Gus Cosio says so

Ideas on the Philippine Stock Market

Where can you find yield nowadays?

9:00 am   Thursday  9 July 2009

I’m going to try to guess what people in the Philippine equity market are thinking.  Later today, The BSP Monetary Board will be meeting and on top of the agenda is a move on policy interest rates.  It is a forgone conclusion that the MB will cut interest rates considering that inflation figures released a couple of days ago showed the CPI at +1.5% which was the lowest in many years.  How can inflation be a threat to the economy at all.  The biggest reason to cut rates is that growth of the domestic economy has been dismal so far and is not expected to pick up by any significant measure.

What’s my guess then?

I think people will try to pick up a good amount of stocks today.  That is what I would do.  I see some stocks being stuck in support levels.  MBT, for instance, has been stock in the 31 to 32 level for a couple of weeks already.  Perhaps, downside for this issue is limited.  That’s likely the case for stocks like FLI, EDC, PNB, FGEN, GLO and TEL.

The biggest news on stocks today is the winning bid of DMCI for the Calaca power plant.  This is significant because the other strong bidder was Banpu Power Ltd., a Thai Coal producer.  The fear was that if they won the bid, they would shut out Semirara Coal (SCC) from further supplying coal to Calaca.   With DMCI operating Calaca, the long term supply arrangement which is the status quo with SCC will most likely be renewed when it expires in May 2010.  SCC share price tanked the other week because of these concerns.  It looks more like a buying opportunity at this point.  Remember, SCC paid 6 pesos in dividends last April.  They will likely pay the same next year.  At yesterday’s price of 35.50, that is 20%.  Where can you find a yield like that nowadays?

So the other guess would be that SCC will move higher and DMC will likely follow.  I think the broad market will probably do better today.

Have a fun day!

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

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