InsiderAsia’s model portfolio

It was a good week for the local stock market, which saw extended gains from the previous week and the FBM KLCI rising for four out of five days.

For the week, the FBM KLCI rose a total of 20.8 points or 1.58% to end at 1,335.9. This adds on to the previous week’s 18.5-point gain.

Shares on Bursa traded higher at the start of the new week, with gains adding as the week progressed. Much of the improved sentiment was aided by gains in the Chinese stock market and Wall Street’s continued rally, as well as better than expected economic data, especially from the manufacturing sectors in the US and China.

Investors were also relieved after debt-laden Greece was able to raise funds from the capital market. Earlier, leaders of the European Union and the International Monetary Fund (IMF) agreed to provide aid to the country as a last resort.


After Greece, China has been the centre of recent investor concerns, after stronger-than-expected February inflation data triggered further credit-tightening fears. After the recent bout of weakness, Chinese stocks rallied last week, with the Shanghai Composite Index surging 3.2%.

The better showing was due to stronger corporate earnings and the introduction of stock index futures trading, which will begin on April 16. Perhaps more crucial was data showing that manufacturing activities in China accelerated in March 2010, with the Purchasing Managers’ Index (PMI) rising to 55.1 in March from 52 in February.

The manufacturing sector in the US is also faring relatively well, and is leading the economic recovery there in the absence of strong consumer spending due to high unemployment. The ISM manufacturing index came in at a six-year high of 59.6 for March 2010, compared with an expected reading of 57, and up from February 2010’s level of 56.6.

The positive manufacturing data suggest the global economic recovery is on track, led by China. Indeed, business confidence also strengthened in Japan while South Korea reported a strong 35.1% year-on-year (y-o-y) rise in exports in March 2010, its fifth straight month of double-digit gains.

In other US economic data, the latest initial claims for unemployment benefits slipped 6,000 to a seasonally adjusted 439,000, while the four-week moving average of new claims dropped 6,750 to 447,250. The number was better than market expectations and the lowest level since September 2008.

The latest Conference Board’s consumer confidence index showed an increase to 52.5 in March 2010, after falling to 46.4 in the previous month. Whilst this is still below the readings for December 2009 and January 2010, the latest number remains supportive of expectations that consumer spending will grow, albeit slowly.

All eyes will be on the key US employment report for March 2010, which will set the tone for trading on Wall Street and global bourses in the coming week. Any evidence of jobs creation will go a long way to reassuring investors that the unfolding economic recovery can be sustained.

On the local front, the highlight of the week was the much-awaited New Economic Model (NEM). The NEM contained broad policy measures and recognises the risks and issues facing the economy, and some of the measures that need to be undertaken.
Investors will await more details of some of these measures in the second and third phases of the NEM later this year.

Portfolio review
After the previous week’s strong performance, our basket of 19 stocks outperformed the benchmark index again last week, rising by 1.83% compared with the FBM KLCI’s 1.58% gain. Including our large cash reserves (for which no interest is imputed), the total portfolio value increased by 1.55% to RM576,840.

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 RM416,840. Of this amount, RM224,946 has already been realised from earlier sales, and the rest are unrealised.

Since its inception, our model portfolio has registered a hefty return of 260.5% compared with our capital of RM160,000. By comparison, the FBM KLCI was up by 106.5% 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.

Last week, nine of our stocks rose, nine fell and one was unchanged (Green Packet).

The top gainers for the week were Faber Group (up 6.9%), HELP International (up 6%) and Tanjong plc (up 4.6%). Faber’s shares are generating for us very handsome gains of 91.5% for a relatively short 4.5-month investment. We acquired these shares only last Nov 2009.

The losers were led by Dufu (down 7.9%), Ireka (down 3.1%) and 3A Resources (down 2.8%).

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.