Gus Cosio says so

Ideas on the Philippine Stock Market

Is the U.S. recession over?

8:45am  Monday     10 August 2009    Philippine Stock Exchange Index Friday close 2782.98 (-2.05%)

Friday was another day of consolidation.  It’s an experience that many of us are no longer used to.  We’ve had very few of these corrections since March this year.  I find that a pull back such as this is most welcome although it may be difficult to tell when the consolidation is over.  It is a reality check that we are all still rational.  It gives us an opportunity to veer away from the herd and try to assess our individual positions.  If you like what you’re seeing in your portfolio, well and good.

Notice that all headline stocks except GLO, ALI and PX were down today.  The 58.3 point decline reflects the broadness of the correction.  Even second liners like RLC, URC, PNB, and AEV took a hit.  A second look tells us, however, that most of these stocks closed above their lows indicating that some bottom fishing is going on.  The value turnover of Php 2.85 billion strengthens my view that buyers are in the wings looking to pick up correcting issues.  That certainly what it looked like for AC, FLI, TEL, MBT and even MER.

How do you gauge whether you like your portfolio or not? My barometer is the answer to the question “am I willing to buy this stock again at today’s price?”  If your answer is yes, then you should be happy that it is in your portfolio.  It should nor really be whether the price is underwater or making money.  The more appropriate idea to ponder is which stock will perform better going forward.

In my view, it is probably a good time to accumulate stocks like AC, BPI, MBT, PNB and other interest sensitive stocks because rates remain soft and do not look like they are in any pressure to move up.  Property shares such as MEG, FLI and VLL should be worthwhile considering.  Accumulate means nibbling at the stock to sense if interest in building up in the market.  I’m not sure which way we would go in the short run, but I fully understand why we could not surge.  We were just a shade below 2900 in the index 2 trading days ago.  While a number of stocks were still below their March 2008 levels then, there were issues that were comfortably above.  March 2008 is an important benchmark because that was when JP Morgan took over Bear Stearns indicating  the severity of the problems of the financial system in the U.S.

Fortunately, this view may seem quite moot with the U.S. market reacting very positively to signs that the economy has pulled out from recession.  Needless to say, people will start the week at an optimistic tone.  There may some skeptics who would take profits on whatever strength the market shows.  Again, the trend had been established although the trader’s adage would be buy on expectation and sell on news, trends are very difficult to thwart and it is usually the end investors that prolong the trend.  If you ask me, that’s where we are today.

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August 9, 2009 - Posted by | Financial markets in Asia

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