Disclaimer: This research should be used purely for informational purposes and is my own personal opinion. I bear no responsibility to whatever investment decisions taken by anyone with regards to this research.

Market Performance: KLCI is up in line with other markets in the Asia region, breaching the 1550 psychological level.

The Kuala Lumpur Composite Index (KLCI) today advanced by 1.5% to end at 1562 points, breaching the 1,550 psychological level. The next technical level to look out for will be the 1,600 level, which will put the KLCI firmly at levels before the Covid-19 pandemic of 7 Jan 2020 (1,611 points). This marks an important development, as breaching the 1,600 levels signals a full recovery.

All markets in the region were up notably Philippines (+4.4%), Thailand (+2.7%), while Indonesia (-0.5%) was the sole loser in the region. Meanwhile, the US market (+2.0%) continued its ascension into bull territory, breaching the 26,000 level. The Germany stock market was in a similar state growing by a bullish 3.9%.

Market Outlook: More positive as initial estimated data on US unemployment data are much better-than-expected

Probably the most important development today is the estimated job loss data for the United States. Initial estimates from ADP indicate that jobs loss was at 2.8m in May 2020, way lower than the forecast of 8.8m from Dow Jones economists. The ADP estimates are a precursor to the monthly nonfarm payrolls report from the Labour Department coming out tomorrow. This indicates way better-than-expected data for the US, and contributed to the 2.0% gain in US market today. If this is true, the economic situation in May could have reversed direction swiftly. The positive sentiment was also boosted by better-than-expected retail sales (-11.7%; Forecast: -15.0%) in April 2020 in the Euro Area and ECB’s plan to increase the amount of stimulus for the economy (ECB is set to announce this later today). 

The news on US unemployment numbers is a shock to me. I did not expect economic conditions to recover that quickly considering that the reopening of the economy was only towards the end of May. It will really be interesting to delve deep into the labour report coming out tomorrow to see which sectors economist have got wrong.

Portfolio Performance: Portfolio returns increased, while still outperforming the KLCI index.

To date, the portfolio of companies I am keeping track on has improved to 16.7% return (3 Jun 2020: 15.3%), outperforming the KLCI index at 14.0%. This indicates an alpha of +2.7% for today (3 Jun 2020: +3.0%). (Note: Alpha is a measure of how much higher or lower the portfolio performs against the market. A positive alpha indicates that the portfolio outperforms the market and vice versa)

From a sectoral point of view, the manufacturing stocks in my portfolio continues to outperform the other sectors, registering 27.2% returns to date. This is followed by Construction (+17.8%), Banking (+17.7%), and Retail (+15.1%).

The higher returns today was supported mainly by daily returns from Kerjaya (+6.8%), Affin Bank (+4.1%), CIMB (+3.1%) and Gamuda (+2.6%). To date, Lotte Chemical Titan (+94.1%), Cahya Mata Sarawak (+38.3%) and Alliance Bank (+29.6%) are my highest returning stocks. You can have a look at the companies I am keeping track on in the Google Excel sheet here or the table below.