As we enter the final week of the 3QCY15 reporting season, corporate earnings report cards remain the main factor driving the FBMKLCI this week. Barring any major negative earnings surprises, we expect the 30-stock index to continue its range bound mode this week. Technically-speaking, the FBMKLCI is still weak, underpinned by the listless key momentum indicators. We continue to view that the local bourse will trend with downsidebias to fill the gap at 1,647/52 this week before rebounding towards the 1,674/80 level. Sellon- Strength strategy is still in play if the index breaches the 1,700 level. Portfolioperformance- wise, THEMATIC portfolio was the only outperformer (supported by HARTA) with its value outpacing the FBMKLCI by another 3,810bps WoW. Meanwhile, all portfolios still outperformed the barometer index by 664-3,404bps based on YTD basis.

All eyes on corporate report cards. We expect the FBMKLCI to continue its range bound mode this week barring any unforeseen circumstances. Having said that, being the final week of the 3QCY15 reporting season, the direction of the local bourse this week, to a huge extend, will be very much influenced by the corporate earnings. We are expecting more than 50 results to be released under our core coverage list. Thus far, 62 companies under our coverage have released their respective 3QCY15 report cards, of which 55% (or 34 companies) came in within, but 31% failed to deliver. Technically speaking, the FBMKLCI still weak, underpinned by the listless key momentum indicators. We continue to view that the local bourse will trend with downside-bias to fill the gap at 1,647/52 this week before rebounding towards the 1,674/80 level. Sell-on-Strength strategy is still in play if the index breaches the 1,700 level. On the external front, the US is scheduled to release its 3Q GDP and November’s consumer confidence index on Tuesday where Bloomberg’s surveys are expecting the numbers to come in at 2.0% QoQ (vs. 1.5% QoQ in 2QCY15) and 99.2, respectively.

Countdown to December’s FOMC. Despite overhanging concerns arising from potential terrorist threats, the external picture somehow turned more encouraging last week as U.S. stocks rallied most of the time last week. This came about after the Federal Reserve bolstered confidence in the strength of the U.S. economy and reinforced speculation that the interest rate increases will be gradual. It signalled that “it may well be appropriate” to raise rates next month, according to minutes of the October 27-28 meeting. Economic data since then have also been encouraging, which lifted the probability for the benchmark rate hike this year to 66%, according to futures data compiled by Bloomberg. The improved external picture, however, did not lift the local market with the FBMKLCI continued to be trapped in a tight trading range last week. Foreign investors, meanwhile, remained in net selling position last week and recorded a total net outflow of RM228m (as of last Thursday). At last Friday’s closing bell, the barometer index inched up 0.18% or 2.98pts WoW to settle at 1,661.89, which was led by TNB (+0.61%), AXIATA (+0.98%) and PBK (+0.44%).

Generally listless weekly portfolios’ performance, with most of the invested stocks posting weekly losses except HARTA (+9.43%) which bucked the trend with a decent weekly gain of 9.43% (or RM1,650 for THEMATIC portfolio). Likewise, BJTOTO as well as DIGI also bucked the macro weakness with marginal weekly growth of 0.07% and 0.33%, respectively. Among all the portfolios, THEMATIC portfolio was the only outperformer (supported by HARTA), outpacing the FBMKLCI by another 3.81ppts weekly. While DIVIDEND YIELD portfolio dropped marginally by 0.76% WoW with marginal appreciation of BJTOTO and DIGI offsetting LUXCHEM’s feeble performance (-3.90%), GROWTH portfolio experienced the sharpest drop among all the portfolios, dragged by lacklustre performances of PESTECH (-3.71%) and LUXCHEM (-3.90%). On a YTD basis, GROWTH Portfolio remains the top performer with YTD total returns of 31.42%, as compared to FBMKLCI’s -2.62%, followed by THEMATIC (+24.87%) and DIVIDEND YIELD Portfolios (+4.02%).

Source: Kenanga Research - 23 Nov 2015