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 while markets in the region registered mixed performances.

The Kuala Lumpur Composite Index (KLCI) today gained 1.2% to end at 1,575 points, getting closer to the 1600 level. Elsewhere in Asia, markets were mixed with Thailand (-2.1%), Indonesia (-0.7%), and Japan (-0.4%) leading the losses. The US market (+1.7%), continued its bullish run today while the German market declined (-0.2%).

Market Outlook: Bad economic data in Europe outweighed by positive sentiments in the US, and Malaysia’s latest fiscal plan

The European Union GDP for 1Q 2020 came up within expectations at -3.1% (Forecast: -3.2%) but Germany’s exports came up below expectations at -24.0% Month on Month (MoM) for April 2020 (Forecast: -15.6%), indicating worser conditions on the ground. Germany’s industrial production came out much weaker than expected at -17.9% MoM in March 2020 (Forecast: -7.5%).

In light of the bad economic data coming out of Europe, US unemployment numbers came out way better-than-expected when it reported that US added 2.5m jobs (Forecast: -8.6m). This resulted in an unemployment rate of 13.3% in May 2020 (Forecast: 20.0%). While this was a big miss by economists, there is troubling news on the calculations of employed people. In this post from Jack Kelly from Forbes, he highlighted that about 4.9 million people may have been mistakenly counted as employed, although they were unemployed for the past 2 months. The unemployment rate for April could have been 19.5% rather than 14.7%, while May would have been 16.1% rather than 13.3%. However, it doesn’t seem like investors are concerned about this as the US market continued to climb upwards.

Portfolio Performance: Portfolio returns increased, and remained higher than KLCI returns

To date, the portfolio of companies I am keeping track on has increased to 17.5% return (5 Jun 2020: 15.4%), outperforming the KLCI index at 15.0%. This indicates an alpha of +2.5% for today (5 Jun 2020: +1.8%). (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 automotive sector continues its high performance (+36.2%), due to the sales tax exemption on cars. This is followed by Manufacturing (+25.6%), Banking (+18.3%), Retail (+16.8%), and Construction (+17.3%).

The higher returns today were due to daily gains from Bermaz Auto (+6.8%), Aeon (+3.9%), Padini (+3.9%), and Kerjaya Prospek (+3.6%). To date, Lotte Chemical Titan (+78.8%), Cahya Mata Sarawak (+40.8%) and Bermaz Auto (+36.2%) are the 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.