HDFIV Report Card @ 22 August 2008

Performance:
HDFIV is currently beating KLCI by 5.50% (20 Aug 08: 4.24%) at a loss of 12.91% (20 Aug 08: 15.11%) while KLCI suffered a loss of 18.41% (20 Aug 08: 19.34% ). Crude palm oil price rebounded as well of recoveries of commodities prices in the United States propelled KLCI slightly higher. IOI was the top performer in the fund this week with recovery from RM4.80 to RM5.15.



















Portfolio:
No purchases or sales this week.


















Asset Allocation:
Staying at 7% cash (20 Aug 08: 7% cash)





















Strategy:
Brokers and remisiers revealed that funds are buying back into IOI Corporation Berhad after the massive sell down that caused the share price of IOI to drop from RM8.00 plus to RM4.00 plus. Reason is the higher crude palm oil price. Now people, investors, speculators are looking at crude palm oil hitting RM3,000 per tonne again. Such development is very short term based for simple reason - movement in daily crude palm oil does not have immediate impact on the operational and financial performance of IOI as the company may be able to hedge prices if they want or leave it exposed. But what is happening is investors are reacting to movement of crude palm oil and make buy and sell decisions of IOI stock based on movement in crude palm oil.

In other words, the increase in crude palm oil may not be sustainable in three days time (for example) and after three days, buyers might dump IOI stock if crude palm oil decreases again.

We will just have to take advantage of these movements and continue to accumulate stocks when it's below our cost as we believe crude palm oil is a commodity with no real substitute in the world. Further, any increase in crude oil will make crude palm oil viable for biodisel as well, creating another source of demand for crude palm oil. And I am wondering when CIMB Research will start to come back with another buy call with "increase in crude palm oil price" as one of the key re-rating catalyst.