GLOBAL STOCKS got off to a torrid start in the New Year, buffeted by another bout of weakness in crude oil prices and rising concerns over economic growth.

My outlook for the local stock market has not changed. We are picking up exactly where we left off, in my last article on December 19, 2014.

Recent economic data continue to point to sluggish global growth, save for the US. The European Central Bank appears closer than ever to further monetary loosening, to prop up deteriorating fundamentals in the eurozone. Renewed uncertainties over the political situation in Greece are just adding to worries.

Brent crude oil prices, which looked like stabilising around US$60 per barrel levels in mid-December, plummeted anew, breaking below the US$50 threshold. At the time of writing, Brent crude was being traded around US$50.60 per barrel. The jury is still out on where prices are next headed. Neither OPEC nor US shale producers are blinking, yet.

As the only major economy that is projected to gain meaningful growth traction this year, the US dollar is currently the “no brainer” as a destination for capital flows. The ringgit continued to slide against the greenback — falling as low as 3.586 — in the past week.

Underscoring the unwinding of foreign ownership in Malaysian Government Securities (MGS), benchmark yields shot up to a high of 4.32%, from 4.08% at end-2014. Meanwhile, the country’s foreign exchange reserves dropped to US$116 billion, the lowest level since March 2011.

The FBM KLCI fell sharply in the first four trading days of 2015. Despite an attempt at recovery towards the end of the week, the index is already down 1.6% year-to-date to close at 1,732 last Friday.

A quick survey of forecasts by 10 local research houses indicates a target of 1,850 for the benchmark index, on average. This suggests expectations of improvement, which is contradictory to underlying fundamentals.

A weak ringgit, capital outflow, lower oil revenue, widening budget deficit, GST, rising inflation and interest rates, high government and household indebtedness — they all point to a difficult year ahead, which will be marked by falling stocks and property prices.

The deteriorating fundamentals will be reflected in corporate earnings growth, which has been dismal in the past three straight years — hovering in the low single digit. 2015 will be worse! In short, there is a lot of room for disappointment ahead.

In my last article, I talked about repositioning my portfolio. The plan was to reinvest the substantial cash holding (of RM109,191) into stocks that will fare better under challenging economic and market environment.

Specifically, I intended to buy InsiderAsia’s Top 10 stocks for 2015 — which was published in The Edge Malaysia’s January 5th issue. I already own some of the stocks on this list.

To be perfectly transparent, my portfolio will only buy InsiderAsia’s stock recommendations after they are published, either on The Edge Markets — www.theedgemarkets.com — or in The Edge Malaysia.

Unfortunately, prices for all the 10 stocks that were featured rallied in the past week.

Looking at the table above, share prices for OKA and Homeritz gained as much as 19.4% and 14.3%, respectively, in just the one-week period, from their opening prices on January 5. At the high for the week, the smallest gain for a stock that I do not already own was 5.2%.

Based on last Friday’s closing prices, all the 10 stocks traded higher for the week. Gains ranged from 3.2% to 15.8%, with an average of 6.5% — far outperforming the broader market where the FBM KLCI was down 1.2%.

Given the surprisingly strong investor interest in the recommended stocks, I have decided to hold off, for the moment — on the hopes that prices may retrace a bit or until the broader market momentum shows sign of reversal.

Meanwhile, stocks in my portfolio fared well since December 19 — paring overall losses to just 2.26% since inception. This means that my portfolio continues to outperform the benchmark index, which has fallen by 5.32% over the same period.

This article first appeared in The Edge Malaysia Weekly, on January 12 - 18 , 2015.

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