Gus Cosio says so

Ideas on the Philippine Stock Market

The Philippine Market – The trend is your friend, another day!

Friday evening  10:30 pm, writing from home

While I am impressed by the way investors bought the early pullback in the market, I’d be slightly cautious in the next 2 or 3 days simply because we need to see a more substantial pull back before this rally strengthens its legs.  Surely, I believe in this rally, but I also believe in mean reversals of both volatility and prices.  In plain English, in order for thing not to go out of hand, it should not go out of hand.

Frankly, what really dampens sentiment is when sentiment goes to extremes.  Warren Buffet said, “”The fact that people will be full of greed, fear or folly is predictable. It’s the sequence that is not predictable.” We had seen some of the fear being squeezed out of the markets; and that is why we’re seeing this rally which had its beginnings in the third week of March.  The fact is that those who overcame their fear early, had already tested the waters and dove in.  They’re the ones who are profiting from this rally.  The folly to avoid is the thought that this market will run away from us.  I don’t think that unusual greed is upon us yet.

The peso strenghtened again today to Php47.25 from Php45.45 yesterday indicating strong sentiment in the local scene.  Come to think of it, Manny Pacquiao planed into Manila this morning; perhaps he sold all the US dollars he made from the prize money and pay-for-view for pesos.

Seriously, sentiment seems to be extremely positive for the local economy.  Bloomberg reported this morning: “Asian currencies, including the peso, are aggressively pricing in a global recovery and investors seem to be very euphoric and hungry for emerging-market assets,” said Ayes, senior vice president at Rizal Commercial Banking in Manila.  “In the Philippines, we’re seeing the same strong appetite for our stocks and bonds.”

Most Asian markets were up today with Jakarta being the strongest moving up 1.84%. Hong kong and Shanghai were both up 1% while Singapore was down a mild 0.15%.  Only India took a beating coming off by 1.98%.

In my view, this market rally has quite a long way to go simply because there’s a lot of money looking for productive use.  Like water, stock prices will find its own level.

Some snippets:

PLDT (TEL) is still cheap closing at 2160 today.  Market had been neglecting (TEL) choosing instead to snap up property issues such as ALI, MEG, and FLI as well as banking issues like MBT and PNB.  However, I noticed a volume spike for TEL today and I’ve always believed the market adage that volume precedes price.  Rival Globe was also left behind closing at 815, but I’m watching it closely because it is yielding much better than banks and property.

Buying opportunity is also being generated by power utilities EDC, FGEN and AP.  Prospects look good for utilities.

Today’s pull-back in prices saw these issues drop only to be bought back up quickly.  The index was down 33 pts. in the first hour of trading; when the market closed, we were up 3 pts. This kind of a recovery can only mean that there are still too many investors looking to buy the market corrections.  Risky?  Don’t forget, the FED is back stopping the global financial markets for the time being.

Happy weekend.

May 8, 2009 - Posted by | Financial markets in Asia

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