SHARES in my portfolio performed quite well last week. Total value for the portfolio was up 1%, in contrast to the 1.4% drop for the FBM KLCI. Last week’s gains raised my portfolio’s total returns since inception to 8%. I continue to outperform the benchmark index, which has fallen by 2.6% over the same period.

My most recent acquisition in Oceancash Pacific (Fundamental: 1.4/3; Valuation: 0.6/3) has fared well, chalking up 15.5% gain for the week.

Sentiment for the broader market, on the whole, was fairly poor. I believe it will remain so, at least for the near term.

Part of the weakness can be attributed to the sell-off on Wall Street earlier in the week, which was precipitated by its latest, stronger-than-expected labour market report. The robust number of jobs created and fall in unemployment rate have increased the odds for the US Federal Reserve to raise interest rates, sooner rather than later.

Accordingly, the US dollar strengthened, against most currencies in the world. Prices for commodities, typically denominated in US dollar, fell. This includes that for crude oil, which was also being weighed down by rising inventory in the US.

The strengthening of the greenback and weakness in oil prices are having outsized impact on our ringgit, given that we are a net oil and gas exporter.

Early this year, in our State of the Nation special report, we forecasted the ringgit would weaken to 3.70 to the US dollar. This has now come to pass — sooner, in fact, than we expected.

The ringgit weakened despite Bank Negara’s decision to keep the Overnight Policy Rate (OPR) unchanged, which stood out like a sore thumb at a time when almost every central bank in the region is cutting rates to counter sluggish growth.

Last week, the Bank of Korea and Bank of Thailand were the latest to hop on to this bandwagon, in the footsteps of China, Indonesia, Singapore and Australia, to name but a few.

Confidence was, undoubtedly, hurt by the ongoing controversies surrounding 1MDB, the sovereign wealth fund’s high level of indebtedness and the potential repercussions on our economy.  

In reality, our central bank has little room to manoeuvre. The impending GST will offset any deflation pressure that is a key consideration in other countries. Importantly, it needs to keep an eye on further ringgit weakness, which could perpetuate capital outflows.

Foreign funds have been net sellers of both our bonds and stocks. Yields on the benchmark Malaysian Government Securities have risen anew, now hovering around 4%, after having fallen as low as 3.72% in early February.

The price of inaction, however, could be slower economic growth and weaker corporate earnings, which will, in turn, be a dampener on stock prices.  

This article first appeared in The Edge Malaysia Weekly, on March 16 - 22, 2015.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.