Gus Cosio says so

Ideas on the Philippine Stock Market

Word to the wise

6:20pm  6 August 2009  Philippine Stock Exchange Index   2841.21 (-1.59%)

“In economics it is a far, far wiser thing to be right than to be consistent” – John Kenneth Galbraith.

The market is down 45.75 points, that’s a decline of 1.59% which is not a lot considering that we’ve had an almost unbroken rally from 2435 on  6 July.  What creates concern for me is the way prices of PLDT (TEL) and Globetelecom (GLO) behaved.  GLO tanked from 1140 yesterday to 1010 today.  That’s a 130 peso drop or 1.14% after a five day string of unbroken surges.  Some people are disappointed with their expressed strategy of not battling PLDT for market share but focusing more on deriving value from existing subscribers.  Are they giving up on the competition?  What when Sun Cellular (DGTL) catches up? Do they just throw in the towel?

Something like that should have done wonders for TEL, but it dropped also -from 2625 to 2530, 3.6%.  I read in a Reuters report that PLDT stands to lose US$27.5 million on account of the bankruptcy of satellite services operator ProtoStar Ltd. of India.  It comes at a time when fixed line income dropped by 3% and EBITDA margin is down 2% although all other semi-annual figures are up including core earnings per share.  I don’t like the way it looks.  People are looking at the bad side of the news rather than the good.  This may signal the start of a major consolidation of the first-liners.

The case for going into second-liners and small caps has just become stronger.  In spite of the market’s drop, PNB closed up at 24.50 from yesterday’s 23.25.  Volume had also picked up by 725,900 shares or 44% more than the previous day’s turnover. It may aslo be that financials are very much in favor because of high net interest margins.  BPI was up slightly today in spite of all the Ayala stocks going south.

Small cap ISM also closed higher at .029 from .028 – marginal but may indicate a move down the road.  EEI took back some of it gains closing at 2.28 from previous day’s close of 2.30 and a day high of 2.36.  I think this is just a buying opportunity for this share.

Over the intermediate term, I don’t think that the bullishness has yet been squeezed out of the market.  The best thing to do in this kind of situation is to cash in on some gains.  After all, there are still some cheap stocks around.  Taking profits on the frontliners of this rally will just make you more confident when the rally resumes.

If you notice, I change my mind from time to time and sometimes I get it wrong.  What I would like to avoid is to be consistently wrong.  Successful market practitioners are not right all the time, they just know when to bet and when to stay.  At the end of the day, what really matters is the money that’s left on the table.


August 6, 2009 - Posted by | Financial markets in Asia

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