With the local market expected to trend downward technically, we view any further weakness as opportunities to accumulate selective value stocks should the key index dip below the 1,600-level with an ideal “Buy on Weakness” level of 1,570. Having said that, any technical rebound will likely be capped at 1,650 given that the lingering macro issues of weakening MYR and sluggish crude oil prices will limit risk appetite, at least for the nearterm. Therefore, the local market is likely to trade within the range of 1,570-1,650 technically with downside bias. Portfolio-performance-wise, both THEMATIC and GROWTH portfolios performed strongly despite the overall sluggish market sentiment, thanks to small-to-mid caps HARTA and PESTECH. Meanwhile, all our portfolios still outpaced the benchmark index by 829-3,014bps YTD.

Testing the 1,600 psychological-level. We expect trading volume to improve after last week’s school holiday coupled with Hari Raya Haji holiday. Technically, the benchmark index is likely to test the 1,600 psychologicallevel with a downside potential to 1,570. However, we view any market weakness as an opportunity to accumulate selective value stocks should the key index dip below the 1,600 level with an ideal “Buy-on-Weakness” level of 1,570. However, any technical rebound is seen capped at 1,650 given the lingering macro issues of weakening MYR and lacklustre crude oil prices, clamping down on market sentiment at least in the near-term. As such, the local market is likely to trade within the range of 1,570-1,650 technically with downside bias. As we are entering the final quarter of the year this Thursday, we will be releasing our 4Q15 Investment Strategy report soon, which should give investors a better guidance on where to put their money in this volatile market. Stay tuned!

An expected pullback last week. After an unexpected stellar performance in the previous week thanks to the RM20b ValueCap injection, the FBMKLCI started last week with heavy selling as investors took the opportunity to lock in profits as Ringgit continued to find new lows, which approached the RM4.40 level per USD. We saw selldown in bank heavyweights like MAYBANK (-3.33%), PBBANK (-4.97%) and CIMB (-5.25%) and all telco stocks AXIATA (-5.45%), TM (-1.33%), MAXIS (-4.16%) and DIGI (-4.69%). On a positive note, the weakening of Ringgit will continue to benefit exporters like glove makers HARTA (+5.68%), TOPGLOV (+5.19%) and KOSSAN (+2.80%). In fact, HARTA hit fresh all-time-high again last Friday. Overall trading volume also declined in the shortened work week due to the Hari Raya Haji holiday last Thursday. At last Friday’s closing bell, the barometer index retreated 3.26% or 54.44pts to close at 1,615.01, which was led by PBBANK, CIMB and MAYBANK. On Wall Street, the Dow started the week on a positive note, recovering from post-FOMC meeting losses. However, US stocks failed to sustain their gains over the next three trading days. By last Thursday, concerns about the health of global economic growth and potential US interest hike end of this year continued to suppress market sentiment.

Strong portfolios’ performance despite sluggish market, thanks to our exposure to small-to-mid cap stocks like HARTA and PESTECH (+3.91%). While HARTA continues to benefit from the weakening of Ringgit, PESTECH rallied ahead of a RM134m substation contract secured from TENAGA (-0.98%) last Friday. As a result, THEMATIC and GROWTH portfolios posted strong weekly gains of 6.79% and 6.29%, respectively, against the FBMKLCI’s -3.26%. On the other hand, as the two invested stocks, i.e., DIGI and BJTOTO (-1.59%) in the DIVIDEND YIELD Portfolio are blue chips, the income portfolio posted 2.51% weekly loss, which was still better than the benchmark index. On YTD basis, GROWTH Portfolio continued to be the top performer with 24.22% YTD total returns as opposed to the 30-stock index’s -5.92%, followed by THEMATIC (+14.61%) and DIVIDEND YIELD (+2.37%).

Source: Kenanga Research - 28 Sep 2015