Gus Cosio says so

Ideas on the Philippine Stock Market

Working hard for the money

8:50 am   Thursday  May 28, 2009 (the PSE is still closed)

Stocks on Wall Street declined by 2%.  The volatility Index (VIX) is up 5.7% for the day hinting that U.S. traders are getting to feel a little edgy.  Markets in Japan and Australia are trading lower while Korea which opened down is surprisingly higher a few minutes after the open.

My guess is that we will open lower.  PLDT was lower in new York at $47.20.  That is still approximately Php2230 which is just about where it was yesterday.  What pulled New York down was rising U.S. treasury yields amid concern of record supply. The U.S. is estimated to sell $3.25 trillion of Treasuries in the fiscal year ending Sept. 30 to fund bank bailouts.  That together with signs of recovery have brought a lot of jitters to investors driving down prices of long term treasuries causing the yield curve to steepen.

Remember, it’s all about the money.  So far, the FED and the U.S. government has been pushing money out.  These auctions tend to pull money in.  If it goes purely to the treasury, that would not be a problem because it will come back in terms of fiscal spending.  The worry is that the FED may be taking money out of the system.  That would squeeze some liquidity from the markets.

My guess is that while the FED will eventually take the money back, they won’t be doing it anytime soon.  As for the local Philippine market, I do not think that this will be a negative.  While it will lead investors to give the local market further thought, it would actually highlight the attractiveness of Philippine stocks.

Do I sound like the everlasting optimist?  I believe I’m just calling it as it is.

Have a cheerful day.

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May 27, 2009 - Posted by | Financial markets in Asia

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