Global financial markets were subjected to harrowing daily swings over the past two weeks, as developments on the Europe debt crisis kept investors on a nervous edge.
Investors had earlier breathed a sigh of relief and cheered a rescue plan by eurozone members for Greece and plans to leverage on the remaining funds available in the European financial stability facility.
Representatives of the private bondholders have agreed to a voluntary 50% haircut, much deeper than the earlier proposed 21% reduction. This is projected to cut Greece’s debt to GDP ratio to about 120% by 2020, instead of more than 160% under the July proposal.
However, the euphoria quickly evaporated after Greece threatened a U-turn, with its Prime Minister George Papandreou announcing his decision to put the European bailout deal to a popular referendum. This was later aborted and the prime minister stepped down, but not without damaging confidence and sending financial markets into a tailspin.
Concerns over the European debt crisis later shifted to Italy, the eurozone’s third largest economy, and which holds US$2.6 trillion (RM8.2 trillion) of debt compared with Greece’s US$500 billion. Soaring Italian bond yields prompted fears of a default.
Towards the end of last week, financial markets regained some stability.
With Greece having appointed Lucas Papademos as the prime minister and Italy expected to appoint a new government headed by economist Mario Monti, investors are hoping that both countries will have measures to strengthen their economies, although the debt crisis is probably not by far over.
Amid a volatile external environment, local investors turned their attention to penny and retail stocks in the last two weeks on speculative buying interest. Many counters, notably Harvest Court, chalked up spectacular gains.
While the interest in these penny stocks and lower liners has livened up an otherwise dull market, investors should also note that they carry high risks. Many of these stocks are loss-making and the gains are not supported by fundamentals.
Over the last two weeks, the FBM KLCI lost a total of 13.1 points or 0.9% to close at 1,468.8.
Portfolio review
Stocks in our model portfolio outperformed the benchmark index in the last two weeks. Total market value for our basket of 17 stocks was up by 0.42% to RM377,900, compared with the FBM KLCI’s 0.9% loss.
Seven stocks in our portfolio closed with gains, six with losses and four stocks were unchanged in the past two weeks. DiGi was the biggest gainer, up 7.2% as it announced a capital management and repayment plan. This was followed by Pantech warrants (+4.3%) and Media Chinese International (+3.7%). The losers were led by Masteel and its warrants, down 8.5% and 5.5% respectively.
Including our cash holdings, for which no interest income is imputed, our total portfolio value was up by a lower 0.24% to RM657,113. Last week’s gains boosted our model portfolio’s cumulative returns since inception to 310.7% on our initial capital of just RM160,000. We continue to outperform the FBM KLCI, which was up by about 127.1% over the same period, by some distance.
Our total profits are very substantial at RM497,113, of which RM399,053 has already been realised from previous shares’ sales.
We kept our portfolio unchanged last 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.
This article appeared in The Edge Financial Daily, November 14, 2011.
Investors had earlier breathed a sigh of relief and cheered a rescue plan by eurozone members for Greece and plans to leverage on the remaining funds available in the European financial stability facility.
Representatives of the private bondholders have agreed to a voluntary 50% haircut, much deeper than the earlier proposed 21% reduction. This is projected to cut Greece’s debt to GDP ratio to about 120% by 2020, instead of more than 160% under the July proposal.
However, the euphoria quickly evaporated after Greece threatened a U-turn, with its Prime Minister George Papandreou announcing his decision to put the European bailout deal to a popular referendum. This was later aborted and the prime minister stepped down, but not without damaging confidence and sending financial markets into a tailspin.
Concerns over the European debt crisis later shifted to Italy, the eurozone’s third largest economy, and which holds US$2.6 trillion (RM8.2 trillion) of debt compared with Greece’s US$500 billion. Soaring Italian bond yields prompted fears of a default.
Towards the end of last week, financial markets regained some stability.
With Greece having appointed Lucas Papademos as the prime minister and Italy expected to appoint a new government headed by economist Mario Monti, investors are hoping that both countries will have measures to strengthen their economies, although the debt crisis is probably not by far over.
Amid a volatile external environment, local investors turned their attention to penny and retail stocks in the last two weeks on speculative buying interest. Many counters, notably Harvest Court, chalked up spectacular gains.
While the interest in these penny stocks and lower liners has livened up an otherwise dull market, investors should also note that they carry high risks. Many of these stocks are loss-making and the gains are not supported by fundamentals.
Over the last two weeks, the FBM KLCI lost a total of 13.1 points or 0.9% to close at 1,468.8.
Portfolio review
Stocks in our model portfolio outperformed the benchmark index in the last two weeks. Total market value for our basket of 17 stocks was up by 0.42% to RM377,900, compared with the FBM KLCI’s 0.9% loss.
Seven stocks in our portfolio closed with gains, six with losses and four stocks were unchanged in the past two weeks. DiGi was the biggest gainer, up 7.2% as it announced a capital management and repayment plan. This was followed by Pantech warrants (+4.3%) and Media Chinese International (+3.7%). The losers were led by Masteel and its warrants, down 8.5% and 5.5% respectively.
Including our cash holdings, for which no interest income is imputed, our total portfolio value was up by a lower 0.24% to RM657,113. Last week’s gains boosted our model portfolio’s cumulative returns since inception to 310.7% on our initial capital of just RM160,000. We continue to outperform the FBM KLCI, which was up by about 127.1% over the same period, by some distance.
Our total profits are very substantial at RM497,113, of which RM399,053 has already been realised from previous shares’ sales.
We kept our portfolio unchanged last 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.
This article appeared in The Edge Financial Daily, November 14, 2011.
