Gus Cosio says so

Ideas on the Philippine Stock Market

Money from heaven?

2:30pm Saturday   PSEi –  2308.7 (+1.98%)    PHP/$47.64

March remittances from OFWs into the  country grew 3.1 percent from a year earlier to $1.47 billion.  The figure comes after a 4.9% year on year rise in February.  This brings money sent home by the more than 8 million Filipinos to $4.1 billion in the first quarter up 2.7 percent from Q1 2008.  What is impressive about this growth is that is comes during the depth of the global recession.  If you look back to initial jobless claims in the U.S., that number peaked in late March at 674,000.  The latest initial jobless claims as of May 9, 2009 was already down to 639,000 and the number of claims was even exacerbated by a 32,000 lay off due to Chrysler’s  bankruptcy.

We held the notion that Philippine overseas worker would not be adversely affected by the slowdown because they were mostly in the health care and services sectors which are very difficult to retrench compared to construction and manufacturing workers.  This bodes well for our economy because of the very high multiplier effect of remittances to the gross domestic product.  It represents complete value inflow into the economy. In manufactured exports, for example, only about 40% is value added because 60% is accounted for by imported raw materials.  Remember though that the economy is one thing, and the market is another.  The do not necessarily move in lock-step.

Our market has been very strong since March 17, so it may be wise to be a little prudent in buying new positions.  Wall street looks to be running out of steam.  The U.S. market faced its first down week since March 9.  The Dow closed  down 3.67%  for the week while the broader S&P closed down 4.99%.  Wall street still has some sway to the general scheme of things in Asian markets.

The idea to keep in mind is that with markets, it is all about the money.  If people have too much cash in their balances, their propensity to take on risks is greater.  The remittance level is very closely watched because it sustains the amount of cash available to a broad consumer base.  At the end of last year, economists were predicting that flows from OFW remittances would decline by as much as 5%.  It has not happened; and because global recession is no longer worsening, economists may just be pleasantly surprised that remittances this year will be just as much, if not greater, than last year.

Anyway, if you are fully invested, I would recommend that you shift some to cash.  Counters like BPI, AC, ALI, FLI, GLO and MBT have had quite a run.  Nobody loses money by taking a profit.  Do not, however, walk away from this market.  Look for a time when you are comfortable to load up again on your portfolio.

The Q1 2009 earnings season has just started.  Be sure to follow your favorite companies.  I remain very constructive on the PSEi.  Given how cheap stocks are today, they will likely be higher by Q4 2009.

Remember, watch the money!


May 16, 2009 - Posted by | Financial markets in Asia

No comments yet.

Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: