While the market is still lacking fresh catalyst, investors will train their focus on corporate earnings report cards as we are entering the 3QCY15 reporting season. So far, the early batch of reports such as those from the Telcos was disappointing and thus failed to provide any impetus. This week, we shall see how the Petronas-linked companies fare as they are set to release their results. With persistently depressing crude oil prices and weakening of MYR, the local market is likely to face downside bias to test the 1,650 level this week with a trading range of 1,610-1,680 as it has broken down from its key 1,670 support level. Portfolio-performance-wise, we had a lacklustre week, which was in line with the broad market performance, but they still outperformed the barometer index both on weekly and YTD basis. Our portfolios still outpaced the benchmark index by 614- 2,836bps based on YTD basis.

Testing 1,650-level. Although the index is now below our Sell-on-Strength (SOS) level of 1,680-1,720, we think it is still not the time to venture into the market yet. There are basically still the pressing issues of depressed crude oil prices and weakening MYR while there is also little catalyst to support a reversal. Technically, the local bourse has broken its support-turnedresistance level of 1,670 as it retreated further towards its -2SD regression level. As such, the benchmark index is likely to test the downside-bias of 1,650-level this week within the trading range of 1,610-1,680. Meanwhile, the focus will be on Petronas-linked companies, including PCHEM (-1.70%) and PETDAG (-3.43%), as they are releasing their 3Q15 results this week while HARTA (-1.70%) is expected to release its 2Q16 results this Thursday and we are expecting a flattish QoQ quarterly results where volume growth derived from new capacity expansion is negated by forex loss.

A pull-back, finally after 2-3 weeks of anticipation. Overall market sentiment has turned cautious as the FBMKLCI started the week lower after the unexciting Budget 2016 announcement the previous Friday. The market continued to trend southbound for the remaining of the week as Riggit and crude oil prices slid again. Not helping was the early batch of 3QCY15 corporate earnings release that was generally uninspiring. In fact, both telcos DIGI (-6.57%) and MAXIS (-2.37%) reported disappointing results. As a result, DIGI has been bashed down by c.5% since the results release last Monday which saw its 3Q15 core earnings falling 7% QoQ due to product competition and lower devices sales. On the other hand, foreigners turned net sellers in the market with total net outflow of RM359m last Thursday from last Wednesday’s outflow of RM117m. At last Friday’s closing bell, the barometer index fell 2.64% or 45.22pts to settle at 1,665.71, which was led by PBBANK (-3.00%), MAYBANK (-3.84%) and CIMB (-6.11%). On Wall Street, the US stocks had a slow start for the week which was weighed down by declining oil prices while investors braced themselves ahead of FOMC meeting in mid-week. Despite a rally in the mid-week due to strong Apple’s earnings and the recovery of oil prices, the US market continued to slide lower on the unenthusiastic FOMC meeting outcome while disappointing tech stocks’ earnings report cards sent the key index lower.

A sluggish weekly portfolio performance with all invested stocks posting weekly losses except LUXCHEM (+0.64 %) which was the only invested stock with weekly gain last week, albeit a small gain of RM100 each for GROWTH and DIVIDIEND YIELD Portfolios. Nonetheless, the portfolios performed in line with the overall market performance. In fact, the weekly performance of all our portfolios still outpaced the 30-stock index. DIVIDEND YIELD Portfolio was the biggest loser among the three portfolios with portfolio value reducing by 2.63% as opposed to FBMKLCI of -2.64%, followed by THEMATIC (-1.98%) and GROWTH Portfolios (-0.30%). DIVIDEND YIELD Portfolio was badly hit which was attributable to the sharp decline in DIGI on disappointing 3Q15 results. On a YTD basis, GROWTH Portfolio remains the top performer with YTD total returns of 25.87%, as compared to FBMKLCI’s -2.49%, followed by THEMATIC (+18.28%) and DIVIDEND YIELD Portfolios (+3.65%).

Source: Kenanga Research - 2 Nov 2015