Global equity markets are likely to see higher volatility in coming months following the surprise win by Donald Trump in the US Presidential Election as his “American First” policy is likely to have a big impact to international trade. However, we believe it is still too early to draw any conclusions. We maintain our end-2016 Index Target of 1,715 and 1,755 for end- 2017. Moreover, as the discount of FBMKLCI over the consensus target is fast approaching its 12-month average of 4.6%, buying opportunities could be emerging. Technically, the local market is supported at 1,648 in the immediate term with upside capped at 1,680. Portfolioperformance-wise, all our portfolios have shown improvement in the month of October, in tandem with the overall market, with THEMATIC Portfolio as the top performer.

Uncertain times ahead. The immediate reactions to Donald Trump’s surprise win was obviously negative among investors as bourses tumbled around the globe. However, the US market rallied the day after which left investors with disbelief. As such, the regional markets, Bursa Malaysia included, rebounded yesterday as if it were business as usual. However, we believe it is still early to draw any conclusions on Trump’s win regarding his upcoming new policies. Investors are concerned over his trade protectionism stance, which could hamper international trade. This could affect the local furniture and garments/textile players which export their products to the US. Domestically, apart from the US uncertainty factor, the weakening MYR against the greenback and the declining crude oil prices are not helping to improve the lacklustre market which is in dire need of catalysts to boost sentiment. Technically, the immediate resistance is at 1,680 while the downside is supported at 1,640.

A better month in October. The local market was generally moving upwards last month amid investors’ cautious mode ahead of the US Presidency Election. This was on the back of improving Crude oil prices which hit a 52-week high in the middle of the month on news of OPEC members agreeing to cut productions. There were buying in selective bank stocks such as MAYBANK (+5.33%), CIMB (+6.79%) and AMBANK (+2.69%) while telco stocks like AXIATA (-5.7%), TM (-3.54%) and MAXIS (-3.25%) continued to face selling pressure. At the end of October, the FBMKLCI closed 19.91pts or 1.20% higher to settle at 1,672.46 with MAYBANK, CIMB and SIME (+7.06%) as the index movers. On the other hand, foreigners remained as net seller in the month with increasing total net outflow of RM483m as opposed to net outflow of RM289m in September. This reduced YTD total net inflow to RM143m last month. On Wall Street, US stocks consolidated with a tight range as market sentiment was subdued ahead of the US Election. The key indexes’ upside was also capped by some poor earnings reports.

And our portfolios performed better as well. All our portfolios performed better in October with positive returns in tandem with overall market performance. DIVIDEND YIELD Portfolio was the only underperformer against the market with 0.67% monthly gain as the FBMKLCI posted total monthly returns of 1.39%. Meanwhile, THEMATIC Portfolio was the leading gainer with monthly gain of 2.78% while GROWTH Portfolio grew 1.75% over the month. This was attributable to the stronger prices for small caps namely APOLLO (+3.88%) and OCK-WA (+9.09%) while upside was capped by BJTOTO (-3.63%) and TEXCYCLE (-5.61%). On YTD performance basis, DIVIDEND YIELD Portfolio remained as top performer with total YTD return of 4.42%, against the benchmark index of 1.43%, followed by THEMATIC Portfolio of 2.62% and GROWTH Portfolio of 1.18%. With the market trapped in the range bound mode while sentiment is unlikely to be energised, our portfolios are unlikely to outperform the FBMKLCI significantly like in the past years. Having said that, we are hopeful for potential rebounds as we believe the fundamentals for these stocks remain intact.

Source: Kenanga Research - 11 Nov 2016