Gus Cosio says so

Ideas on the Philippine Stock Market

Let’s put things in perspective!

7:15 pm  Monday  May 18, 2009   PSEi – 2279.37   PHP/$47.53

The big question lingering in people’s mind today is “Will the rally last.”    Analysts have started to question the foundation of Wall Street’s rally which basically was a view that the worst in the U.S. economy was over.  The fear today is will economic indicators improve to warrant a total change in outlook.

Stocks in the Philippines today closed down 29.33 points (-1.27%).  Fortunately, not all the stocks that contributed to the recent rally came off.  MBT, MWC and MEG were unchanged while ALI, MER and GMAP were up.  EDC, FPH, GLO,TEL, BPI were down contributing to the decline of the index.

I would not be anxious at this point.  I would even welcome further consolidation in order to allow strong hands to buy into this market.  I just came back from a fund managers’ monthly meeting this afternoon, and our speaker who was a strategist from one of the top global investment banks believes that we are in the beginning of the next bull run.

Let me put it in perspective.  The last bull run in the Philippines had its beginnings in 2004 when the fundamentals in this country looked very bad due to a blow out in the budget deficit followed by presidential impeachment attempts for 2 consecutive years, not to mention several coup attempts and threats of military uprising.  That rally lasted all the way to October 2007 and was killed not on our own doing but because of the financial meltdown in the U.S. and Europe.

Today, our banks are in much better shape than they were in 2004, our telcos have a bigger subscriber base than in 2004, our power utility companies are better off, and most every other company listed in the stock exchange have prepared for a turn for the worse of the economy.  So economic growth is slower and possibly earnings growth among companies will also be slower.  But hey, stock prices are also way below that of October 2007; the index was at 3,800 then.

Economies such as ours always make a come back.  There may be some belt tightening and other adjustments in the interim, but that only means that companies are conserving cash and restructuring themselves in order to get stronger.  We may not bounce back in the next day or so, but a lot of investors that missed the March to May rally are looking for levels to return to the market.  My suggestion is for investors to decide to have a longer time horizon.  In my case, I’d like to be able to ride out a three year rally, so I’m going to stay around for this one.

Have an exciting week!

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May 18, 2009 - Posted by | Financial markets in Asia

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