Gus Cosio says so

Ideas on the Philippine Stock Market

When the rain comes

9:45am  Wednesday  30 September 2009   Philippine Stock Exchange Index   2797.03

The events of the past few days have kept people’s minds on the plight of many unfortunate Filipinos who had been victims of the deluge that fell on the region of Metro Manila and surrounding provinces.  It was one of the most horrifying and depressing experiences that people ever had.  My house, for one, was not spared.  In spite of being almost 5 feet above street level, because the drainage in the neighborhood could not take the water released from the floodgates of the heavens, water rose up to our living room and our entire perimeter – garden, garage and studio – came under water.  Our property was a virtual white water rapids.  Even the garden snakes panicked as we saw a few swimming aimlessly in the flood.

In spite of it all, we considered our family fortunate knowing that just 5 blocks away, some of our friends were in 10 feet of muddy water brought upon them by the breaching of the banks of the San Juan River.

Last Monday, the first day of PSE market trading, you could feel the depression in the air as volume and prices gradually eroded.  Enthusiasm was a rare commodity and anybody who could make it to their trading desks or their on-line terminals just had no energy to make any smart move.  Even opportunistic traders could not muster the gumption to take advantage of the pervading gloom.

Anyway, the floods have receded in many places.  People are picking up the pieces and getting on with their lives.  Stock prices should be getting back the life that it was endeavoring to live out.  We just have to figure out whether we are headed to the mountain tops or down the valleys.

The few days respite allowed me to have a good look at some stocks, so let me share my ideas:

TEL – I think it is range bound between 2300 and 2550.  If you are looking buy for a quick turn today, I would not recommend it.  If you have the holding power of a few weeks, I think there will be around 100 pesos in the trade.

GLO – This is ranging between 970 and 1030 and is a decent buy.

MBT – My view is that 36.50 is a strong buy, but my instincts tell me that MBT wants to break out of 40.

FLI – The range is 0.91 – 1.06.  I feel that it is a good buy as I sense that the positions above 0.85 are very light meaning I don’t see any selling pressure until above 1.00.

EDC – Will likely trade between 4.50 – 4.95.  It is a good buy.  I also think positions above 4.60 are very light and selling could come beyond 4.80.

AC – This is a good stock to buy now with the support looking very strong around 300.  Positions are very light on this stock and it looks like we are near the bottom of the range that will take us between 295 and 325.

FPH looks like a buy but at lower levels, perhaps at 36.  I would not be in a hurry to buy.

PNB looks very light at 24.  It would be a good buy at this level with profit to be taken at 26.

ISM was a brilliant stock 2 weeks ago but the support looks to be at 0.032 a far distance from 0.044 where it peaked in spite of the fact that chart-wise the stock is oversold.

MER at first glance looks to be trending down.  However, my guess is that the strong support is 165 or slightly below.  The float in the market can easily be squeezed so this could easily spike back to 200 in no time.

As to the broader view, most major markets in the west were down overnight.  Yesterday, the Hang Seng, the Nikkei and Singapore’s STI were all up, but China was down.  China looks to be ranging as well as it takes its consolidation further which is not surprising to me after a 70 % rise to June.  It is still around 50% higher than where it was at the beginning of the year.  People are also saying that October is historically a “jinx” month as many of the market crashes occurred in October.  We have to be mindful of these events because many market participants are very superstitious and in that environment, we just can’t make any rational judgement.

Anyway, fundamentals in the Philippine market are likely to shift on account of the devastation wrought upon us by nature.  NEDA says that the damage would set GDP back by 0.43% meaning that the original growth path for the 3rd quarter of 0.8% to 1.8% will likely be adjusted downward to 0.7% to 1.7%.  Nevertheless, I would look more closely on how the damage affects specific companies.  For one, I think the telcos will be in better shape as people get to value communications facilities better.  High end property developers may also gain as people set their sights on homes that are less flood prone.  You think of it, there are good and bad news in singular stocks; but many times when people sort through muck, sometimes they stumble into nuggets.

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September 30, 2009 - Posted by | Financial markets in Asia

9 Comments »

  1. hi, sir gus.

    Nice to see you back. Been following your blog since I stumbled on it. Very helpful blog you have, I have it on my live bookmarks. Stock newbie here, started March 2009.

    Good to hear you’re fine after the flood.

    Comment by jovy | September 30, 2009 | Reply

    • Hey jovie,
      I hope all is well with all those who follow this blog. Actually, if we can go on the internet today, we are among the more fortunate residents of metro manila.
      Gus

      Comment by Gus Cosio | September 30, 2009 | Reply

  2. If you want to see what my house looked like during the flood, click on this:

    Comment by Gus Cosio | September 30, 2009 | Reply

  3. Oh my! That’s a really bad flood… I was worried too when I noticed the blog wasn’t updated for quite a while… I’m in the province, but it’s still raining here

    Comment by wren | September 30, 2009 | Reply

    • In spite of the great inconvenience, I still am very thankful for God’s protection. Things could have been much worse. My heart goes out to the residents of Marikina, Cainta and Pasig. They really had it bad. So did New Manila Rolling hills where a few friends were terribly flooded.

      Comment by Gus Cosio | September 30, 2009 | Reply

  4. Sir, do you still consider FLI as a good buy? But aren’t they the ones that would be greatly affected by the floods as most of their projects are in the Rizal province?

    Comment by Kerwin | September 30, 2009 | Reply

    • Personally, I think that concern had been discounted by the market over the last 3 days. Remember a lot of these projects are already sold, so the cash is on their side. I think their Cainta project, the one next to the Manggahan Floodway is at least 60% sold. They have projects in San Mateo and Rodriguez, but from my understanding, those are on higher ground. If at all, we thought FLI was worth at least 1.40 (actually, I’ve seen valuations as high as 2.20), perhaps we can re-rate in downwards to 1.20 as a guess. I’d stick to my trading range for FLI (0.91-1.06) for the time being.

      Comment by Gus Cosio | October 1, 2009 | Reply

  5. Hi Tito Gus,

    I just started reading your blog again after the flood. I didn’t know that the flood in your house was that bad! I’m glad to know you’re all okay though.

    Nicole

    Comment by Nicole | October 3, 2009 | Reply

    • Hi Nicole,
      All is well now. I sympathize with those who got hit bad. Terrible loss to life and property. In spite of the flood in my house, I am one of the luckier ones. Praise God.

      Comment by Gus Cosio | October 6, 2009 | Reply


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