Gus Cosio says so

Ideas on the Philippine Stock Market

I like to enjoy the seaview

7:45pm  Thursday  3 September 2009   Philippine stock Exchange Index  2803.31 (-0.17%)

Today, I walked over to the Ayala trading floor of the PSE and had coffee over a meeting at the exchange’s Brokers Lounge.  There was quite a good number of people in the gallery section looking down into the exchange’s trading floor.  The lounge itself was not filled with people and the trading floor did not seem to buzz with activity.  If I did not know that a lot of trades were now being done off-site, I would think that no one was interested in the market.  Actually, a lot of trades are now matched on-line as more Filipinos all over – throughout the country and some overseas – have become used to accessing the market through the internet.  Data from the PSE reveal that there is greater participation of Filipinos in the market, around 70% against 30% foreign fund managers, compared to previous years when it was the other way around – 70% foreign.  To me, that is excellent news.  That really tells me that the base of this market will surely be bigger as the year goes and more Filipinos will grow wealthy.

When the market took the index down 34 points this morning, there was nothing but calm among traders.  I guess many are of the belief that sentiment is positive which was rightly so.  At the end of the day, the market was down just 4.9 points.  Unlike yesterday, there were a number of gainers today – FLI, EDC, AC, GEO, FGEN, TUNA, MWC & BPC; this was just among the 20 most active.  Those that were sold off earlier such as AGI, MER, FPH, AC, BPI, FLI, TEL & ALI recovered at the close.  I would say most people saw this correction coming.  While I would not be so hasty as to say that declines are over, I would not want to be so anxious that I abandon all my positions.

Looking around us, Shanghai which lost 6.7% last Monday, gained 4.8% today.  The Hang Seng traded in the same direction though gaining a little less, up 1.2%. The rest of Asia was mixed with the Nikkei down 0.6% while Singapore, Jakarta and Thailand gaining well over 1%.  The hungry ghost which people were expecting to spook investors isn’t looking so hungry yet.

The big picture has not changed.  The OECD is saying that the global recession is coming to an end faster than they had earlier expected.  On a top-down perspective, the macroeconomic picture continues to show signs of sustained improvement both in the global scene and in our domestic situation.  Even the PHP/$ which had lost gound over the past month going from below 47 to above 49 is now hovering in the 48.84 level.  It just so happened that import season in preparation for Christmas is at its peak.  With the PHP so cheap, I think opportunistic investors from overseas will see carry trade situations in fixed income as well as equities.  I think the Php will start to swing back to strength, and I see foreign funds closely following.

September is normally a dreadful month for stocks.  As long as we know that, we’ll be alright.  Remember, the horizon is what to look at and not the waves.  That way, the seas do not seem so rough after all.

Advertisements

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

18 Comments »

  1. Sir:

    1. Whats your take on BRN? BRN stocks appears to be getting some action lately. I do not have any BRN stocks in my portfolio but im considering getting some shares. Do you think BRN is a good buy?

    2. Whats your take on CYBR? CYBR is trading within the range of .68 to .70 this past few weeks. Although it had a very good run for the last three months, CYBR appears to have lost some steam recently and cannot hold its position at .70. Do you think CYBR is a good buy? Do you see CYBR stocks gaining in the next few weeks?

    Cheers

    czar

    Comment by Czar | September 3, 2009 | Reply

  2. If September would be a sweet month, i will be buying more stocks!

    Comment by Bullish Trader | September 3, 2009 | Reply

    • I have no problem with that idea.

      Comment by Gus Cosio | September 4, 2009 | Reply

  3. Czar,
    1.As a rule, I do not touch stocks where information available is spotty. It is dangerous to trade on rumors alone. There has to be substance behind it. The fundamentals of BRN are just like any other property stock except BRN’s is weaker because their development is in Cagayan de Oro. I don’t see enormous upside in that, unless you have information that many of us do not know. I dabbled in ISM, for one, because a lot of their corporate information is available.
    2.CYBR is a potential backdoor play. My information is that most of the shares is already controlled by principals of San Miguel. Having won the bid for power plants, they may inject the assets into some listed company separate from SMC. That, however, is pure speculation on my part as of the moment. It would really depend on whether it makes sense to you.
    gus

    Comment by Gus Cosio | September 4, 2009 | Reply

    • Thanks for the insightful advice. Looking forward to your other comments on the market. cheers

      Comment by czar | September 4, 2009 | Reply

  4. Yeap, It is dangerous to trade on rumors alone. But I wonder if financial reports are readily available for investors here in the Philippines? I check some sites, and they usually only have the recent ones :)… but still, that’s better than nothing :)… in fact, it’s good enough

    Comment by Wren | September 4, 2009 | Reply

    • Warren,The companies that trade very well in the market provide good and sound information. Companies like PLDT, the Ayala group, the banks and even the real estate companies provide good information. Our market has better governance nowadays compared to 10 years ago because both issuers and investors have become mature. If a company comes to the market often enough with information, as a rule of thumb, I think that is a good company to follow.
      Gus

      Comment by Gus Cosio | September 5, 2009 | Reply

  5. Sir :

    I need your insight. Typically gold trades inversely to US dollar. But in the past two days the market witnessed a strong surge in the price of gold but without a substantial decline in the value of the US dollar index. Technically both RSI and MACD are divergent to the index ( both oscillators are trending up, the index is trending down generally ), which to me signifies a loss of momentum in the decline of the US dollar. I interpret this as : both gold and USD are strong relative to other markets, even relative to crude oil. It makes sense only if I consider them both as safe haven trades. So are they discounting a potentially major event?

    ( I hope I made sense. )

    Comment by Melvin | September 4, 2009 | Reply

    • Melvin,
      You make a lot of sense. Remember that originally, there was always inverse correlation between the US dollar and gold. Do not forget however that the correaltion is not a perfect one because there may be demand or supply of gold not necessarily of the financial type, i.e., if a large shipment of gold is coming out, gold will drop even if the dollar is weak. Remember, too, that as a rule, gold earns no short term yield; currency does. That means gold positions need to be financed and people sell some gold to finance positions. Lastly, most of the gold traded is traded in the futures market which is,unlike stocks and bonds, a zero sum game. In order to profit from a futures contract, you must liquidate some positions. In trading gold, just like trading any contract in the futures market, it is the trend that is important. So, it may be a situation that people are bullish on gold but the early buyers are banking in some profits. Rightly so because any trading activity ivolves proper money management and that is done by banking in profits from time to time.

      Comment by Gus Cosio | September 5, 2009 | Reply

  6. Hi Gus and fellow readers,

    I’ve been researching some of the stocks you’ve mentioned over the last few days and SPH seems very interesting. They’ve got a whole lot of cash which translates to about PHP 2.45 a share. Book Value is even better at around PHP 3.60 as of their last 17-A (please correct me if I’m wrong). At the price its trading now I would say its undervalued and trading at a significant discount which makes it probably worth a little risk. Would you have any information regarding management and the quality of their operations?

    Thanks.

    Comment by ed | September 4, 2009 | Reply

    • Ed,
      I must admit, I like SPH. I did not buy it at IPO, but I bought it first a month after IPO when it went down to 6.90 then sold it around 7.70. Unfortunately, I bought again at the 6.40 level and cut my losses at 5.50. I continued to follow this stock and I bought it again at an average of 2.58 a few months ago. I trust the management of this company and I know that they really want to grow the company. It is a profitable company and they pay good dividends. In 2008, they paid Php0.18 per share and in 2009, Php0.21. According to Doc Hortaleza, the CEO, if not for the loan covenant in their floating rate note that limits dividend pay-out to 50% of net income, SPH would have paid more dividends. I think dividends next year will be higher than 0.21. That is a yield of 7% at the prevailing SPH price of Php3.00. What I am looking forward to is if they make a big acquisition that would raise their top-line by around 30%. That would also raise profitability even more. I know the key people in management and they are very dynamic people who are passionate in building a world class company. I continue to accumulate this stock.
      Gus

      Comment by Gus Cosio | September 5, 2009 | Reply

      • Thanks, good to read your take on it. I forgot to disclose that I own a very tiny position in SPH too (don’t want to be accused of pumping up a stock). I’m also looking into PNB although I’m not too fond of banks unless they’re really really cheap.

        Comment by ed | September 7, 2009

      • I like PNB too. I own some stock and I’m waiting for the merger with Allied. It is trading at 50% of book value. Even if it just goes to 70% of book value, that would be 35. It is a very safe bet that I am more than willing to take.

        Comment by Gus Cosio | September 7, 2009

      • I haven’t seen all the numbers on PNB yet but those sound good. My only concern is that banking is so heavily regulated and competition is so tough. I’m not an expert but I’ll be reading up on it and watching it though.

        One international stock that may be worth looking into is Tata Motors (TTM) in India. They made a few mistakes buying Jaguar and Land Rover right before the financial crisis which put them heavily into debt. However long-term they could have quite a bit of upside with the Tata Nano and they’ve been agressive with debt repayment. It is trading at a premium (I stupidly bought it in 2006 at its highs) but could be worth watching just in case it drops.

        Disclosure: I own TTM but I don’t own any PNB.

        Comment by ed | September 7, 2009

      • Objectively, I like a stock like Tata (TTM) particularly because it is one of the stocks that you initially buy if you want exposure to the Indian market. If I dabbled in that stock, I would research its fundamentals and see what analyst forecasts are for next year’s earnings. If the numbers are good and P/E and P/B look historically reasonable and not expensive vis-a-vis benchmark stocks, I would then consult the technicals and time my entry.

        As to PNB, my personal view on the stock is that after the merger with Allied and the price does not rise to close to book value, I think one of Union, RCBC or SECB will offer to buy PNB simply because it has 600 branches that is virtually impossible to replicate in this day and age.

        Comment by Gus Cosio | September 7, 2009

  7. Hi Sir :

    Thanks for the reply. I also found that September is typically bullish for gold because of an Indian festival that pushes up demand for the precious metal. So there is a seasonality factor involved.

    Since you mentioned SPH a few posts back I also took a look at it.The company’s financials are ok. Technically SPH seems to be forming an ascending triangle, which I take as a sign of accumulation. I noted a similar triangle pattern when PSEi ( the index ), EEI, and some other stocks were bottoming in March.

    I am just wondering why this stock lagged the overall market so much.

    Comment by Melvin | September 5, 2009 | Reply

    • There will stocks that will always lag the market. Part of the art of investing is understanding whether these dogs will eventually catch up or not. In a bullish market they usually do because everything becomes expensive. I like EEI as well and my personal view is that it should be worth somewhere close to 4. I own the stock at this level and I’m willing to wait for at least 3.

      Comment by Gus Cosio | September 7, 2009 | Reply

    • I just wanted to add something. The IMF is rumored to be looking to sell some of its gold reserves. Of course those are just rumors.

      Comment by ed | September 7, 2009 | Reply


Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: