KLCI continue its downward trend this month, dropping around 20 points (1%) probably due to large outflow of foreign capital. As expectation on US Fed to raise interest rate earlier next year growing high, foreign capital are retreating from emerging market to go back US in anticipation of stronger dollar and better return in US. News of China economy slowing down may further exaggerate the situation.
On local front, Bank Negara didn't raise OPR during latest MPC meeting (here). This is a good news to the market as higher OPR will make KLSE stocks look more overpriced and unattractive as investment. Q3 GDP data expected to be released around mid of November shall give us more clue on which direction Malaysia economy is heading. Until then i don't think Bank Negara will raise the OPR during next MPC meeting at 6th November.
Current Return and performance
The outperform can be attributed to a single stock - Mega First Corporation Berhad (MFCB, 3069) probably due to the latest annoucement that one of its project at Laos just got an extension of term. (source)
Trading Activities
i. Addition of Symphony Life (1538). The stock is trading at nearly half of its NAV now. Although recent news that their township development at Sungai Long been holding back due to potential land acquisition by Selangor government, future pipeline of project remain strong (see here). This make its stock looks attractive with P/E around 6 to 7.
ii. Addition of Public Bank (1295). and
iii. Addition of CIMB (1023)
Due to recent plunge in KLCI affected by external environment as outline in market overview, the share prices for this blue chips took a small dip. I am cautious that i may not adding the stocks at their lowest point in near visible term, the sole reason for investing was purely based on the following market view.
Although KLCI looks a bit overpriced now, my bet is that while KLCI will continue suffer some correction (probably fall back to 1800-1820 level), but will remain overpriced for next two to three years. Hence, without knowing which stocks will perform in the future, holding a basket of stocks which i aim to build into my portfolio in long term will be a safer bet.
Besides, contrast with other close-end funds which will not see any addition of capital, I have the ability to add capital (cash) when the opportunity came via two methods.
1) I am depositing my saved salary into the portfolio every month. My portfolio cash position will grow everymonth if i dont buy any new stocks.
2) I have the ability to draw down quite a sum of cash (via personal loan, EPF and some other stable investment) when necessary.
Hence, there is no need for me to hoard cash in anticipating of a crash like Icapital do.
A more prudent approach will be stop buying (or start selling small) when market is at near term high, and start buying when market is at near term low, keeping cash position in range of 5% - 25% of total portfolio value.
However, Investors with less way of raising capital when time required should take a more conservative approach.
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