InsiderAsia's Model Portfolio - Week 317

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 STOCKS on Bursa Malaysia gained last week. For the most part though, daily trading was relatively listless with the KLCI moving within a narrow range on very thin volume.  For the week, the KLCI rose a total of 13.4 points or 1.6%, to end at 856.8 points last Friday. However, one-third of the index' gains came from a late spurt of buying on Friday. The local bourse's performance was in contrast to Wall Street and much of the region - especially Hong Kong, Korea, China and Japan, which chalked up two weeks of solid gains. This is partly due to our relative resilience when Wall Street and global bourses fell sharply a month earlier. Wall Street had rallied strongly since the beginning of last week, after major indices had earlier hit 12-year lows. Investor optimism on Wall Street was led by hopes that the US economic downturn will bottom out by the end of this year. Some recent economic indicators have turned out better than expected, including retail sales and housing starts. Indeed, the biggest positive was a surprising recovery in the badly battered US housing market - the source of the current recession. US housing starts increased 22.2% in Feb 2009 after plunging 14.5% in Jan 2009, according to the US Commerce Department. The US Federal Reserve is aggressively stemming the downturn by bolstering monetary policy and "printing money". Last Wednesday, the Federal Reserve opted to keep its historically low interest rates unchanged, as expected. With short-term interest rate already near zero, the Federal Reserve unveiled plans to buy long-term government bonds and mortgage-backed securities, worth a total of US$1.15 trillion (RM4.2 trillion). The resulting lower mortgage rates should lend a hand in reviving the moribund housing market. The flipside of this is the long awaited depreciation of the US dollar, which has started to happen after recently reaching multi-year highs against major currencies. This in turn is fuelling a rise in commodity prices again. Crude oil prices rose to above US$50 per barrel while crude palm oil futures traded close to RM2,000 per tonne.  With Wall Street having built in so much expectations of a recovery later this year, investors will assess every bit of economic data to see if forthcoming statistics show a recovery or at least a moderation on declining trends. This will determine whether Wall Street's recent gains are sustainable. And that in turn, will affect the performance for Asian bourses in the near term.  On the local front, there have been few corporate developments or leads. All eyes are focused on the political front, with the Umno party elections and leadership change due around the corner. Portfolio review Over the past week, our basket of 18 stocks rose by 1.1%, slightly less than the KLCI's 1.6% increase. Including our large cash reserves (for which no interest is imputed), the total portfolio value increased by a smaller margin of 0.6% to RM391,808. The 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 3 March 2003. Our total profits are very substantial at RM231,808, of which RM206,221 have already been realised earlier.  This represents a hefty return of 144.8% compared with our capital of RM160,000. We continue to outperform the KLCI significantly, which is up by 32.5% in the same period. Over the last week, we had 11 gainers, six losers and one unchanged stock. The major gainers were Tanjung warrant-B (up 14.3%), Bursa Malaysia (up 9.5%), Muhibbah (up 9.4%) and Pantech (up 6%). The main losers were Selangor Properties, Masteel and EON Capital (each down 3.2%-3.7%). The portfolio's latest purchase, Resorts World, was down 1.6%. We are keeping our portfolio unchanged this week. 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.