We expect the local bourse to continue with its lacklustre mood for the remainder of the month in view of the uncertainties ahead coupled with the lack of positive catalysts. Indeed, the uninspiring 3QCY16 report cards coupled with prevailing confusion on global trade post Donald Trump’s victory have provided investors lesser reasons to cheer. Technicallyspeaking, the local index is expected to trade sideways within the 1,620-1,650 range over the two weeks with immediate support zone at 1,600-1,610 level. We have liquidated all our model portfolios yesterday, which marked the first year of disappointment after posting three consecutive years of outperformance in CY13-CY15. Moving forward, we will unveil our 2017 model portfolios in early of January with an intention to introduce a new 4th portfolio that is based on model portfolio theory.

Uncertainties remain. We expect the local market to continue to trade sideways within the 1,620-1,650 range in view of the uncertainty ahead coupled with the lack of positive catalysts. Buying support, meanwhile, may emerge at the 1,600-1,610 zone on year-end window dressing activities. Donald Trump’s unexpected victory in the US presidential election has sparked concerns on US trades policies worldwide, especially to the ex-American markets, in view of his widely publicised anti-trade and anti-globalisation rhetorics. Besides, measures taken by BNM to curb forex speculations coupled with disappointing 3QCY16 corporate report cards have also provided lesser reasons for investors to cheer the market. We have trimmed our 12-month FBMKLCI’s end-2016/17 target to 1,682/1,732 from 1,715/1,755 level previously post the results season review despite the undemanding market valuations.

Sentiment-driven month. Shares and currencies fluctuated widely in the wake of Donald Trump’s unexpected victory in the US presidential election on November 8. Despite some initial panic selling, stock markets worldwide bounced backed with the hope of fresh financial stimulus. However, confusion prevails and doubts remain over the new president’s plans for global trade and investment. At the end of November, the FBMKLCI fell 53.34 pts or 3.2% to close at 1619.12, with 25 out of 30 of the index component stocks showing declines. The top three index leaders for the month are IHH (+3.12%), HAPSENG (+1.93%) and GENTING (+1.52%) while the laggards are AXIATA (-14.84%), SKPETRO (-11.11%) and BAT (-10.74%). On the contrary, over at Wall Street, bulls reigned amid growing optimism that the new policies could benefit the US economy.

Celebrating the Christmas holiday early. We have closed all three model portfolios for the year 2016. In short, our investment during the year 2016 was affected by the weak share price performance of TOPGLOVE and TEXCYCLE as well as inactive trading approach. With that, our portfolios have bucked the 3-year consecutive OUTPERFORM trend and recorded a first disappointing return in the year 2016. DIVIDEND YIELD portfolio (1.96%) was our top performer followed by our THEMATIC (- 2.58%) and GROWTH (-3.36%) portfolio vs. -0.01% total returns in the FBMKLCI. Moving forward, while we continue with the traditional model portfolios (i.e. THEMATIC, GROWTH and DIVIDEND YIELD) which focuses mainly on small-and-mid cap stock selections, and we will initiate a 4th model portfolio by using the model portfolio theory. Details of the model portfolios will be unveiled on the early January 2017, so stay tuned.

Source: Kenanga Research - 15 Dec 2016