Aboi's Portfolio Review For August 2015

Highlights
- Portfolio's increased in value slightly. Fears of Grexit have abated (hence my Aberdeen's fund returns doubled), meanwhile in the home front we continue to get battered on several fronts (currency, growth and the stock market). It is a crisis of confidence (see my previous post).
- Continue to maintain all ratings, similar to June and July'2015. Aboi's Portfolio Review For June 2015.
- No new additions in July, Fed interest rate hike in Sept is still a possibility.
- Postpone my integration of US holdings (I didn't have the time).

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

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

Notes

- SUPERMAX CORP BERHAD, 0.03 (MYR), CASH DIVIDEND, JUN-22-2015
- GENTING BERHAD, 0.03 (MYR), CASH DIVIDEND, JUN-26-2015
- FREIGHT MNGEMENT HLDG BHD, 0.015 (MYR), CASH DIVIDEND, JUN-26-2015
- AFFIN HWANG SIF, 0.005 (MYR / UNITS), UNIT REINVESTMENT, JUN-09-2015

Comments
- Portfolio target for the 5th year @ RM156k for April 2015: Still slightly OFF. 
- Portfolio target for the 6th year @ RM171k for April 2016.
- The TWRR (time weighted annual return rate = 7.95% 
- TWRR up by 0.07% from July'15 vs portfolio target = 9.40%).

Supermax (Equity Malaysia)
- Maintain HOLD. Uncertainty in local stock market.
- Lowered fair value (RM2.07) - following BursaMKPLC consensus target price. No new developments - stronger USD will help due to exports. See below for previous month June'2015 update.

- Stock crippled due to fire at its Alor Gajah plant but has since recovered.

- Growth in capacity from two new plants in Meru, Klang which will double nitrile gloves production from 6.9b to 12.3b pieces p.a.

- Still has attractive valuations vs peers e.g. PER & Div Yield.

Genting (Equity Malaysia)

- Maintain HOLD. Uncertainty in local stock market.
- Maintain fair value (RM10.69). No new developments. Stock took more beating and is further undervalued, no reason to sell as fundamentals have not changed. See below for June'2015 update.

- However most of its current investments will only come to fruition in 2H15/2016 so there is no short term catalyst to prop up share price.

Freight (Equity Malaysia)

- Maintain HOLD. Uncertainty in local stock market.

- Maintain fair value (RM1.65). No new developments. See below for previous month June'2015 update.

- Stock took a beating due to cessation of a 3PL contract and temporary closure of a warehouse for renovation but expected to slowly recover.

- Growth will be supported by its core Sea Freight division and trade within Asia-Australia region.

ICapital (Closed-End Fund Equity Malaysia)
- Maintain BUY.
- Huge discount from current price to NAV (21.05%)

Affin Hwang Select Income Fund (Equity & Bond - Asia)

- Maintain BUY.
- Asia Pacific's healthy credit market more or less can offset stronger USD in the coming months. See below for previous month June'2015 update.
-Strong USD will make headwinds for Asia markets as such fund pare down exposure in equities (30% -> 20%). 
- Also doubled cash levels to 7% and continue exposure on Asian credit market pending US Fed's direction in the 2H15 (possible hike in Sept / Dec).   

Kenanga Growth Fund (Equity Malaysia)

- Maintain HOLD. Uncertainty in local stock market.
- Because fund held so much cash, impact from recent KLCI selloff activity is not too worrisome yet as year-to-date return is still in positive territory.

- Lack of catalyst in the short term, fund holding high level of cash ~20-25%.

FUND PERFORMANCE (BID TO BID CUMULATIVE RETURNS)

Period 1 wk 1 mth 3 mth 6 mth YTD 1 yr 2 yr 3 yr 5 yr 10 yr Bid to Bid Returns (%) - RM -4.3 -2.4 -3.0 2.6 10.87 2.4 32.1 56.7 135.6 365.8 Performance figures are absolute returns based on the price of the fund as at August 11, 2015 (Last updated on August 13, 2015),on NAV-to-NAV basis,with dividends being 'reinvested' on the dividend date.

AmDynamic Bond Fund (Bond Malaysia)
- Maintain BUY.
- No change in my previous commentary. BNM has maintained the base lending rate in the 4th MPC meeting as expected.

- Mainly invested in local corporate bonds ~80%.

- BNM will likely continue its policy pause and maintain cautious stance with a "wait-and-see" approach on US Fed direction (a possible hike in Sept / Dec).

FUND PERFORMANCE (BID TO BID CUMULATIVE RETURNS)

Period 1 wk 1 mth 3 mth 6 mth YTD 1 yr 2 yr 3 yr 5 yr 10 yr Bid to Bid Returns (%) - RM 0.1 0.6 2.2 3.4 4.2 6.7 7.6 12.8 35.1 116.9 Performance figures are absolute returns based on the price of the fund as at August 11, 2015 (Last updated on August 13, 2015),on NAV-to-NAV basis,with dividends being 'reinvested' on the dividend date.

Aberdeen Islamic World Equity Fund (Equity Global)

- Maintain BUY.
- European markets recovered and with fund's medium exposure in Europe, fund has done well. Also it has USD exposure further strengthening its returns since the MYR has weaken considerably in July.
- Fund has no exposure to China's overheated stock market and slowing economy. Fund also has 18% exposure to the already lofty valuations in US equities so impact is minimized if a correction occurs.
- Fund continues to be very diversified globally; Healthcare (21%), Materials (16%), Energy (15%), Industrial (13%), Consumer Staples (13%).

FUND PERFORMANCE (BID TO BID CUMULATIVE RETURNS)

Period 1 wk 1 mth 3 mth 6 mth YTD 1 yr 2 yr 3 yr 5 yr 10 yr Bid to Bid Returns (%) - RM 2.7 3.2 2.5 5.0 9.59 13.3 28.3 - - - Performance figures are absolute returns based on the price of the fund as at August 10, 2015 (Last updated on August 13, 2015),on NAV-to-NAV basis,with dividends being 'reinvested' on the dividend date.

CIMB Principal PRS Asia Pacific Ex Japan Equity Fund (Equity Asia)

- Maintain BUY.
- Shanghai's stock market continue to weight down to date but fund's exposure is minimal so I'm safe. With Grexit off the table, fund has started to recover.
- Fund holding exposure to China's overheated stock market is minimal ~10%.
- Positive on Asian Equities but growth will be more scarce moving forward as regional portfolios are fully invested hence earnings will depend highly on stock selection.

FUND PERFORMANCE (BID TO BID CUMULATIVE RETURNS)

Period 1 wk 1 mth 3 mth 6 mth YTD 1 yr 2 yr 3 yr 5 yr 10 yr Bid to Bid Returns (%) - RM 0.9 1.6 -1.4 2.8 8.99 18.0 36.8 - - - Performance figures are absolute returns based on the price of the fund as at August 11, 2015 (Last updated on August 13, 2015),on NAV-to-NAV basis,with dividends being 'reinvested' on the dividend date.

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.

Weekly Market Highlights August (1) - Special Malaysia Highlights

Source: Amp Capital (here for full market update) & iCapital biz (subscription required)


United States
The US Federal Reserve is on track to hike interest rates (Amp says Dec but I think a hike in Sept is still on the cards & cannot be disregarded), but September is looking less likely thanks to very weak June quarter wages growth. A further improvement in growth and confidence that inflation will rise is needed. On the inflation front, falling commodity prices and a very weak rise in June quarter employment costs which saw annual growth fall back to just 2% suggests that a September hike is now looking less likely with the timing being pushed back to December.

The US June quarter earnings reporting season continues to better expectations. We are now 70% done and 74% of companies have beat on earnings. The focus will be on the July institute for supply management manufacturing conditions purchasing managers’ index (Monday) which is expected to remain solid at 53.5 and July jobs data (Friday) which is likely to show continued strong jobs growth of 220,000 but unemployment remaining unchanged at 5.3%.

Eurozone

Eurozone economic confidence rose in July to a four-year high, despite the noise around Greece, and is running around levels consistent with decent growth. On top of this bank lending is continuing to improve and the Spanish economy grew 1% in the June quarter with annual growth at its fastest since before the global financial crisis. Clearly Spain is not a Greece! Meanwhile, although Eurozone core inflation rose in July to 1% year-on-year it remains well below target and is likely to fall as lower commodity prices feed through, so European Central Bank quantitative easing is set to continue. 

Asia

Chinese shares had a bad week with their biggest one-day fall in eight years, largely in response to a rumour that the China Securities Finance Corporation was no longer committed to stabilising the share market. While this was subsequently denied volatility remained high. After very sharp share market falls like the 1987 share crash or through the technology wrecks and global financial crisis, it’s quite normal to see a volatile period of base building around the bottom. So the same is likely to apply in relation to China. That said further policy stimulus is still needed in China. 

Japanese economic data was mixed with household spending down and unemployment up, but against this the jobs-to-applicants ratio held at its highest since 1992, industrial production rose more than expected in June with an improvement in the July purchasing managers’ index pointing to further gains and core inflation at least rose to 0.6% year-on-year in June. The Bank of Japan (Friday) is unlikely to change monetary policy, although more quantitative easing remains on the cards at some point. 

On the Malaysian front, we are battered in several fronts; stock market, domestic spending and currency but they all have a common theme - we are suffering from a 

crisis of confidence.

[1] Sell-off in the stock market intensified amid weakening growth prospects continuing to weigh down on investor sentiment. Even EPF is selling since Monday of the week. 

At the same time, PNB had sold 25,000,000 shares of Maybank. Citi Research, a unit of Citigroup Global Markets Inc, yesterday projected Malaysia’s economic expansion may slow to 4% in the second quarter ended June 30 from the 5.6% achieved in the first quarter.
BNM will release this data 13th Aug 2015 (Release of 2nd Quarter 2015 GDP). If data is worse than expected, more market sell-off may occur.


[2] Domestic spending confidence is like tumbling monkeys - almost to the same level as it did during the financial crisis. With further weakening of myr (take oil as example, global oil has shed half its price but prices at the pump remains relatively same a year ago) and consumers still reeling from post GST effects it is very certain confidence level will remain low for a while.

[3] Currency woes can be summed up as = commodities bear market (palm oil & oil) + low IR  + the super moron. I will talk about each. 

- The two commodities are the country’s major exports after electrical and electronic products. Oil is now below $50 a barrel while crude palm oil is at near RM2,000 a tonne levels. Oil is expected to remain low (Saudis are in deep shit with their war against US shale frackers losing ground) while most analyst expect CPO prices to average between RM2,200 to RM2,400 a tonne this year amidst not so strong demand from India and China.

- Low interest rate. It will remain so (unless the currency gets far worse than it is now >4.5). I have said this many times.

BNM will continue to burn reserves to smooth the decline. It is very clear already. If this runs dry capital controls will follow or possibly interest rate rise.
The international reserves of Bank Negara Malaysia amounted to RM379.4 billion (equivalent to USD100.5 billion) as at 15 July 2015. 
The international reserves of Bank Negara Malaysia amounted to RM364.7 billion (equivalent to USD96.7 billion) as at 31 July 2015. 

- Super moron. Najib Razak himself (also the Finance Minister) is a crisis. If a prime minister can pocket RM2.62 billion and walks away a free man running the country, what is there to stop him from becoming the ultimate major shareholders of all the 940 public listed companies in the stock exchange? Meanwhile he is also surrounded by equal bigots:

"Nazri (Tourism Minister) stands by belief that weak ringgit is good for tourism." 
Kepala otak hang -> nak jadi Uganda, Madagascar, Siera Leone, Zimbabwe ke?

“God willing, the ringgit slide will stabilise,” said Husni (Second Finance Minister). “We will get a better picture when the US Federal Reserve decides on the interest rate.
Kepala otak hang -> when the US decides the only direction is going to be up. 

"Wahid (Minister in PMO): Ringgit slide not as bad as during Asian financial crisis."
Kepala otak hang -> the Ringgit is now 3.943 per dollar, its weakest since Sept. 2, 1998, the day before the government pegged it at 3.8000 per dollar to put a floor under the currency during the Asian financial crisis.

Aduhai..in 3 days 3.855 -> 3.943

What can you do?
Before you ask me. No, we are not even close to Greece (debt default crisis) is different than that of crisis of confidence. Please don't queue up to withdraw all your savings or EPF like there's going to be a RM60 max withdrawal per day.

Use your Ringgit and invest in Asia Pacific ex Japan funds - call it a form of hedging because the Malaysian Ringgit lost 2.8% to Singapore, 3.8% to Thailand, 4.9% to Indonesia. Within the same 3-months period, the ringgit also losses 7.6% to Chinese Renminbi, 4.1% to Japanese Yen, 2% to Korean Won, and even a staggering 7.9% to Pakistan Rupee and 8% to Indian Rupee.

I would avoid putting more money in the Malaysian market. As I have mentioned a month earlier in my July Portfolio Update, everything in Malaysia is already at HOLD.  

Hold some USD/SGD/GBP at least for the short term (6 months). Don't bother about Euro, Yen or AUD (they are expected to remain relatively weak). Don't even bother about Gold (a stronger dollar & suppressed oil will mean this asset class will remain weak). I prefer SGD as historically it has appreciated against MYR. There is a risk that the Ringgit gets pegged to USD.

Join the calls (blogs, Bersih 4, facebook and whatever) to demand Super Moron to step down. I can safely say that both the currency and stock market will have a knee-jerk 5-10% recovery or at least our endless bird droppings will stop further.

The Risk of Holding Ringgit is Skyrocketing, WTB Donations

I was told that this table is used by Forex dealers that rely on forecasts on currencies for their business. I did not verify it but judging by looks and the technicality of it, I don't think is worthwhile for anyone to falsify it. Some hard data below.
RatesFX: Daily foreign exchange rates, information about currencies and currency markets

The US dollar is the most important currency here simply because commodities are priced in USD and world trade is dominated by the use of USD.

Dealers are forecasting in 3 months that Ringgit will hit a new high of 4.3246 against the dollar down to a low of 3.8276. Aduhai...

Even while Japan is busy printing tonnes of Yen, we are still weakening against it. Yesterday I was at the money exchange, the Ringgit was around RM3.855, today it's already RM3.873! This is live rates btw. Aduhai...

BNM has burned $30 billion of our reserves (in less than a year!) to defend the Ringgit and yet the currency is still falling. Please note that this is $ (dollar) so it's more than RM 100 billion. Aduhai....

Our half-past-six minister to tell all how fabulous it is to have weak ringgit. The country can export more and increase foreign investments. Weak ringgit also encourages tourists. That’s why Uganda, Madagascar, Siera Leone, Zimbabwe are such a paradise.

I have said this before (see below). Now if the MYR really plummets more, capital controls might follow. The interest rate gun will be used as a last resort (like how Russia & Greece did). When that happens you'll wish you don't even have a housing loan. 2017?? 

Here's what on the news lately and on the on the ground:
-conclusion = economy crisis, good for export, good for tourism and good for songlap

-we are doing so well that we are able to attract donation for billions

-even USD/MYR at 4.50, the macais will keep donate to him.

-Slowdown? Many packed and close shops ady...migrating elsewhere

-$30 billion in reserve wiped out! wow!