Gus Cosio says so

Ideas on the Philippine Stock Market

The advantage of buying

6:10pm  Wednesday  28 October 2009   Philippine Stock Exchange Index  2908.21 (-0.94%)

Today’s drop in share prices was almost precipitous due to a sell off in MBT.  Actually, BPI also tanked and AC, which many foreign fund managers view as a financial stock, did likewise.  Some brokers thought that the positive news for BDO’s 9-month 2009 earnings may be causing some reduction in weighting for the other 2 big banks and reallocating the portfolio weight into BDO.  My view is that we remain in a profit taking mode from all sides.  The traders in Wall Street seem to be quite keen to sell into any strength of the Dow; the guys in Connaught Road are looking to do the same in both Hong Kong and China shares.  One global analyst has been talking about buyers’ fatigue in stocks.

Like I’d said in previous posts, markets do not behave like sky rockets.  We’ve been having a good run since March this year.  In the last 3 months, we’ve had only two major spikes in the market – the one in late July into the first week of August and the surge we saw on October 6 & 7.   The move in August was followed by 8 weeks of almost sideways movement.  From the highs of October, we’ve been bouncing within 100 points of 2970.  Technically, this is not bad for the market.  We can view this action in the index as the entire market trying to consolidate gains and forming a solid base where investors are comfortable with their positions.

One reader had asked about MPI which had sold shares to Lyonnaise Des Eux at 2.57 per share while the stock is trading in the market at 3.40.  Actually, the share swap had been agreed upon around a year ago when MPI took control of Maynilad.  It is a matter of keeping Lyonnaise as a significant minority in Maynilad but at the holding company level.  I don’t think this is anything to worry about as far as existing shareholders of MPI is concerned because I don’t think Lyonnaise will sell those shares anytime soon.  What it does to Lyonnaise, which is a global water utilities player, is that it gives them a real market price for their investment in Maynilad.

Over all, my suggestion at this point in time is to look beyond day-to-day trading.  Look at stocks that you are willing to hold for the next three to six months and take advantage of buying opportunities.  There is money to be made in trading the range and in periods like these, the opportunities always present themselves.

 

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October 28, 2009 - Posted by | Financial markets in Asia

2 Comments »

  1. Hi Gus,

    Great post as usual. I’ve made your blog part of my daily reads. 🙂

    My concern with the DJIA is that earnings season is going to end soon and the despite the positive results, the Dow hasn’t broken its resistance around the 10200 level. Should the earnings season wind up and the Dow remain at its present levels, what’s going to propel it upwards for November? I noticed that positive news about the US economy hasn’t had a great impact compared to say, 2 or 3 months ago.

    This worries me because of the relationship between the DJ and our local markets. While not moving exactly in tandem lately, I think we can still say that our two indeces haven’t really decoupled. On the other hand, local companies should be reporting 3Q numbers soon.

    Regards.

    Comment by Gianfranco | October 28, 2009 | Reply

    • Gianfranco,
      You are absolutely right. Whether we like it or not, our market will be affected by drastic moves in Wall Street. If you superimpose the local index to the DJIA, you will see that any decline or up tick of the Dow that is over one percent will cause the same directional move here, though magnitudes may not be equal. Earnings reports will run till the end of November and I see very little surprises. What keeps me constructive on stocks is the low level of interest rates which simply causes those with large cash hoards to allocate money in stocks. If stocks go down and no new crisis is in sight, people will just have no choice but to get into the large cap stocks.

      Comment by Gus Cosio | October 29, 2009 | Reply


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