Monday, 09 August 2010 17:30
EVEN as investors continued to tread cautiously, confidence in the global economic recovery and corporate earnings growth prospects remained on a relatively strong footing. Bellwether indices in key Asian markets closed higher last week.
Corporate earnings for 2Q10 have largely measured up, and more often than not, exceeded market expectations — and not just in the US. Stronger-than-expected economic data out of the eurozone is also signalling that the worst could be over for the region, which was rocked by sovereign debt crisis earlier in the year.
Actions taken by Greece, so far, have been greeted with praise while a strong manufacturing sector in Germany, bolstered by the weaker euro, is shoring up the economic recovery and investor confidence. In fact, the European Central Bank has been sounding more upbeat than the US Federal Reserve lately.
Data continued to suggest that recovery in the world's largest economy remains patchy. Businesses are still reluctant to hire amid sluggish consumer spending, which is in turn, damped by high unemployment rate.
The local bourse ended the week flat. The FBM KLCI finished almost unchanged at 1,360.5 points. Trading volume improved from the previous week, to a daily average of about 948 million shares.
Our model portfolio performed mixed last week. Six of the 16 stocks in our portfolio closed lower for the week while seven ended higher and three traded unchanged. The best performing stock was Tanjong plc, which surged 20.9% to RM21.26 following the announcement of a general offer at RM21.80 per share. We are making very good gains on our investment. Our cost, after adjusting for dividends, is now only RM9.83 per share.
Nonetheless, our portfolio was dampened by the sharp selldown in Notion VTec, which plunged 22.1% last week. HELP International Corp Bhd also saw some profit taking on the back of its recent rally.
Overall, our basket of stocks fell 0.53% but including our large cash reserves (for which no interest is imputed), the total portfolio value declined by a lesser 0.4% to RM678,545.
Last week's losses pared our model portfolio's cumulative returns since inception slightly to 324.1% on our initial capital of just RM160,000. Nevertheless, we continue to outperform the FBM KLCI, which was up by about 110.3% over the same period, by some distance.
Plus, our portfolio holds a significant amount of non-interest yielding cash at all times for prudence's sake. Our total profits are very substantial at RM518,545, of which RM264,345 has already been realised.
We sold our 4,000 shares in Notion VTec for a gain of RM1,627. The stock has fallen sharply on the back of production problems and weaker-than-expected earnings in the last quarter. The company also warned of further earnings weakness going forward, guiding down market expectations. Due to the uncertain industry outlook, we decided to dispose of our shares pending clearer leads.
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.