Gus Cosio says so

Ideas on the Philippine Stock Market

Does it look shaky?

11:45 pm Thursday 29 October 2009  Philippine Stock Exchange Index 2862.33  (-1.58%)

Down 46 points today, Thursday, on account of negative sentiment all over the financial market place all over the globe.  One regular reader was saying that he can’t help but think that our market cannot avoid but to react in the same way as the DJIA.  I agree 100%, all markets are interconnected.  After all, I am of the belief that global capital is like water and will eventually find the level where the pull of gravity in one market is equal to the pull of other markets.  Of course there will be allowance for regulatory bottlenecks of capital controls and risk.

Anyway, U.S. GDP came in at 3.5% versus an expected 3.3% 3rd quarter growth and the market appears to be taking back what it gave away on Wednesday.  I believe the same thing will happen in Manila.  Thursday, when prices tanked and the index was down over 50 points, I tried to buy some AC at 282.50 and ALI at 10.25.  I could not get any.  I posted both orders at 10am, 30 minutes into trading.  Prices had already touched these levels so my bid prices were well within range.  ALI closed 10.50 and AC closed 290.  MBT even managed to gain and close at 40.

Is the market moving out of control or is market risk increasing?  My view is that it is not.  The index is still within the range we’d seen from October 2 when the market spiked well above 2900.  The 4-week range is only 122 points wide which is less than a 5% price volatility of the index.  That does not look like a very nervous market to me.

Anyway, I will not be surprised if stock prices move into lethargy these next few days.  In fact my expectation is that the index will stay in the range between 2800 to 3000 for the next 2 weeks.  I do not think that prices of the large cap shares will be breaking down soon.  Looking at the small cap stocks like SPH, PIP and TUNA, these are not looking shaky either.  I think opportunistic trades can be seen in a lot of these stocks.  A stock like MPI is trading at the lower end of its trading range.  So is PNB and a few others.  I would just watch the recent highs and lows and trade these stocks like a contrarian – that is buy on weakness aand sell on strength.  That is how people can make money when stocks are moving in a range.  I would not be greedy though.  If I was able to buy at the low of the range, I’d sell as soon as it touches the high.

8:30am Friday 30 October 2009

The DJIA was up 199.89 points by the end of New York trading as investors become encouraged by the GDP numbers.  I think we’ll be taking back what we lost yesterday.  I will framework my own trading strategy around the trading band of 2800 to 3000 from now til next week.  The volatility index in the U.S. is working itself back down.  In the local market, my personal measure of volatility is likely to go down as well.

 

Advertisements

October 29, 2009 - Posted by | Financial markets in Asia

6 Comments »

  1. Hi Sir Gus. Thanks again for posting your insights regarding the status of our market. I’m planning to invest in consumer stocks and I’d like to get your opinion id URC at 12.50 is already expensive. Thanks in advance.

    Comment by chinchin | October 30, 2009 | Reply

  2. I do not think that URC is expensive; in fact one fund manager friend of mine is accumulating the stock because he thinks that it is worth 20.

    Comment by Gus Cosio | October 30, 2009 | Reply

  3. Hi Sir Gus,

    Just saw this on the net.. http://business.inquirer.net/money/breakingnews/view/20091030-233103/Henry-Sy-offers-to-buy-Lopezes-remaining-stake-in-Meralco,

    Assuming that is true, why not just buy through the market? Why offer higher price for the Lopez bloc when they can get cheaper shares at the market?

    Thanks

    Comment by Oliver Mia | October 30, 2009 | Reply

  4. An offer such as this may not be mutually exclusive, i.e., they could be making offer overtures and simultaneously buying in the market. A large block of shares in a company is actually worth more than what it is going for in the market for the reason that if you were to buy an equivalent block in the open market, you would be driving the price higher with the risk of not getting the size of the block you want.

    Comment by Gus Cosio | October 30, 2009 | Reply

  5. I see. Demand and Supply. Less supply would make the price higher. Thanks!

    Comment by Oliver Mia | October 30, 2009 | Reply

    • You’re absolutely right, Oliver. The new group has to make the price interesting for Lopez to consider. They can keep buying in the market but they may never get enough shares even if they paid above 300. If it gets there, nothing prevents Lopez from asking for a higher price.

      Comment by Gus Cosio | October 30, 2009 | Reply


Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: