Gus Cosio says so

Ideas on the Philippine Stock Market

which way is up?

10:00am    Monday    June 15, 2009    PSEi 2579.46

Some good news for global stocks – the Dow year to date has moved into positive territory last Friday. That normally lifts psychology of retail investors to add to their mutual fund portfolios or outright buy some of their favorite stocks.

Over the weekend, I stumbled on an article that had recommended 4 ADRs to U.S. investors looking for income or dividend yield.  These were Taiwan Semi conductors, Spain’s Telefonica and Repsol, and our own PLDT traded as ADRs in the NYSE under the ticker PHI.  Now wonder that in the last 3 trading days TEL has contributed the most to the PSEi’s gain even though the article had been published a few weeks back.

Looking back, Philippine stocks had moved into positive territory as early as March 25.  In effect, our market has been qualitatively bullish for almost 3 months now, in spite of weak macroeconomic conditions.  In contrast to this underlying constructiveness, a survey commissioned by Barclays Bank Wealth Management found that almost 90 percent of respondents in a poll of 2,100 people worldwide said there were opportunities in the current market,but 68 percent believe the risks of further price fluctuations are still too high, the survey found.  Incidentally, respondents were high net worth individuals with portfolios ranging from 500,000 to 30 million pounds.

I find this very positive because it indicates that investors who have the ability to support the market are still sitting on a lot of cash.  That seems to be true in the global markets; that is pretty obvious locally.

G8 ministers meeting in Lecce, Italy over the weekend began drawing up contingency plans for rolling back budget deficits and bank bailouts as the economy shows signs of recovery and investors start worrying about inflation.  They said it is prudent to consider what exit strategies to deploy once global growth is secured.  News like this could douse the current market sizzle since much of the stimulus for the rally was the global injection of liquidity on an unprecedented scale.  Even now, global bond markets are seeing yields rising as investors begin to consider future inflation and the effective tightening that the stimulus unwinding will bring.  Locally, government yields have similarly inched up by around 20 basis points in the long end.

Well, nobody ever thought that market investing was straight forward.  If you entered the market for the very first time in your life last March, you might be led to think that investing in stocks was an easy walk in the park.  I hope that your park had a roller coaster because it is more like taking that ride.  It’s a lot of fun if you know what you’re up to.

In the meantime, I am still looking for a meaningful correction in this market simply because that’s the way strong markets behave.  Will we have a deep correction, i.e. a reasonably large decline in the index?  I think so.  But remember that an index decline does not necessarily mean a large decline in individual stock prices.  One thing for sure, stock prices have to adjust to a major movement in bond yields.  Anyway, if we know that we’re headed up in a few months, what’s a few points down today or this week?

For individual stock pickers, watch GLO, EDC, MWC, PNB, SPH and of course, my favorite TEL.

Have a good week!

http://www.condon.us

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June 14, 2009 - Posted by | Financial markets in Asia

2 Comments »

  1. What about IPVG?

    Comment by Marie | July 26, 2009 | Reply

    • The BPO story is quite strong. I like IPVG but I don’t know how well it will perform. PAX seems to be more tradeable as a stock. If you really want a trade that will hold up for a month, try picking up some AC at these levels. PNB is another; my target for PNB is at least 30 pesos.

      Comment by Gus Cosio | July 26, 2009 | Reply


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