Although the anticipated pull-back did not materialise last week, an immediate retracement is still likely due to the market’s overbought technical position. Hence, we advocate investor to sell into strength ahead of the Budget 2016 announcement this Friday, given that the benchmark index is already in our “Sell-on-Strength” zone of 1,680-1,720. Being the first Budget after the GST implementation in April, this could be a market friendly one. Meanwhile, investors may want to watch closely the MYR and Crude oil prices before making any meaningful moves, although they have recovered convincing rebound in the past two weeks, for the first time from their recent lows. Portfolio-performance-wise, we had a mixed week with DIVIDEND YIELD Portfolio the only underperformer against the barometer index. Nonetheless, our portfolios still outpaced the benchmark index by 334- 2,560bps based on YTD basis.

Still expect a pull-back. Although the anticipated pull-back did not materialise last week, we believe an immediate retracement is still likely given that the RSI is approaching the overbought territory while Stochastic is toppish. These could suggest limited upside from here. Moreover, the benchmark index is now at our “Sell-on-Strength” (SOS) range of 1,680- 1,720, thus profit- taking could be an appropriate strategy to deal with this range-trading market. On the other hand, Budget 2016, to be tabled in the parliament this Friday, will be the key focus for this week and we believe it could be possibly a market friendly one being the first Budget after the implementation of GST last April. In view of this, the trading activities of the local market could be lacklustre ahead of the budget announcement. Technically-speaking, we see immediate resistance at 1,720 and 1,730/35 next. On the downside, support levels are seen at 1,700 and 1,690/85.

Still going against the odds. The local market held well above the 1,700-psychological level which went against the anticipation of a pull-back after a strong performance in the previous weeks. The FBMKLCI was traded within a tight range of 10 index points in the past one week which we believe was supported by the recovery of MYR and Crude oil prices. In fact, MYR has strengthened >6% against USD from the 17-year’s low two weeks ago while the Brent Crude oil prices were maintained at close to USD50/bbl last week. However, some profit-taking activities started to kick-in towards the end of the week on selected oil & gas stocks such as SKPETRO (-1.36%) and COASTAL (-5.88%). On the other hand, despite the strengthening of MYR, glove makers TOPGLOV (+8.89%) and KOSSAN (+9.17%) made fresh record highs. In fact, TOPGLOV announced a record profit of RM280m for FY15 last Thursday. At last Friday’s closing bell, the barometer index inched up 0.60% or 10.28pts to settle at 1,716.82, which was led by TENAGA (+2.40), IHH (+5.81%) and PBBANK (+1.52). On Wall Street, US stocks had a mixed week as market sentiment was dented by disappointing earnings report card by Wal- Mart and Boeing during mid-week coupled with sluggish retail sales data and the biggest decline in producer prices. However, strong Citigroup’s earnings as well as tepid inflation data helped to reverse Dow’s 2-day losses as of last Thursday to its highest level in eight weeks.

 A mixed weekly performance. With the good performance of small-caps, namely PESTECH (+3.19%) and LUXCHEM (+0.64%), both GROWTH (+3.19%) and THEMATIC Portfolios (+1.56%) managed to outpace the 30-stock index last week. In fact, PESTECH had performed fairly well, rising to a fresh all-time-high on market talks that it is bidding for projects in Sri Lanka. Meanwhile, DIVIDEND YIELD Portfolio was the only weekly loser with its portfolio value dipping 1.27% last week against FBMKLCI’s +0.60% after the share prices of DIGI and BJTOTO contracted WoW by 1.05% and 3.13%, respectively. On a YTD basis, GROWTH Portfolio remained the top performer with YTD total returns of 26.07%, as opposed to FBMKLCI’s +0.47%, followed by THEMATIC (+15.82%) and DIVIDEND YIELD Portfolios (+3.81%).

Source: Kenanga Research - 19 Oct 2015