Friday 29 Mar 2024
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insiderasia 

THE local stock market had another solid run last week, despite Wall Street and most other regional markets taking a breather from the earlier strong rally that started in March.

The KLCI rose a total of 27.5 points or 2.85% for the week, ending at 992.7 — just shy of the psychologically important 1,000-point mark. This brings the index's total gains to a sizeable 149.3 points so far over the past six weeks.

The local stock market appears to have detached itself somewhat from Wall Street, extending its rally even as US and global stock markets took a pause. Most bourses, led by Wall Street, had been rallying for some six weeks now and profit-taking activities have started to set in.

Indeed, Wall Street suffered a significant setback on Monday, when the Dow Jones Industrial Average index fell 3.6%, its largest percentage decline since March 5, 2009, led by financial stocks. Higher bad loans at Bank of America revived fears about the health of the US financial system and the sustainability of the recent spate of better-than-expected bank results.

The recent spate of strong bank earnings — as well as a rash of better-than-expected February 2009 economic data — had fuelled Wall Street's earlier rally. However, economic data for March 2009 were decidedly more mixed, and most non-bank corporate earnings in the US have been less inspiring, underscoring the still difficult operating environment.  

The IMF estimates that the global writedowns by banks and financial institutions could reach US$4.1 trillion (RM14.64 trillion), of which only about one-third of that amount has been written down, so far. This suggests the global financial sector would be hit by more loan loss provisions in the coming months. The IMF predicts that the global economy insiderasia-tablewill shrink 1.3% this year.

Nonetheless, there is a growing consensus that the worst is behind us. Investor and even consumer sentiment has improved over the last month. But to be fair, global stock markets have also rallied very strongly over the past six weeks. Thus, intermittent profit-taking activities are inevitable — even if most opine that the worst for the global economy is behind us.

Malaysia detached itself from Wall Street's falls last week due to several domestic factors, including a rally in crude palm oil prices, which surged to over RM2,500 per tonne.

The biggest boost to sentiment was no doubt Prime Minister Datuk Seri Najib Razak's decision to liberalise ownership limits on 27 services sub-sectors, which will help attract more investments and create a competitive business environment. This move was very well received by businesses and investors, with many hoping it will be a prelude to further liberalisation.

Portfolio review
Our model portfolio performed exceedingly well again last week, the third week in a row that our returns have well exceeded those of KLCI's — and with weekly gains of over 5%. Our basket of 18 stocks rose by another 5.6% last week. This was nearly twice the KLCI's 2.85% increase. Including our large cash reserves (for which no interest is imputed), the total portfolio value increased by 3.54% to RM445,349.

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 March 3, 2003. Our total profits are very substantial at RM285,349, of which RM206,221 have already been realised earlier. 

This represents a hefty return of 178.3% compared with our capital of RM160,000. We continue to outperform the KLCI significantly, which is up by 53.5% in the same period.

Last week, 14 of our stocks rose, two were unchanged (Bursa Malaysia and Ireka Corp) and two fell — Dijaya Corp and Dufu Technology (down 1.1% and 1.4% respectively).

Our gainers were fairly large, with five stocks registering double-digit gains. Our top performers for the week were Tanjung warrant-B (up 24.5%), Notion VTec (up 23.4%), Tanjung Offshore (18.8%), Pantech and Muhibbah (both up 10.7%). On April 22, 2009, Tanjong's shares traded ex for a 17.5 sen dividend while Pantech's shares traded ex for a 0.8 sen dividend. We have adjusted for both accordingly.

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.

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