While the market is likely to stage a technical rebound in the short-term, the overall technical outlook remains weak with further downside-bias consolidation. In addition, both MYR and crude oil prices are trending down again which do not bode well for market sentiment while investors are also cautious ahead of the next FOMC meeting scheduled for the middle of next month. This week, focus will remain on the 3QCY15 earnings season. Portfolio-performance-wise, we had a fruitful week despite the lacklustre market, thanks largely to mid-to-small caps such as HARTA, PESTECH and LUXCHEM. Our portfolios outperformed the benchmark index by 276-1,080bps WoW and 759-3,550bps based YTD.

Technically still weak. With crude oil prices nearly at its new low coupled with continued weakening of MYR, local investors are hungered for catalyst to propel the index higher. We believe investors will remain in a cautious mood before the last FOMC meeting for this year, which is due on 16-17 December, on interest rate hike concern. On the other hand, we are now at the second leg of the 3QCY15 reporting season which we expect earnings announcements to increase in the coming days before the month-end. Unlike the past quarter which was riddled with disappointments, this round of results reporting has so far turned out results mostly within expectations. Technically speaking, the charts still look weak with the benchmark index likely to fill up the gap at 1,647/52 before rebounding to 1,674/80 in the near-term. In the mid-term, the market is expected to consolidate further with downward bias. In view of this, we maintain our view that investor should Sell-on-Strength when the index is above 1,700.

A sluggish week. The local market trended lower last week, which was in line with the regional performance, as investors sold down heavyweight banks, such as PBBANK (-1.21%), CIMB (-2.99%) and MAYBANK (-0.60%). Plantation stocks, including SIME (-3.72%) and IOICORP (-4.39%), faced selling pressure after latest industry data release showed that palm oil inventory hit an all-time-high of 2.83m MT in October, pressuring CPO prices. On the other hand, lacklustre crude oil prices also kept investors away from oil & gas stocks like SKPETRO (-4.52%) and COASTAL (-1.42%). Nonetheless, glove makers remained in the spotlight and continued to trend higher in view of strong USD coupled with lower operating cost environment as raw material costs declined. In fact, TOPGLOV (+5.85%), HARTA (+7.24%) and KOSSAN (+5.11%) hit fresh record highs again this week. At last Friday’s closing bell, the barometer index fell 1.59% or 26.79pts to settle at 1,658.91, which was led by GENTING (-6.15%), SIME (-3.72%) and CIMB(-2.99%). On Wall Street, US stocks generally closed lower, mainly depressed by plunging crude oil prices while investors hesitated to take position before the Fed’s speeches last Friday for more indications on the health of economy. Energy stocks led the index lower as the US crude WTI lost nearly 10% in November alone, likely to be the worst month since July.

A fruitful week for portfolio. Despite the overall lacklustre market performance, our portfolios performed fairly well, thanks largely to the strong rally of mid-and-small caps such as HARTA (+7.24%), PESTECH (+3.53%) and LUXCHEM (+10.49%). In fact, this was the second week of strong showing for the alternative power player PESTECH (3.53%) which saw its share prices continued to rally after a solid 11.48% gains in the previous week. Our investment returns of PESTECH for both THEMATIC and GROWTH Portfolios has risen 101.14% YTD which is a record so far since we started this model portfolio in early 2013. Thus, THEMATIC Portfolio was the biggest winner last week with 9.21% weekly gain. While GROWTH Portfolio also posted handsome weekly gain of 8.81%, DIVIDEND YIELD Portfolio’s gain of 1.17% was still better than FBKLCI of - 1.59%. On a YTD basis, GROWTH Portfolio remains the top performer with YTD total returns of 32.67%, as compared to FBMKLCI’s -2.83%, followed by THEMATIC (+23.67%) and DIVIDEND YIELD Portfolios (+4.76%).

Source: Kenanga Research - 16 Nov 2015