Gus Cosio says so

Ideas on the Philippine Stock Market

The woods are lovely dark and deep…

9:05 am  Thursday   23 July 2009   Philippine Stock Exchange    2612.38

The main Philippine index closed near its recent high yesterday.  A closer look will tell us, however, that the more widely followed stocks are still below their recent highs.  I’m refering to the heavy weights like PLDT (TEL), Ayala Corp. (AC), Globetelecom (GLO), Metrobank (MBT), Ayala Land (ALI), SM Prime (SMPH), Bank of P.I. (BPI), SM investments (SM), and Banco de Oro (BDO).  What has brought the index this high were Meralco and the Lopez stocks.  The market have been very skewed the past few days and I think it is giving some investors a difficult time to call the broad movement.

Nevertheless, I would not want to miss the big picture which today will be strongly affected by the possible reduction of reserve requirements for bank deposits.  This will have a strong impact on short term interest rates and bond yields in general.  It will also affect the Peso/US Dollar rate.  Instinctively, I think that this will be good for the market because it generates more cash available for investments.

The market has been looking overbought and is close to the upper target of its trading range, so I expect it to trade a bit softer today.  I would be a buyer on weakness anyway since my longer term view is very constructive.  I also believe that there will be another surge of demestic liquidity as banks reduce their funding cost over the next few months.  With so much money being pumped into the system, there is no other way to go but buy good yielding stocks.  After all, if we are looking at the long run, our journey has just begun.  We have miles to go before we sleep.

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July 22, 2009 - Posted by | Financial markets in Asia, Uncategorized

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