Portfolio 24-Sept-2006

Finally, I did pull up myself and do the portfolio review this week. I was busy on some other works for the past few weeks, which include developing my new found hobby...photography @ velo photo, heheee...

Well, back to stock investing, it was indeed a disappointing week for me. The value of my portfolio lost 1.46% or RM1228 compare to last week while KLCI gained 0.65%. The main losers were Tanjong and Magnum, which lost 2.29% and 1.41% respectively. Personally I think Tanjong has been oversold. There was no any new finalization on the IPA negiotiation yet and it seems that many investors were selling out Tanjong base on some romours. Although I did have some concerns on its certain businesses like the Germany Tropica Resorts, but I will likely to convert some other shares (e.g. YTLPWR-w) to Tanjong if its price drops further. As for Magnum, I have no plan to sell my stake as it still appears very attractive with its large cash reserve and continuos share buyback activities.

On the other hand, I guessed I have missed the oppurtunity to sell MTD at RM1.83 as targeted earlier. With its current price fluctuating at range RM1.70-1.80, it is unlikely that I am able to sell it without suffer some losses. I am just praying that there will be more new projects granted to MTD in near future so that its price can be lifted beyond RM1.80. I plan to hold it for another 1-2 weeks. Let's see...

Trading: Public Bond & Public Islamic Bond

Last week, I have finally made a big change in my investment allocation, I moved a big portion of my liquid cash to 2 bond funds. I have invested RM25,000 each in Public Bond and Public Islamic Bond, with price at RM0.9327 and RM0.9989 respectively. This made my current bond to equity ratio around 38:62. In the next 6 months, I plan to increase this ratio to about 90:10. However, I still have no idea whether to convert all the remaining equity to bond fund, or keep it as cash in fixed deposit. This will depend on the overall economic scene then. Also, I have put off my initial plan to invest in gold, which I will detailed out my rationale later.

I selected Public Bond (PBOND) based on its consistant performance and proven track record. It may not be the best performer at all the time, but over a longer term and/or during the recession, it did outshine many other funds. Base on Lipper fund ranking found in Personal Money magazine, PBOND is not even in the top ten ranking of 1-year performance chart (in fact, it only gains 2.89% in past 1-year). However, in longer term, it ranks 4th for the 3-years performance while crowning the top in 10-years performance chart. Furthermore, during the economy slowdown period of 1997-1998 and 2000-2001, it managed to chunk out an impressive 18.97% and 22.70% respectively in the tough 2-years period ! Thus, I believe this fund will be a very good hedging for sailing through any possible recession.

Thanks to recommendation of Emily in one of my blog comment, I took a deeper look into Public Islamic Bond (PIBOND) and later decided to split half of my investment into it. PIBOND is a newer fund than PBOND but it managed to outperform the latter in both 1-year and 3-years return. From the latest quarterly fund report of Public Mutual, I reckon that PIBOND is a slightly more volatile (thus more aggressive?) fund than PBOND as it has significantly larger exposure to money market of 33.91% compare to only 4.64% of the latter. However, this could also means that PIBOND has not fully invested into bond market and is in the process to find the suitable Islamic bond. Nonetheless, its shinning past few years performance caught my heart and in case I was wrong on the prediction of major slowdown ahead, I will still get reasonable 3-4% annual return in bond, after averaging it between PBOND and PIBOND.

I did a last minute pull out from gold mainly because after reading an article regarding gold investment and rethink of my short term investment goal and strategy. It was a really good article but unfortunately I couldn't remember now where I read it from. All in all, the article made me to think why invest in gold, what is the hedging provided by gold, what support the rise in gold price and more. In the past, I always think that gold is a good hedging for inflation, rising crude oil price and falling currency. But looking into details, historical gold price has no strong or firm correlation to any of these elements. Besides, gold has never been "recession-proof". No doubt that inflation and rising crude oil price can leads to recession, but it is also not all due to just these few factors. We have had recession in the period of low inflation, low crude oil price. It suddenly becomes unclear to me why I want to invest in gold and looking at the current high gold price, it is definitely too risky to dip in. I may not be right on what I view in gold but that are at least some of my concerns. Previously, my focus was more on how to invest in gold, rather than looking at the very basic of the rationale in investing gold. For all other gold investors / guru out there, your comment or correction of my view on this topic is most welcomed !

Portfolio 02-Sept-2006

First, my apologise to all my blog readers as I did not manage to do the portfolio review for last week in time. The reason is I did not manage to capture the price change of my portfolio as I am on traveling. I'm too lazy now to track back (without able to refer directly from my Star portfolio) as I believe that the minor change in my portfolio is not worth to mention. However, I would like to mark down here few of my comments in view of the budget 2007 announcement and some corporate developments concerning my portfolio that happened last week.

I was delighted that government has finally reduced the tax imposed on REIT, despite it is only a mere 8% reduction (to 20%) in the case for foreign investor. If I interpret correctly, for Malaysian, the REIT tax will be capped at 15% instead of 28%, which follows individual income tax bracket. This means tax will be lesser for people with annual taxable income of more than RM50k. This will certainly make REIT more attractive in term of nett yield. Nonetheless, compare to Singapore with only 10% tax for foreign investor, there is still a big gap to catch up with. This is reflected in the share prices of REITs after budget announcement, which did not get boosted at all. I think it is just a matter of time for foreign investor to come and start investing in local REIT, as encouraged by the positive move of government and most importantly, the potential appreciation of RM. In addition, I also feel that the new tax structure which will only apply to REIT that distributes at least 90% of their income is another positive action to encourage more REITs to comply to this requirement. So for those richies out there, make sure you buy some good REITs (with 6-8% yield) and start enjoying the lower tax of 15% on your side income!

The second goodness is of course the corporate tax reduction from 28% to 27% in 2007 and eventually 26% in 2008. In an article from The Edge Daily, the saving in tax reduction can almost wholly be transferred to the same increase in earning (0.9% according to one analyst base on their share selection). Personally, I doubt this eventually will make any big "wave" to the general industry. Moving forward, many has acknowledged that the economy will be slowed down, thus reduced earning or even potential loss may happen to the corporate. The 1% saving in tax (in the case of corporate makes profit) will only give an additional boost in good time but during the bad time, its effect is near minimal if not none, in my opinion. Government got to take other more aggressive measures to reduce the bottom line of cost of doing business, such as direct monetary incentive to certain industries or sectors that are most vulnerable to economy slowdown. Thus, I will not rejoice over this move by government, and certainly will not alter my stance of continuing reduce my exposure in stock market.

Lastly, this is a note to myself. For those who follows my blog, you will notice that I have never or seldom touch on the discussion of some counters in my portfolio, likes MTD or KASSETS. The reason is because I treat these counters as hibernating counters which I do not have any plan to buy or sell them in short term. As time passes and new development progresses, in this case is MTD, I revise my call. The latest quarterly report of MTD is indeed very disappointing to me. Mainly I see that its quarterly profit has dropped ~44% and debt has widen by ~14% compare to the last quarter. Investsmart has done a review and he has downgraded it from BUY to HOLD. For me, I will be looking forward to sell this counter when it touches RM1.83, where I'm able to recoup some of the transaction and opportunity cost involved.

At last, I made a real change in my investment vehicle weighting today. I have dropped the idea to invest in gold in the last minute and bought more bond fund instead. If you are interested to know the reasons of my last minute change and details of my latest move, watch out for my next post.....