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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