. At last Friday’s closing bell, the FBMKLCI climbed 2.42% WoW or 38.07pts to settle at 1,612.74, which was led by TNB (6.7%), PETCHEM (8.8%) and AXIATA (5.5%). Foreigners, meanwhile, remained as net sellers for the 16th consecutive days with total weekly net outflows breaching the RM1b mark as of last Wednesday. The persistent strong capital outflows have led the MYR to continue depreciating (against the greenback) and hit RM4.2995 before easing to RM4.199 on last Friday’s at 5pm. The global financial markets have been volatile since China decided to devalue its currency earlier this month; a move that global investors interpreted as an attempt to bolster a sagging economy. Traders are also jittery about the outlook for interest rates as the Fed has signalled it could raise its key interest rate for the first time in nearly a decade later this year.

Positive YTD returns remain unchanged. The strong market rebound last week did not benefit our model portfolios much given our limited equity exposure post the recent disposals. All our model portfolios’ fund values have been lowered by less than 1% last week with the GROWTH portfolio dipping the most by 0.86% WoW, narrowing the YTD gain to 21.32% followed by THEMATIC (-0.69% WoW to 9.78%) and DIVIDEND YIELD (-0.44% WoW to 0.19). In view of the current high market volatility, we believe capital preservation is top priority. Total Return (%)

Source: Kenanga Research - 1 Sep 2015