Gus Cosio says so

Ideas on the Philippine Stock Market

Cash revealed?

9:45am  Tuesday  13 October 2009   Philippine Stock Exchange Index  2945.79(just after opening)

Fortunately, Mondays do not usually set the mood of markets.  We initially had prices racing up at the open as TEL moved from 2605 to 2645 and MER from 190 to 198.  BPI and MWC looked like they were ready move higher and out of the tight range where these two stocks had been trading over the past 5 days.  Somehow, buyers did not move with definite conviction and selling in other issues like ALI and MBT overcame any positive sentiment.  Actually, other Asia-Pacific markets were trading mixed as Tokyo and Shanghai were moving positive while Hong Kong, Korea and Australia sagged.

I think it is too early in the week to say which way this market is headed.  After last weeks tremendous strength, I imagine that the healthy thing to happen is for gains to be pared to affordable levels.  Quite ominously, Wall street behaved similar to how the PSEi did Monday.  The DJIA opened strong, but as the day wore on, sellers came out of the woodwork which leads me to think that new positions are not yet being built up.  I think that it is good that investors are still long cash because the buying power is still in their hands.  When the U.S. markets continued to rally in the final days of 3Q, analysts were commenting that the up ticks were not fueled by too much volume.  I can only surmise that there will be some profit taking coming out of New York.

A bit of good news is that PLDT ADRs in New york was up 1.21%.  TEL will likely set the tone in the local market for the rest of the week.  On the whole, looking at the individual stocks, I can’t help but feel that our market is looking pretty soft.  Prices will not run away from us in the near term.  My choices remain: buy AC at 300- or below; start accumulating MBT prehaps closer to 40;  I’ll wait for MER to come off a bit before buying (I don’t have a number in mind so I’ll just keep an eye on supply demand conditions on the share).

Some quarters are expecting positive news on the government deficit to come out this week.  Indications appear that the deficit will still be on track, in line with the revised target.  The implications are that bond yields will be steady to lower.  In fact, the Treasury was able to sell Php1 billion of 91-day T-bills at 3.897%, Php2 billion of 182-day T-bills at 4.138%, and Php3.5 billion of 364-day T-bills at 4.368.  These yields are pretty much in line with the BSP’s policy rates although the downward bias on yields is revealed by the over subscription on all tenors.  For the Php6.5 billion awarded, the Treasury received around Php22 billion in bids.  What does that say about the amount of cash sloshing around in the market?

If you hear what I’m saying, while we’ll be in for some kind of a shakeout in the next couple of trading days, it would not really be a cause of serious concern.  As I’d said before, in a trending market, we should use times of stalling prices to have a closer look at the stocks we haven’t yet bought or those that we would like to trade.

Have a good one.

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

4 Comments »

  1. Hi Sir Gus! So this consolidation will still continue. By the way, do you use charting? What indicators do you use to determine entry point? Thanks!

    Comment by Oliver Mia | October 13, 2009 | Reply

    • Oliver,
      First of all, I use a candle chart because it gives me a good picture of what happens over time. I also look at different interval periods for each stock because, in my opinion, short term price action tells a lot about what’s going on in a stock. I also track buy and sell volume to give me an idea of what level a stock is heavy or light. I then look at indicators of overbought/oversold conditions. I must warn you that I am not a purist when it comes to charts because I also like to follow the flows. I figure, playing the market is both an art and a science so personal touch matters. You have to keep on following stocks to get the rhythm of the stocks you follow.

      Comment by Gus Cosio | October 13, 2009 | Reply

  2. I see. So that is why TEL, AC, MBT, FPH, etc are almost always in your writings cause these stocks are the issues you religiously follow.

    When it comes to following flows, does that mean you also join speculative plays like MVP vs RSA – MER and PX, FGEN Stock Div, and NI’s SRO?

    Thanks Sir Gus.

    Comment by Oliver Mia | October 14, 2009 | Reply

  3. I follow TEL because a lot of foreign fund managers use it as a surrogate for the Philippines. The alternative foreign funds stock is AC. I follow these 2 stock closely because they will show signs of large inflows into our market. MBT is important because there are 2 major banking stocks that institutional funds follow – MBT and BPI. I also follow BPI but it is very expensive now so if funds rotate into banks, MBT will be the likely stock to trade.

    Notice that I follow MER, FPH, FGEN and also MPI. I do this because there are money making opportunities evr present in these stocks. Given that I think the sustaining trend is bullish, I would take selective positions on these stock when they are trading buys. Stock div plays are also important profit opportunities on these stocks.

    PX is a resource stock and you can trade this stock in relation to commodity/metals prices.

    I follow as much stocks as I can for opportunistic trading as well as core positions. I try to maximize the use of my cash because my available cash is not so big.

    Comment by Gus Cosio | October 14, 2009 | Reply


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