We had a lacklustre trading week as all our portfolios underperformed the benchmark index last week by 75-114bps WoW. However, these portfolios still outperformed the 30-stock index by a whopping 1,447-2,005 bps YTD. This week, while the local market is expected to consolidate further, we believe investor should buy into weakness, but with more emphasis on stock picking. We see limited downside as the FBMKLCI is nearing its six-year discount mean to consensus index target of 1,945. In addition, the benchmark index also could be supported by seasonally strong 4Q factor. Investors may watch out for the 10 TOP PICKs in our just released 4Q14 Strategy last week: BARAKAH (TP: RM1.74); COASTAL (TP: RM5.94), GAMUDA (TP: RM5.52), KSL (TP: RM6.63), MBSB (TP: RM2.65), MUHIBAH (TP: RM3.55), RHBCAP (TP: RM10.00), SIME (TP: RM10.10), SUPERMX (TP: RM3.23) and VS (TP: RM3.16).

Market to remain lacklustre this week, given the uncertainty of external economic as well as geopolitical issues. Being one of the important financial hubs in Far East, the prolonged “umbrella revolution” in Hong Kong could continue to be the sentiment dampener to regional markets, including the Malaysia. Technically speaking, FBMKLCI is expected to consolidate further this week but we believe the downside from here could be limited given that the key index is now trading near to the six-year average of 5.6% discount to consensus index target of 1,945 and had tested the 1,840-30 area. In addition, the local market could be supported by the seasonally strong 4Q factor. We prefer to adopt a “Buy-on-Weakness” strategy with more emphasis on stock picking.

The market hit fresh 6-month low. Last week, although the local market started the week with a positive note, it turned weaker and maintained the flattish tone till midweek when the benchmark hit its six-month low on Thursday. Although the barometer index rebounded the following day, overall market sentiment remained weak as investors were reluctant to make decision ahead of the long weekend for Hari Raya Haji holiday. On a positive note, we saw some bargain hunting and value buying activities in selective blue chips in bank and telco stocks. Overall, foreigners remained as net sellers for almost the whole of last week before it turned net inflow of RM16m last Friday. At last Friday’s closing bell, the barometer index closed barely unchanged at 1,840.82, which inched up slightly by 0.32pts or 0.02% over the week. TENAGA (+2.28%) was the main market’s mover followed by AXIATA (+1.28%) and TM (+2.45%) On Wall Street, US stocks were generally flattish last week within a downtrend as investors remained indecisive given the uninspiring US economic data and geopolitical uncertainty. Energy stocks came under pressure after crude oil price fell to a two-year low. On the other hand, the lacklustre market sentiment and weakened commodities prices prompted investors to switch to US Treasuries (as safe-haven).

Small caps dampened portfolio performance. Last week, as investors were value buying selective blue chips while small caps and third liners faced profit-taking activities. This was reflected in our portfolio performance as we have a well-balanced big and small cap portfolio mix. GROWTH Portfolio was the main loser with YTD total returns reduced to 22.84% after a 1.12% WoW decline in fund value whereas FBMKLCI managed to inch up 0.02% WoW bringing YTD total returns to 2.79%. On the other hand, THEMATIC and DIVIDEND YIELD Portfolios saw their YTD total returns dropping to 22.05% and 17.26%, respectively, after both portfolios posted 0.73% weekly decline over the week. The poor set of portfolio performance was mainly attributable to small caps, like REDTONE (-3.70%), MAGNI (-1.90%), MITRA (-1.57%) and PESTECH (-1.48%). Nonetheless, the losses was mitigated by gains in bigger caps like TENAGA, MAYBANK (+0.71%) and DIGI (+0.34%). We are still confident with our portfolios; the well-balanced exposure between big caps and small value stocks could weather any market conditions to optimise returns.

Source: Kenanga