Gus Cosio says so

Ideas on the Philippine Stock Market

The home is on the range again

A lot of intraday volatility, but in the end the market stood still.  It seems to me like differences in opinions are developing in as far as individual stocks are concerned, but no one really wants to sell down in a big way.  I was watching AC hoping that it would be sold off to 300 but 307.50 looks like where people want to buy it today.  When it got there, all the sellers were gone and buyers just had to take whatever was left on offer at 312.50.  You see, those who just want to buy the market probably think that TEL is already too rich at 2650 and are starting to take profits.  AC on the other hand is still cheap at these levels and you get full exposure to the market, AC being the second weightiest stock in the index.  Some analysts say that it is also a cheap way of getting exposure to BPI and ALI which are both very expensive.

In the U.S., Johnson & Johnson – a Dow component – came up with 3Q09 earnings that disappointed the markets, driving the share price down 3% immediately after the report was released.  What the market saw was weaker-than-expected quarterly revenues and that profits was only a result of cost-cuts and lower taxes.  J&J’s performance bodes negative because the health-care sector accounts for over 20% of the S&P 500.  If health-care which was the only bright spot in America was floundering, how could other sectors be doing better.  Nevertheless, the market in the U.S. appears to have shrugged off the negative sentiment caused by J&J.  Both the Dow and the S&P fluctuated within a 1% range for the day yet closed almost unchanged.  This is an indication that people are still looking for direction.

Locally, I feel that we are in the same boat.  We had some kind of break-out last week but we need a catalyst to see a follow through.  It could be the foreign markets; It could be the 3Q earnings report.  In the meantime, I’ll place my bet on the ranges that I mentioned earlier on the stocks that I watch because I don’t see any reason yet why they would breach the ranges.

7:10pm   Wednesday   14 October 2009   Philippine Stock Exchange Index  2930.70 (+0.02%)

The market traded on a 24 point range today but closed practically unchanged from yesterday.  Yesterday, the range was even wider -35 points, but the index closed practically where it opened.  So you have 2 days where the market seems to be going nowhere.  A closer look, nevertheless, would reveal that investors are taking profits on TEL, ALI,  & FLI.  Meantime, we see renewed buying of MER, EDC, FPH, BPC FGEN, MPI and AC.  It looks like local rotation buying.

In the U.S., we saw an early report that JP Morgan tops all earnings estimates paving the way to some directional trades.  A lot of Wall Street players are waiting for an assault of the Dow to past 10,000.  That could just provide the catalyst for buying of bank shares here.  Actually, I would really favor Philippine banks right now.  Practically all listed banks have cleaned up their balance sheets coming to the financial crisis that we are currently recovering from.  You name it, SECB, PNB, UBP;  these banks are lining up solid earnings going forward with very little NPA’s sitting on their books.  I would even go for a PSB who is very profitable; unfortunately, PSB is not so liquid.  This bank , however, has a lot to offer for the investor who can afford to wait.

Remember that our market just came through a long sideways correction before the break-out above 2900 last week.  I believe that we are still on an upward thrust generally; so be prudent, but don’t be left without a position.

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October 14, 2009 - Posted by | Financial markets in Asia

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