Gus Cosio says so

Ideas on the Philippine Stock Market

What becomes of the faint-hearted?

7:00am Monday 26 October 2009 Philippine Stock Exchange Index  2932.99 (-1.53%) Friday close

I don’t think that a lot of people believed that the market would go up as much as it did on Friday.  In Thursday’s trading session, some people were trimming positions which were fortunately met with confident buying.  The value turnover was higher yesterday in spite of it being a down day.  In effect, buyers are in there committed to buy the market.  The thing they do not like doing is to chase the market.

Friday’s market was characterized by buying of TEL which had been consolidating for more than 2 weeks from its recent high at 2670. TEL, I think will continue to move higher till year-end.  I can’t help but remember that way back in March 2007, I thought that TEL was easily worth 2800.   SM was also strong today after sitting in the shadows over the past few weeks.  SM had seen progressive selling from last Friday (Oct.16) and finally saw a blow off on Thursday.  Friday was such a strong recovery that I think any selling of the stock is behind us for the time being.

Looking at the global picture for the coming week, I do not think that Wall Streets retreat last Friday should have strong bearing on local shares.  The positive earnings surprises in the U.S. are outnumbering negative ones three to one.  Yet, stocks came off and some are thinking that buying fatigue has set in on the markets after a gruelling seven month rally.

I believe that the idea of buyers losing steam is not an unreasonable thought.  After all, many of the positive earnings reports were due to improved margins arising from cost reductions and tax breaks.  Most economists think that unless there is a dramatic improvement in employment, consumer spending, which has been the biggest driver of U.S. growth, will not be able to pick up and lead the growth of the economy.  A closer look at the reported earnings tells us that more around 50% of the revenues of these companies have come from global sources.  These companies have been serving overseas markets that do not appear to be shrinking.  Ironically, while the domestic U.S. is struggling, its multinational corporations are bringing home the bacon from international operations.  To me what this implies is that a good portion of the rest of the world is not doing as badly as the U.S.  Perhaps, the Philippines is one of them, typhoons and calamities notwithstanding.

What will face us the next two weeks will be real numbers from companies that are very real to our domestic market.  While we have had our share of the global rally over the last 7 months, we had gone through a lethargic August and September.  The last few days have not been that terrific either.  If I say that investors in this market have been very cautious, I think that would be an understatement.

Look at AC.  It has been easing off and traded even at 297.50 on Friday in spite of ALI remaining reasonably firm at 11.50.  does it make sense that AC is so cheap? I’m willing to take a punt and would be posting at 297.50 which was where I was unsuccessfully bidding last Friday.

What I’m saying is that, I subscribe to the outlook that we have not lost the steam that the U.S. market fears it has lost. Why? Because consumer spending in this country is highly driven by OFW remittances and as long as that is growing, demand for property and consumer durables will be sustainable.  We may have the dips to contend with in share prices, but the market is not really for the faint hearted.  One must have real confidence which is supported by good and reliable information.  At the end of the day, it islike placing a bet; you must have an inkling that you have a chance to win.  When in doubt, stay out.

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October 25, 2009 - Posted by | Financial markets in Asia

8 Comments »

  1. Hello

    What is you comment on MPI – Metro Pacific Investment? Is it oversold ? Is the price at this time a good entry point?

    Comment by gabby | October 25, 2009 | Reply

    • Personally, I think MPI will trade very well. It was trading very well before the brought new shares to the market in spite of the fact that a lot of holders got screwed by the lower priced share placement. Nevertheless, MPI has all the ingredients of a good stock. It is a good infrastructure play by virtue of its holdings in Meralco, Maynilad and Manila North Tollways. It also has a very strong foothold in the health care industry which is I believe to be in its infancy as a professionally run industry. It is really an exciting stock. My buy level is 3.30 because there are very few sellers below that level. I would trade it at the range of 3.30 to 4.00. I don’t think that it will break out of this level for the time being.

      Comment by Gus Cosio | October 26, 2009 | Reply

  2. Hi Sir Gus,

    Just want to know your thoughts on PRIM. This stock has soared and been hitting the ceiling for three trading days already. I know this has something to do with PLDT taking over ABC5.

    Is it still safe to ride this speculative stock, considering that a correction will probably happen anytime soon?

    Thanks and Godbless!

    Comment by Marcus | October 26, 2009 | Reply

    • I’m not really up to date in my information on PRIM. I have no clue on its valuations nor has any further information been disseminated on the company’s fundamentals. It is really a toss of the coin right now on this stock until we know what’s going on after Pangilinan takes it over. If you want a media play, I think a surer play would be in GMAP or GMA7 where things are more transparent. From what I know, PRIM has very small market share in advertising billings. I don’t think they can compete with ABS and GMA in the near future. What point would it be in investing in PRIM except for a punt or a shot in the dark. You can make money if you’re lucky. But it will be like playing mahjong.

      Comment by Gus Cosio | October 26, 2009 | Reply

  3. Good Evening Sir,

    Before I used to be all in in stocks, but now I realized it is better to have some cash for some opportunities in the market. I am clueless though on what the percentage of my stock money should it be. What do you think should it be?

    Could you please also enlighten me about CMT’s reduction of par value and authorized capital stocks, and it’s wiping of deficit. Is this good or bad? It seems the market think bad of it, losing 10% today.

    Thanks in advance.

    Comment by jovy | October 26, 2009 | Reply

    • I was not following this stock, but I heard that they had to reduce their par value because its retained earnings had been wiped out. Anyway, I thought that it was not good for the investor in the short run. It could be better later on.

      Comment by Gus Cosio | October 27, 2009 | Reply

  4. Hi Sir Gus.. Hi readers..

    Just an update on SECB’s SRO:

    Offer Price: Php 28.00
    Ex-Rights Date: Oct 30, 2009
    Rights Offer: Nov 5 – 11, 2009
    Settlement Date: Nov 12, 2009
    International Offer: Nov 12, 2009
    Listing Date: Nov 18, 2009

    http://www.pse.com.ph/html/disclosure/pdf/2009/pdf/dc2009-6927_SECB.pdf

    So assuming today is Oct 30 (SECB closed at 62.00), adjusted price would be:

    3.7 shares * 62.00 = 229.4
    1 share * 28.00 = 28
    229.40 + 28 / 4.7 shares = 54.76595

    Is that correct?

    Thanks!

    Comment by Oliver Mia | October 27, 2009 | Reply

  5. yes, that would be a correct computation.

    Comment by Gus Cosio | October 27, 2009 | Reply


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