Adopting wait and see approach

During my CFA class last weekend, my lecturer of the day Mr O shared with us his view of the current outlook for Malaysia. I sort of agree with him that the next 12 months will not be good for Malaysia because:

1) Fitch is planning to downgrade the credit rating of Malaysia from A- to BBB. This would cause the Malaysia Government Bond 's yield to spike above 5%. This coupled with a high foreign bondholding would mean that the yield might spike further and ringgit will fall further if some foreign funds decide to exit in exodus. See you at 4.00?

2) GST is not a April fool's joke. With the implementation of GST, the consumer mood will deteriorate. The country's GDP will be affected as well based on the experience in Japan and Singapore. Lets hope Malaysia will not experience technical recession at the end of the year.

3) The Kelantan flood repair bill has not come in yet. Nobody knows as of now the extent of the destructions brought by the worst flood in some time. The government will have to foot the repair bill soon. 

4) The oil price will probably linger at 50USD level for the next one to two years at least. Although Malaysia has become a net oil importer according to the government, we still depend a lot on oil revenue. In 2014, the government receive at least RM 60 billion from Petronas. Other than that, due to the capex cut, there are less projects for the downstream and upstream companies in Malaysia. Hopefully these companies can stay profitable in the mean time.

Based on the few points above, I have decided to sell 

- all 40000 units of Hovid @ RM 0.43

- some 8500 units of Inari @ RM 3.33 

- all 1500 units of Inari - WB @ RM 1.47

- all 3000 units of Westport @ RM 3.70.  

*I have actually forgotten to sell Jaya Tiasa. It will be done tomorrow.(Update: JTiasa has been sold as planned @ RM 1.70 each

So Huat Fund looks like this today:

Cashing in on Pestech too

On Thursday, Pestech has finally risen above RM5.00 for the first time after the share split in 2014. During the CFA class, I have learnt about some technical indicators and so I have tried to use them on Pestech:

First technical indicator I used is the Moving Average Converge Divergence (MACD). According to Investopedia, MACD is a trend-following momentum indicator that shows the relationship between two exponential moving averages (EMA) of prices. EMA is simply the weighted average closing price of the last few trading days that gives more weight/emphasis to the latest data. MACD is calculated by subtracting the 26-day EMA from the 12-day EMA. Then we use a 9-day EMA of the MACD, called the "signal line" as a trigger for buy and sell signals. In the area highlighted by blue circle chart below, the MACD line crosses and rises above the signal line, meaning it is a bullish sign. On 28th February 2015 (red circle), the MACD is still above the signal line and thus Pestech still in bullish mode.

Second indicator I used is the Relative Strength Indicator (RSI). According to Investopedia, RSI is a technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. RSI ranges from 0 to 100. Once RSI hits 70, it is considered overbought and the asset is likely to experience some pullback. In the case of Pestech, it was in overbought mode in the last two trading days (26th and 27th February) as highlighted by the red circle below. However, if the RSI drops below 30, then it is technically oversold and will likely to rise.

The two technical indicators indicate that Pestech is still in bullish mode and thus likely to have some more upside. However, the cautious me decided to exit while the market is still bullish and the Pestech volume is still high. So I sold my 1000 units of Pestech @ RM4.96, earning 22% Holding Period Return (HPR). The two transactions in 2015 so far:  

After this transaction, Huat Fund looks like this:

Cashing in on SKPetro

The market volume is quite good for the past few trading days. So I decided to take profit on SKPetro and sold my 2000 units at RM2.85. Earning 25.92% or RM1.2k in less than two months is not too shabby huh. In my opinion, there will be more chances to earn short term cash like this in the coming months due to the volatility in the market. Lets not forget that GST is on the horizon.

GST itself is actually a good thing as Malaysia has got a very huge shadow economy. In order to tax this shadow economy, GST is the best choice. You pay when you consume. There is no running away from it. And it is harder to evade tax too with the computerized system. I reckon, people will push forward their big ticket purchases and this will leave a huge lull in the economy after the GST. Retail and property will be hardest hit. Then stocks like Padini will be worth considering. So cash could come handy then. From now on, I will build up my cash holding and invest in dividend stocks whenever possible.

Huat Fund looks like this after this transaction:

Wa si CFA Candidate

Certified Financial Analyst (CFA) is a program that I found out a few years ago and I have always wanted to study it. Finally I got the chance to enroll in a part time workshop locally after returning to Malaysia and I am proud to say that I am a candidate for the level 1 exam in June this year.

CFA emphasizes a lot on the ethical investing. For example, the interest of clients always come first and we should take the last bite of any cherries. As a matter of fact, as a candidate or Charterholder of CFA, I am not allowed to give guaranteed returns for that is not realistic in the real world and thus considered not ethical.

Therefore, the objective of Huat Fund will have to be altered. Previously, I guarantee a 10% annual return on Huat Fund. Now, I will try my best to achieve a 10% annual return on Huat Fund.

Meanwhile, a little update on Huat Fund. Paper gain increases as the market improved over the last few weeks. Bulk of the gains come from Inari. SK Petro is almost near my 30% target and Hovid is finally showing some sign of life after hibernating for the past half a year. I suspect the renewed interest in Hovid is due to the fall in ringgit as most of it's export products are priced in USD. Heck, even Pestech and QL have broken even. Jaya Tiasa remains the problem child. Huat Fund looks like this today:

Oil Price update

Oil price just dipped below 50USD barrier today. It would be interesting to see how far it will drop further. My guess will be not much more and a upwards correction will be forthcoming soon. Although I firmly believe that oil price rise back to probably 70-80USD level, I am not holding SKPetro for long. I am looking at 30% profit at most.

Today Inari finally went ex-right. The day has finally arrived. Hopefully the market will stay good until it reached RHB's target price of RM3.41 .

In the meantime, Huat Fund swings back into paper gain zone:

Bienvenida SK Petro, adious SunREIT

The past few weeks were disaster for the market. Luckily the local funds managed to prop up the market and stop the slide. As I said in the last post, the market will continue to be volatile for the next one or two years. So cash will be handy soon. I think the oil price has sort of stabilized at 50-60 USD level and will not drop any further because if it drops further, even the Saudis will be hurt badly.

During this month, I have actually done some transactions. However, due to the activities at the new company, I did not have time to update till today. Last week I sold off the 5000 units of SunREIT @ RM1.50 and then added 2000 units of SK Petro @ RM 2.25 into Huat Fund.

This is an opportunistic (aka risky) buy and I did not do much research beforehand. All I know about SK Petro is that it is one of the biggest integrated oil & gas services and solution provider. Yes, the oil price has halved in this year but the share price has plunged from RM4.96 to the RM2.00 at one point. See picture below. I suspect the gigantic slide in SK Petro share price is due to the high foreign shareholding too. I see some rebound in SK Petro soon=).

Huat Fund looks like this as of today:

All in - Huat Fund fully invested~~

I am jobless for this week due to my second job-hopping for the year. Thus, I have some free time to do some readings, analyzing works and market watching.

So firstly some market comments: In my honest opinion (IMHO), the market will be increasingly volatile for the next one or two years but overall the market will keep on rising as long as the interest rate is kept low. A 20% to 30% annual return will continue to attract more newcomers like me into the market to earn "quick money". As more newcomers come into the picture, the arrogance and greed in the market grow. Then we will see another severe market correction in maybe 2-3 years time.

Based on this hypothesis, I have decided to tinker abit with Huat Fund and insert more stable and mature stocks and make Huat Fund to be more dividend yield orientated. That means I will only invest in growth stock IF there is a gem out there. Ideally I would like to do these changes slowly. However, I had to move faster since one of my favourite stable stocks Westport is having a run for the past two days.

I reckon this is due to a 67pages research report from CIMB with a Target Price of RM4.57. FYI, I still have not read through this report. A summary of the report in TheStar can be found here. Knowing that CIMB has joined the bandwagon, I got excited and bought another 1000 units of Westport @ RM 3.40. Well, this is the side effect of intensive market watching. Your hand tends to get itchy after a few minutes in front of the screen. Anyway, Westport is a stock that is worth investing for a simple fact that it would certainly earn more in 5 years time down the road compared to today's earnings.

After this transaction, Huat Fund is cashless and fully invested. I have to sell off something to increase the cash level soon. Guess which stock will be axed soon. The fund looks like this as of today: