Aboi's Updates For February 2015

KLSE TECH REVIEW

Here's the link for my last month's market sense: Aboi's Updates for January 2015

For those who find it hard to follow I suggest reading through my previous posting on how I am using technical indicators as a trend seeker.

1. First Attempt on Tech Analysis Part 1
2. First Attempt on Tech Analysis Part 2

Recap - January's commentary. 
"As inflation goes up, Bank Negara will only have two real options. [1] sell foreign reserves to support MYR [2] raise interest rates." - On 28th Jan 2015, BNM has decided to maintain the OPR at 3.25%. Nevertheless the inflation impact of GST due in April is unknown (though for other countries inflation did went up when consumption tax was introduced in the following quarters).

"Because I do not believe that 2015 will be a good financial year for Malaysia I will spend more of my efforts to diversify globally and will need to do it anyway due to the need for portfolio rebalancing." - This still holds true. In fact research houses are expecting KLSE to only grow by 2-3% for 2015 and end between 1800 to 1850 points.

Apart from massive currency fluctuations around the globe (I will blog about this in a separate posting), the Malaysian market should be uneventful in February (along with CNY holidays). For the month of February, I will set the same resistance of 1800-1810 and revised the support line to 1760.

Key economic news and market update from AMP Capital's economic update (FoC, updated every Friday):
1. Oil bounced back a little, suggesting that $45 a barrel may be the baseline price for 2015.
2. European Central Bank (ECB) is embarking on its version of Quantitative Easing a.k.a print money. The Euro will weaken against other currencies, similar to the Yen when Bank of Japan (BoJ) did QE.
3. Greece far left party led by Syriza won election and now leads the government. Greece might face the possibility of an exit from the European Union. (though in my opinion this is not likely).

Portfolio - Healthy gains from funds and Supermx rebounded!
Just last month I mentioned that "Supermax was the hardest hit from rm2.35 to rm1.65 - backed by news that the CEO is charged for insider trading. Read more. Knee jerk reaction as Supermax is still business as usual." True to fundamentals I did not sell, it has recovered to positive territory at RM2.23. No need to panic if you did your homework well.

Gains were felt mostly from funds in January.
1. CIMB PRS Asia Pacific Ex Japan Equity: -0.45% to 7.97%
2. Aberdeen Islamic World Equity Fund: 3.53% to 7.40%
3. AmDynamic Bond Fund: 3.91% to 5.51%
4. Kenanga Growth Fund: 40.77% to 48.62%

I will continue to maintain and add position in no.1 as mentioned before. "Private Retirement Schemes in Malaysia Part 2. I plan to triple my current exposure inside this fund in 2015." Aberdeen will continue to do relatively decent backed by a growing US economy (it has no position in Oil & Gas counters which explains why it did not suffer when oil prices plunge). AmDynamic Bond with exposure in the Asia region (where yields are still good) will continue to perform in 2015. The opposite is for Kenanga, with 100% exposure to Malaysia it will attempt to drift along therefore I am only holding it (changed from BUY rating to HOLD).  

"The shining metal - gold is stubbornly holding ground near $1200, still slightly above my target price. Continue to monitor and wait." - Due to the lunar new year, demand for gold will be strong 'seasonally'. Overall commodities still have the downward long-term trend (remember that a US Fed rate hike sooner or later will make a stronger dollar). 

And finally the Dynaquest Stock Performance Guide Sept 2014 has arrived. Expect stock analysis soon which I will begin with YTLREIT.

PORTFOLIO REVIEW

Portfolio target composition. Equities 65%, Bonds 25% and Supplementary 10%.

Targets for returns p.a. Equities 12%, Bonds 5% and Supplementary 3.5%.

Notes
-SUPERMX - Interim Single-Tier Dividend 4%
-FREIGHT - Single Tier Final Dividend 3.5sen
-Changed Kenanga Growth Fund from a BUY rating to HOLD.
-Changed Aberdeen Islamic World Equity Fund from a HOLD rating to a BUY.

Comments
#1 Portfolio target for the fourth portfolio year @ RM140k for April 2014 has already EXCEEDED. Portfolio target for the fifth portfolio year @ RM152k for April 2015. The TWRR (time weighted annual return rate is now at 8.99% (up by 0.78% from Jan'15) vs my target of 9.40%).


Disclaimer: The reports, analysis and recommendations in this blog are solely my personal views. I do not link to any investment body or company. As such, I will not be responsible of any of your investment decision. Consult your investment adviser or come to your own conclusions before making any investment decision.

DIY Financial Planning

Created a simple spreadsheet (rev1.0) to devise some form of self-financial management. You can get it from here: https://www.dropbox.com/s/ani7eo357s0szxl/DIY_Financial_Planning.xlsx?dl=0. Nothing fancy but needs some explanation. The spreadsheet is divided into four sections:

[1] Income Management

[2] EPF Table (Malaysian Pension Fund)

[3] Risk Management

[4] Wealth Generation

Income Management

The most exhaustive among the big four and is important for your monthly and yearly budgeting plan. It is broken down into Income, Expenses, House Affordability Range and Car Affordability Range. Income is straightforward but do make sure you break your income between taxable and non-taxable. From here you can estimate how much you earn yearly in gross income, net take home pay as well as total EPF contributions and taxes you are paying.

In expenses I further drill into day-to-day spending, regular lump sums (monthly), regular lump sums (annually) and occasional lump sums (estimates). The regular lump sums is the critical part here as this probably the bulk of your life commitments. Towards the very end you will notice a column named "Difference". This is computed based on Net Take Home - Total Expense and will conclude if you are overspending hence the need to revisit your "lifestyle".

 

Next is the House Affordability Range. The formula is derived using ratio 4 as the standard. This value is universally accepted in many countries as well as historical figures for a house to be termed as "affordable".  

Similarly there is a Car Affordability Range. There is no standard ratio. This is simply computed by using how much you can afford (Ideal case) and the downpayment value. For the number of payments, it is best to stick at 60 (5 years). Anything longer means you are paying a lot more in terms of interest value.

EPF Table (Malaysian Pension Fund)

The second tab and this is important for your long-term retirement planning; to roughly guess how much you would have at a specific age depending on your current income. You would be able to estimate your yearly gross from the Income Management section earlier. Both average pay rise of 3.00% and EPF estimated returns p.a. at 5.50% are obtained from historical national statistics.

Risk Management

Here is where insurance comes into play. Broken into two parts: Summary of Protection and Inflation Adjusted Medical Costs/Dependency Coverage. I will explain the latter first. You will need to key in the inflation rate, this rate is the medical inflation rate not the usual consumer price index inflation rate. The cost of treating these critical illness is based on Year 2010. I obtain these values from various sources including articles/doctors/medical news and like asking around.

The Personal Accident coverage simply takes into account how much you earn per year * the duration. The duration that you key in for example might be derived from your family's age. E.g. I need to continue to support my kids for 20 years before they grow up to be able to work for themselves.

The Summary section. You will need to summarize all your insurance policies into a single sum. For Life and Health, both are bench marked against the Critical Illness cost for current year 2015. The Medical H&S is bench marked at 200. Likewise the Personal Accident Coverage is bench marked against the Dependency Coverage for year 2015.

Wealth Generation

Honestly the most difficult part. It is not ready yet but you get the idea where I am heading; partly thinking of portfolio style.

I will occasionally update the spreadsheet as I tweak it. Expect new revisions to come up from time to time. Any feedback is appreciated and I can be reached via my email. Again it can be obtained from here. https://www.dropbox.com/s/ani7eo357s0szxl/DIY_Financial_Planning.xlsx?dl=0

Saturday Lite: Econs in 30 Minutes