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Sunday, 06 September 2009 15:17
THIS portfolio review covers the last two weeks, due to the Merdeka holiday last Monday.
Over the last two weeks, the FBM KLCI charted gains, rising a total of 14.9 points or 1.3% to end at 1,178.7 points. In a sign of growing investor caution though, daily trading volume has fallen sharply. Daily trading volume averaged just 554 million shares last week, down from 652 million shares the previous week and 838 million shares the week earlier.
Investors around the region are turning cautious due largely to increased volatility on the Chinese stock market, which in turn is influencing the performance of most Asian bourses.
The Shanghai Composite Index plunged 6.7% on Monday, but later chalked up four consecutive days of gains from Tuesday to Friday. This gave room for Asian markets to recover some of their earlier losses later in the week.
The recent steep fall in the Shanghai Composite Index — by some 20% since early August — is affecting sentiment for Asian bourses. There are concerns that efforts to rein in on excess liquidity and robust bank lending — which fuelled growth in the first half of 2009 (1H09), will affect the rest of the region, even though most economies have bottomed out and are recovering.
US economic data continue to show the world's largest economy is well on the path to recovery. The
Institute for Supply Management (ISM) survey on the US manufacturing showed growth in August after 18 consecutive months of decline. The factory index jumped to 52.9% from 48.9%, above the 50% level that signifies growth.
The services sector also moved closer to growth in August. The ISM index of the non-manufacturing sector rose to 48.4% in August from 46.4% in July. In a separate report, pending home sales in the month of August rose to the highest level since June 2007.
The upbeat data, however, failed to spur buying major interest. Investors, having chased share prices sharply higher over the past few months, are growing worried that valuations have been stretched too far.
Indeed, the main concern remains the strength of the recovery ahead. On Friday, investors around the region were generally cautious ahead of the key US unemployment report for August, which will set the tone for Wall Street's trading on Friday and regional bourses this week.
Ahead of the report, the latest US weekly jobs report was weaker than expected. New claims for jobless benefits fell less than expected (to 570,000 from a revised 574,000) and the number continuing to receive unemployment benefits rose.
A weak labour market suggests US consumer spending, which accounts for 70% of the economy and much of Asia's exports, will remain weak.
There is no doubt that global economic growth will strengthen in the third quarter of 2009 (3Q09). But some investors are worried that the recovery may not be sustainable going into the last quarter of the year — after the impact of inventory rebuilding and government stimulus plans fade.
For instance, August car sales in the US jumped strongly as buyers rushed to take advantage of the government's cash rebate scheme, which has since expired.
On the local front, the second-quarter earnings season has ended with the majority of companies, especially the smaller ones, reporting better- than-expected results. This underscores the resilience of corporate Malaysia during the recession.
Portfolio review
Over the last two weeks, our model portfolio underperformed the FBM KLCI slightly.
Our basket of 16 stocks rose by 0.7%, compared with the FBM KLCI's 1.3% gain. Including our large cash reserves (for which no interest is imputed), the total portfolio value rose by a smaller margin of 0.4% to RM490,817.
Our model portfolio's total value and returns represent a significant achievement compared with our initial capital of just RM160,000. We started the model portfolio on March 3, 2003.
Our total profits are very substantial at RM330,817. Of this amount, RM222,366 has already been realised from earlier sales and the rest are unrealised.
This represents a hefty return of 206.8% compared with our capital of RM160,000. We continue to outperform the FBM KLCI significantly, which is up by 82.2% in the same period. This was achieved even though the benchmark index is less representative of the broader market, and our portfolio holds a large amount of interest-free cash at all times for prudence reasons.
Over the last two weeks, seven of our stocks rose, seven fell and two were unchanged (DiGi and HELP). The major gainers were 3A Resources (up 9.4%), Muhibbah (up 6.7%), Selangor Properties (up 4.8%) and Genting Malaysia (up 4%). The major losers include Ireka Corp (down 9.1%), Tanjung Offshore (down 3.7%) and Bursa (down 2.9%).
Over the last two weeks, we have accounted for dividends from the following stocks, which traded ex-dividends: DiGi (49 sen), Pantech (one sen) and Muhibbah (2.5 sen).
We are leaving our portfolio unchanged.
Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.