InsiderAsia model portfolio

TRADING on Bursa Malaysia was relatively quiet in the holiday-shortened week. Most investors were either on holiday for the extended Christmas-New Year break, or were content to sit on the sidelines and await new leads after making sizable gains for the year.

For the week, FBM KLCI gained 8.9 points or 0.7% to end at 1,272.8 points.

This capped a very good year for the local stock market — and indeed global equity bourses. The year had started off on a very bad note as the financial crisis was in full storm following the Lehman Brothers collapse in September 2009. The declines extended into March before global bourses rebounded strongly and in unison until the end of the year.

For the year, the FBM KLCI gained a total of 396 points or 45.2% after rising from 876.8 points at the start of the year and ending at 1,272.8 points. At its lowest point, the index fell to 838 points in March.

While the gains were slightly less than most regional bourses, it should be noted that the local stock market and domestic economy was relatively more resilient during the crisis.

As a comparison, key market indices in China, India, Taiwan and Indonesia surged 78%-87% for the year. Hong Kong was up 52%, South Korea rose 50% and Singapore was up 64%, but Japan lagged the region with a 19% gain.

After a strong performance in 2009, equity bourses are likely to face more challenging conditions in 2010, depending on the pace and sustainability of the recovery ahead. Much of the recovery in the last two quarters have been driven by stimulus measures and there is a risk of growth dipping in 2H10 as these measures are withdrawn or expire, especially in the US.

There were few fresh domestic leads for investors last week, apart from firming commodity prices. The rise in commodity prices came as the US dollar stopped its recent appreciation trend after a strong rally triggered by sovereign debt concerns in Dubai and Greece. Crude oil prices rose to near US$80 (RM273.60) per barrel while crude palm oil prices increased to about RM2,650 per tonne.

Wall Street was also fairly subdued in light trading, despite several better than expected US economic data released last week.

The Conference Board's Consumer Confidence index rose from 50.6 in November to 52.9 in December. The rise is welcomed as consumer spending is key to a sustained recovery in the US economy, as it accounts for 70% of the economy. A sustained recovery in US consumer spending depends on consumer sentiment, personal incomes, employment and home prices, among others.

The Chicago purchasing manager's index rose to 60 in December from 56.1 in November, the highest since January 2006 and above expectations.

On the other hand, the recovery in US home prices stalled in October, but home prices continued to rise in the UK. The S&P/Case-Schiller composite index of home prices in 20 metropolitan areas was unchanged in October after a 0.4% rise in September. Economists had expected a 0.2% rise. Nonertheless, the annual rate of decline imprived from 9.3% to 7.3% in October.

UK home prices rose for the eighth consecutive month in December to end the year 6% higher, according to mortgage lender Nationwide. However, the monthly rise of 0.4% in December was the smallest since April and the lender cautioned that the outlook for 2010 remained uncertain.

Portfolio review
Our basket of 18 stocks fared extremely well last week, surging 3.2% for the week compared with the FBM KLCI's 0.7% rise. Including our large cash reserves (for which no interest is imputed), the total portfolio value increased by 2.4% to RM524,875.

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 RM364,875. Of this amount, RM223,866 has already been realised from earlier sales.

Since its inception, our model portfolio has registered a hefty return of 228% compared with our capital of RM160,000. By comparison, the FBM KLCI was up by 96.8% over the same period, even though it has been less representative of the broader market's performance. Plus, our portfolio holds a significant amount of non-interest yielding cash at all times for prudence sake.

We currently have surplus cash of RM127,815 for future investments, and the portfolio's equity weighting currently stands at 76%, which we are comfortable with.

Last week, we had 14 gaining stocks and four losing ones.

HELP International Corp was the week's biggest gainer, rising 11.6% to RM1.92 after reporting a sterling set of final results for FY Oct 2009 that saw net profit rise 31% to a record RM15.5 million despite the recession last year. This continues its double-digit growth trend underscores the education company's resilience and strong branding.

Other major gainers for the week include Muhibbah (up 7%), Faber Group (up 5.2%), Notion VTec (up 5%), Dijaya and Selangor PROPERTIES [] (both up 4.8%). The week's losers were marginal, led by 3A Resources (down 2.6%) and MyEG (down 1.1%)

We are keeping our portfolio unchanged.