Trading in global stocks remained volatile last week as investor sentiment swung back and forth from upbeat to concerns on developments in the eurozone, which continued to hog the spotlight.
Spillover positive momentum sent stocks to a strong start at the beginning of last week.
Investor confidence was boosted by the sense of urgency shown by European leaders leading to expectations that a comprehensive solution would be unveiled by yesterday’s summit.
The market was abuzz with speculation on the various measures that would be introduced. An unconfirmed news report suggested that the firepower for the bailout fund, the European Financial Stability Facility (EFSF), would be raised to as high as €2 trillion (RM8.7 trillion) — high enough to stem contagion to the larger, troubled economies of Italy and Spain.
Concerns, however, resurfaced mid-week after Germany tempered expectations for a quick fix. Additionally, confidence was taken down a notch after rating agency Moody’s cut Spain’s and several of the country’s banks credit ratings. It also placed France’s triple-A rating on a negative outlook on concerns that rising bailout costs will hurt the country’s fiscal position.
Calls for a bigger haircut for Greek debts, too, are causing some backlash from the private sector. Under a voluntary agreement, first mooted back in July, bond holders have accepted a 21% haircut via a debt swap exercise. But European officials are now looking at a much larger haircut, of at least 50%, if Greece’s debts are to be reduced to a sustainable level.
The banks are also unhappy with the industry-wide recapitalisation plan currently on the discussion table.
The timeline for the comprehensive package shifted slightly by the week’s end as it became clear that deep divisions remained between Germany and France on the best course forward.
A second summit is now scheduled for Wednesday, at the latest, giving officials several more days to hammer out an agreement.
On the other side of the Atlantic, the latest batch of economic data showed that the world’s largest economy is still growing, albeit at an anaemic pace. Nevertheless, investors cheered that the numbers were not as bad as expected and as a whole did not point to an imminent recession. US corporate earnings for 3Q11 so far have been a mixed bag. Companies are by and large cautious on the outlook but not pessimistic.
China’s most recent data showed further cooling in the country’s economy. GDP for 3Q11 dropped to 9.1%, down from 9.5% in 2Q11 and 9.7% in 1Q11 on government tightening measures and the slowdown in global demand.
Despite some misgivings, most market observers believe that the government will successfully engineer a soft landing for the economy.
As a whole, sentiment for risky assets held up comparatively well last week even though bellwether indices in key Asian markets ended mostly in the red. Investors are keeping faith that a solution for the eurozone crisis will be found and that the world will avoid a double dip recession, at least for now.
We expect trading in the current week to continue to be directed by events in Europe, with all eyes on the outcome of the second summit.
The FBM KLCI swung between gains and losses throughout the week, reflecting uncertainties in the global financial market. The benchmark index eventually closed at 1,438.8 points last Friday on a small 3.6-point loss for the week. Last week’s losses broke the index’s three-week winning streak.
Trading volume improved. The daily trading volume on the local bourse rose to nearly 1.48 billion shares on average, up from the daily average of about 1.06 billion shares in the immediate preceding week.
Trading value was, however, lower as much of the trading interest was focused on lower liners — a shift from the bigger cap blue-chip stocks that we have seen previously.
Portfolio review
Stocks in our model portfolio underperformed the benchmark index last week. Total market value for our basket of 17 stocks was down 0.51% to RM368,520, compared with the FBM KLCI’s smaller 0.25% loss.
Seven stocks in our portfolio closed with gains last week while eight ended lower and two traded unchanged. Some of the notable gainers were Bumi Armada Bhd (+4.3%), Pantech Group Holdings Bhd (+1.1%) and Al-Aqar KPJ REIT (+0.9%). Genting Bhd (-1.5%), MyEG Services Bhd (-1.6%), DiGi.Com Bhd (-1.3%) and Media Chinese International Ltd (-4.3%) were among the bigger losers for the week.
Including our cash holdings, for which no interest income is imputed, our total portfolio value was down by 0.29% to RM647,733. Last week’s losses pared our model portfolio’s cumulative returns since inception to 304.8% on our initial capital of just RM160,000.
Nevertheless, we continue to outperform the FBM KLCI, which was up by about 122.5% over the same period.
Our cash holdings remain substantial, accounting for 43% of our total portfolio value.
The relatively high percentage is primarily for prudence’s sake — reflecting our cautious stance on the market outlook in the near term.
Our total profits are very substantial at RM487,733, of which RM399,053 has already been realised from previous share sales.
We kept our portfolio unchanged last week and will continue to monitor market developments.
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.
This article appeared in The Edge Financial Daily, October 24, 2011.
Spillover positive momentum sent stocks to a strong start at the beginning of last week.
Investor confidence was boosted by the sense of urgency shown by European leaders leading to expectations that a comprehensive solution would be unveiled by yesterday’s summit.
The market was abuzz with speculation on the various measures that would be introduced. An unconfirmed news report suggested that the firepower for the bailout fund, the European Financial Stability Facility (EFSF), would be raised to as high as €2 trillion (RM8.7 trillion) — high enough to stem contagion to the larger, troubled economies of Italy and Spain.
Concerns, however, resurfaced mid-week after Germany tempered expectations for a quick fix. Additionally, confidence was taken down a notch after rating agency Moody’s cut Spain’s and several of the country’s banks credit ratings. It also placed France’s triple-A rating on a negative outlook on concerns that rising bailout costs will hurt the country’s fiscal position.
Calls for a bigger haircut for Greek debts, too, are causing some backlash from the private sector. Under a voluntary agreement, first mooted back in July, bond holders have accepted a 21% haircut via a debt swap exercise. But European officials are now looking at a much larger haircut, of at least 50%, if Greece’s debts are to be reduced to a sustainable level.
The banks are also unhappy with the industry-wide recapitalisation plan currently on the discussion table.
The timeline for the comprehensive package shifted slightly by the week’s end as it became clear that deep divisions remained between Germany and France on the best course forward.
A second summit is now scheduled for Wednesday, at the latest, giving officials several more days to hammer out an agreement.
On the other side of the Atlantic, the latest batch of economic data showed that the world’s largest economy is still growing, albeit at an anaemic pace. Nevertheless, investors cheered that the numbers were not as bad as expected and as a whole did not point to an imminent recession. US corporate earnings for 3Q11 so far have been a mixed bag. Companies are by and large cautious on the outlook but not pessimistic.
China’s most recent data showed further cooling in the country’s economy. GDP for 3Q11 dropped to 9.1%, down from 9.5% in 2Q11 and 9.7% in 1Q11 on government tightening measures and the slowdown in global demand.
Despite some misgivings, most market observers believe that the government will successfully engineer a soft landing for the economy.
As a whole, sentiment for risky assets held up comparatively well last week even though bellwether indices in key Asian markets ended mostly in the red. Investors are keeping faith that a solution for the eurozone crisis will be found and that the world will avoid a double dip recession, at least for now.
We expect trading in the current week to continue to be directed by events in Europe, with all eyes on the outcome of the second summit.
The FBM KLCI swung between gains and losses throughout the week, reflecting uncertainties in the global financial market. The benchmark index eventually closed at 1,438.8 points last Friday on a small 3.6-point loss for the week. Last week’s losses broke the index’s three-week winning streak.
Trading volume improved. The daily trading volume on the local bourse rose to nearly 1.48 billion shares on average, up from the daily average of about 1.06 billion shares in the immediate preceding week.
Trading value was, however, lower as much of the trading interest was focused on lower liners — a shift from the bigger cap blue-chip stocks that we have seen previously.
Portfolio review
Stocks in our model portfolio underperformed the benchmark index last week. Total market value for our basket of 17 stocks was down 0.51% to RM368,520, compared with the FBM KLCI’s smaller 0.25% loss.
Seven stocks in our portfolio closed with gains last week while eight ended lower and two traded unchanged. Some of the notable gainers were Bumi Armada Bhd (+4.3%), Pantech Group Holdings Bhd (+1.1%) and Al-Aqar KPJ REIT (+0.9%). Genting Bhd (-1.5%), MyEG Services Bhd (-1.6%), DiGi.Com Bhd (-1.3%) and Media Chinese International Ltd (-4.3%) were among the bigger losers for the week.
Including our cash holdings, for which no interest income is imputed, our total portfolio value was down by 0.29% to RM647,733. Last week’s losses pared our model portfolio’s cumulative returns since inception to 304.8% on our initial capital of just RM160,000.
Nevertheless, we continue to outperform the FBM KLCI, which was up by about 122.5% over the same period.
Our cash holdings remain substantial, accounting for 43% of our total portfolio value.
The relatively high percentage is primarily for prudence’s sake — reflecting our cautious stance on the market outlook in the near term.
Our total profits are very substantial at RM487,733, of which RM399,053 has already been realised from previous share sales.
We kept our portfolio unchanged last week and will continue to monitor market developments.
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.
This article appeared in The Edge Financial Daily, October 24, 2011.
