Gus Cosio says so

Ideas on the Philippine Stock Market

Is there really a hungry ghost?

6:45pm   Monday  3 August 2009  Philipppine Stock exchange Index – 2835.11 (+1.31%)

Again a bullish day.  Today was a very credible bull run led by TEL and GLO, followed by ALI, AC, FLI and MEG.  These are barometer stocks and reflect a pure move of the market.  Stocks in play (MER and the like) were a good distance from the action.  They were serious investors who were out there looking to add to their exposure.  What disappointed me is that the banks underperformed today.  I am still  a believer of sustained lower interest rates for as long as the world economy experiences slow to no growth.

What we can chew on today is that people’s view of risk has become more accommodative.  Investors are willing to put more assets at risk probably because of guarded optimism that earnings will not disappoint.  Anyway, the next few weeks should bear us out.  Of course, it also helps that the regional markets of are similarly bullish.  The Hang Seng was up 1.14% and Shanghai rose  1.48%.

There will definitely be moves in the small cap and resource shares in this market.  Even now, we are seeing some movements in SPH, Sino, LC, MA, and SCC, to name a few.  There will be some degree of rotation as people take profits on old position and look for new opportunities.  When the markets are going one way, the only danger is that my notes become too repetitive.

Banks were soft today.  In spite of good news from BPI, it’s shares were down.  MBT and PNB were down but BDO was up.  If you look back though, BDO had been a laggard.  It has to do some catching up.  I would still rate MBT and PNB as buys because I expect better earnings from them as the year wears on.  I’m not too keen on BDO and BPI because at these prices, they are looking expensive.

If there’s any big bet I’d like to make, it would still be EEI.  It is trading at 4X PER and I expect dividend yield to be at least 4.5%, and they have the cash to pay it.  SPH and PNB also remain favorites for value.

I’m hearing that some analysts have raised their index targets to 3000 by year end.  Well, who am I to argue?  I am here for the ride.  I don’t want to look back at this year banging my head for not taking the trading opportunities.

Incidentally, August is seen as the month of the “hungry ghost” which tends to keep the superstitious away.  I’m glad that I’m not superstitious, after all, my crystal ball has been very clear so far.

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August 3, 2009 - Posted by | Financial markets in Asia

1 Comment »

  1. I agree with a big bet on EEI. This is the only Philippine listed company that managed to generate a positive net income in 2008 despite the global recession. What more this year and next, especially if the global economy bounces back. The local property sector is resilient. Spending on infrastructure is expected to pick up as election period draws near. The stock pays out dividends, and is even trading, I believe, below book value.

    Melvin

    Comment by Melvin | August 3, 2009 | Reply


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