Gus Cosio says so

Ideas on the Philippine Stock Market

Where does the tide flow?

1:30pm Monday   20 July 2009   Philippine Stock Exchange index  2587.91  (+1.33%)

Markets in Asia continue to surge with the Hang Seng and the KOSPI indices up an identical 2.38% at the mid day close.  Philippine stocks are undoubtedly very strong.  Buyers are lined up to pick up anything that’s cheap.  I was impressed today by the showing of all headline stocks.

Telcos TEL (PLDT) and GLO (Globetelecom) both rose in spite of news over the weekend that expiry dates of pre-paid load would be extended to double its effective days.  I think the extension would hardly dent earnings since it does not alter pattern of cellphone usage.

Ayala stocks – AC, ALI, MWC and BPI – were similarly on the upbeat.  Down the line, you see a strong showing by MBT (Metrobank) which is understandable given the low cost of funds banks are now enjoying after the BSP cut policy rates the other week.  I reckon all banks would see improvements in Net Interest Margins or NIM for the rest of 2009, although stock prices of the less active bank stocks such as PNB, UBP and SECB have yet to follow.

The Lopez stocks, FPH, EDC, BPC and FGEN have also remained very buoyant on the back of the sky high price of MER (Meralco).  It is understandable that trading of these counters are very active since there is a lot of activity in the power generation and distribution sector.

All told, the reasons why the local market is strong are:  the resilience of the major markets in the region and globally and the amount of cash liquidity finding its way to the market because of very low interest rates.  People are convinced that there is no other way but up, in the long run.  In the US, what arbitrageurs use as a bell weather for investor risk appetite is the VIX index.  That has been steadily declining from its astronomical levels late in 2008 and still historically high levels in early 2009.  Essentially, the VIX seems to be saying that it is alright to buy exposure to the equity markets because, on the whole, there will be many others who are wiling to take that exposure with you.

That’s the thing about markets, when you have a lot of people interested, prices move up.  That is why technicians always watch the volume because they believe that volume always precedes price.

I think that anyone can make good money in the months to come because up to this point, the momentum that was initiated by the view that economies are going to start to recover has yet to play out the trend.  In the last few weeks, the guys who really lost money were those who decided to cut losses, present company included.  I was in the beach this stormy weekend and the waves were constantly battering the shore.  It is tough to swim against this tide. I’m afraid contrarians are not just going to feel out of place in these markets, they will even lose a lot of money.  I am always happy about the presence of skeptics because this tells me that the room at higher levels is still wide open.

Be sure to take advantage of buying opportunities.  Have a good week.

http://www.condron.us

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July 20, 2009 - Posted by | Financial markets in Asia

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