Review of 1H 2007 Investment Performance

It has been a while since my last update of my view on the Stock Market in Feb 2007. It turned out to be true that the market pulled back after the Lunar New Year and the strong correction set-in Mar 07. The STI was down from 3,217.68 (2 Feb 2007) to as low as 2,982.29 (-7.3%) by 5 Mar 07.

The correction in Mar 07 was brought about by the sharp dip in Wall Streets due to liquidity worries revolving around the prospect of the collapse of sub-prime lenders in the US and the unwinding of the carry trade in the Japanese yen, and finally, new concerns that the US economy will stall into a recession by the end of the year, a possibility trumpeted by none other than former Federal Reserve chief Alan Greenspan.

However, the correction was quite short-lived and the STI recovering towards end of Apr-May07 and ended at 3,548.20 at end of Jun 07. My investment porfolio was not affected very much due to price appreciation in my small cap investments, e.g. Adampak, Transview & Sp Winsor and REITs, e.g. AREIT, Cambridge & CMT.

I took some profit on Cambridge, SPH, TT International, Transview, TCIL and Vicom, although some of them subsequently continue to spike up. I also reduce my holdings in HTL and sold off Aussino and Portek due to worse that expected results.

The new investments I have made for long-term cashflow income are Babcock & Brown, First Reit and MacPSF.

Babcock & Brown is the first of its kind of business trust investing in operating leases, loan porfolio securitised assets and alternative assets to be listed here. At the dividend yield of >9%, it is rather attractive although the market perceived it to be of higher risks than REITS. I intend to monitor its results and gain further understanding before increasing my investment in it further. However, I should cap the investment to 20% of my funds in this stock due to the business risks it is carrying (it is a business trust!) and the business performance depends very much on the experience and judgement of its management.

I have invested quite heavily (40 lots) into First Reit as I feel that the market is mispricing it too much due to the risks associated with its Indonesian Assests. Nonetheless, with a NTA of 88 cts and yield of >8%, I believe my average purchase price of 73.3 cts has quite a comfortable safety buffer. For the time being, I will just maintain this amount of investment.

MacPSF is a ASX listed fund having duo listing in SGX. It is an investment funds investing in listed and unlisted property funds in Australia, US, Europe, New Zealand etc. This investment looks interesting to me as it gives me exposures in the properties in Aussie Land and other parts of the World and also the currency exposure to AUD since its dividend is to be paid this currency. It is expected commodity-back currencies should continue to perform well for the next few years due to the strong commodity demand in China. However, it should not be forming more than 10% of my investment.

New investments are also made into Contel and YHI for captial growth potential.