With the Ringgit falling continuously in the past 12 weeks and still grappling to find a bottom and crude oil prices remaining lacklustre, the FBMKLC is likely to consolidate further with downside bias within the range of 1,560-1,621. This week, the US FOMC’s meeting is in the main spotlight as consensus is looking for the first rate hike since the last financial crisis. However, there is another school of thought that reckons a hike in interest rate is not necessary given the unfavourable economic data and strong USD. In any case, this is going to affect the equity market globally. Portfolio-performance-wise, we had a mixed week with DIVIDEND YIELD Portfolio the only weekly outperformer. Nonetheless, all our portfolios continued to outpace the benchmark index by 909-2,995 on YTD basis.

All eyes on US FOMC meeting. With the lack of positive catalysts and coupled with lingering macro issues like the weakening MYR which has fallen for the 12th continuous week and lacklustre crude oil prices, investors are putting their focus on the 2-day US FOMC meeting which will be held midweek. Overall, the market consensus is expecting Fed to raise interest rate this time; the first rate hike since the last financial crisis. However, we see another school of thought that reckons a hike is not required as the unfavourable economic data and strong USD could work against the objective of an interest rate hike. Technically, the FBMKLCI is expected to consolidate further with downside-bias within the range of 1,560-1,621.

A better week but… Last week, the local market had a slow start as both crude oil prices and Ringgit weakened, especially Ringgit, which hit a fresh low against the greenback, with uninspiring trading volume while technical indicators slid further towards oversold territory. Nonetheless, the FBMKLCI managed to recover mid-week before falling back before the end of the week. Despite being a better week in terms of index performance compared to the previous week, market sentiment remained fragile as investors stayed on the sidelines ahead of the US FOMC meeting. At last Friday’s closing bell, the FBMKLCI inched up 0.91% or 14.44pts to settle at 1,603.60, mainly led by DIGI (+3.70%), MISC (+4.52%) and TENAGA (+1.26%). On Wall Street, US stocks generally closed mixed as investors were getting more cautious while waiting for more guidance over the timing of the US Fed interest rate hike as the upcoming US FOMC meeting drew nearer. In addition, the weaker-than-expected Chinese and Japanese economic data also caused concerns among investors over the health of the global economy.

A mixed performance for our portfolios, with only DIVIDEND YIELD Portfolio (+2.24%) outperforming the barometer index (+0.91%) on a weekly basis as the two invested stocks namely DIGI and BJTOTO rebounded by 3.70% and 1.94% respectively. While GROWTH Portfolio (+0.86%) underperformed the benchmark index slightly, THEMATIC Portfolio posted a 0.40% weekly decline as HARTA (-1.07%) retreated from the previous week while PESTECH (+0.53%) posted a small gain. Nonetheless, on YTD basis, all our portfolios still outpaced the 30-stock index (-6.63%) with GROWTH Portfolio (+23.32%) remaining the top gainer followed by THEMATIC (+11.48%) and DIVIDEND YIELD Portfolio (+2.46%). Again, in view of the uncertainty in the current market, we are still looking for appropriate timing to re-enter the market as certain stocks appear to be deeply oversold with attractive valuations. Stay tuned.

Source: Kenanga Research - 14 Sep 2015