Gus Cosio says so

Ideas on the Philippine Stock Market

What’s an infection?

7pm  Thursday  13 August 2009     Philippine Stock Exchange Index  2856.06 (+0.97%)

It is easy to like the market these days with the choice of positively moving stocks expanding.  Today’s move strengthens my view that the rally is truly broadening. Take Union Bank (UBP) as an example, a stock that was taken out of the index because there was not enough trading value turnover.  Yesterday, UBP reported very good 2Q09 results with net income showing a 171% rise compared to 2Q08.  Comparing 1H09, net income was 83% higher than 1H08 with all other performance indicators showing remarkable recovery.  UBP was very actively traded today.

In the very active list were  CMT, MPI, and GEO stocks which have also come to life gaining in both price and volume. Counters like WEB, ISM, PAX, EEI and GMA7 (GMAP) were also quite active and with very firm prices.  URC and RLC had also crept up quietly with modest volume. What was noticable was the selling on strength in some of the front liners like AC, BPI, GLO, and BPI compunded by the selling in MER, FGEN, SMPH, and MBT.  It seems that only BPC hung in there with TEL contributing positively to the index.

We are really seeing a consolidation going on even as prices move up which to my mind is extremely healthy.  Value turnover was also above average further indicating the willingness of more investors to take market risk.  Yesterday, there was a bit of a sell-off in Hong Kong and Shanghai as investors got worried about possible lending curbs being imposed on banks in China.  It seems that Chinese authorities are developing concerns about inflation.  Personally, I think the concern is positive because it will pre-empt future infaltion which may threaten future growth.  Anyway, both the Hang Seng and Shanghai composite staged up ticks today with Hong Kong showing the greater enthusiasm.  The rest of Asia Pacific had surged today in reaction to the strnght in the U.S. markets except K.L. and Seoul though their decline were minimal.

The stories are starting to sound repetitive as we see practically every good stock either pace or catch up with the rest of the market.  The thing is that it does not look like a frenzy to me.  While others might say that the prices have not yet been justified by performance results, let us not forget that markets will always be forward looking.  Enthusiasm is not a backward looking action; it is an anticipation of what is yet to come.  For as long as there is no major disappointment that explodes in the market, enthusiasm will likely prevail.  It is very hard to shake it off once it gets started.  In essence, people are tired of being depressed.  That is why we are coming out of a recession that fortunately did not turn out to be a depression.  Enthusiasm is always infectious.

My guess is that we will end this week in a happy note.

9am Friday   14 August 2009

Unemployment claims in the U.S. unexpectedly rose by 4,000 and analysts continue to talk about how to avoid a double dip recession.  Nevertheless, most major markets were positive overnight.  The by word is momentum buying so I guess sentiment will dominate fundamentals.  It’s a good thing that fundamentals locally are improving and OFW remittance figure which will be released on Monday will support that view.  My guess is that punters will continue to play good second liners.


August 13, 2009 - Posted by | Financial markets in Asia

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