Gus Cosio says so

Ideas on the Philippine Stock Market

In no hurry

5:30pm  Tuesday 3 November 2009  Philippine Stock exchange Index  2908.24 (practically unchanged from Friday)

This market opened up really strong and the index pushed up around 42 points in the first half hour of trade.  It was no surprise that MER, FPH & BPC had taken the index up in early trade but what came up from left field was PX.  Of course everybody knew of the M&A activities going on but I think extremely a very small percentage of the stock trading population thought that it would zoom up to 13 today.  It somewhat took the luster out of the Meralco play.

There is one thing that bothers me today, and that is a market that opens strong but completely loses steam.  We lost all of it in the last half hour of trade, even moving into negative territory minutes before the close.  It was only catch up buying that took us to better levels at the close.  This tells me that this market is really looking to move lower.  I see the signs in counters TEL, AC, SM, FLI, MEG, just to name a few.  Of course the jury is still out on the Lopez companies, so we’ll probably see more price movements in MER, FPH and BPC as more information comes.  Nevertheless, even if I liked the market, I will not be in a hurry to add to positions.  I posted to buy ALI today at 10.25 thinking that this is a good level to buy.  I was not sure that I’d be served, so I felt that while I like the current price level, I think people are really inclined to lighten up.

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November 3, 2009 - Posted by | Financial markets in Asia

7 Comments »

  1. Sir Gus,

    I just wanted to thank you for blogging and sharing your thoughts about the market regularly. Your analyses have been very helpful and instructive, and has thought me a more systematic way of viewing the market. More so lately, given the choppiness and increased volatility in the domestic and foreign markets. It will be interesting to see how the next couple of weeks play out, and I eagerly anticipate your take as things unfold.

    Again, thanks much for sharing your insights, and I wish you well on your trades.

    Comment by Jet | November 3, 2009 | Reply

    • Well Jet,
      I’m glad that you find my posts to be useful. To tell you frankly, writing this blog forces me to think more deeply and objectively about market actions. I may not always be right and I do not expect to be. What I would like to impart here is market sense among readers. My ideals are for a local equity market where people trade in a sensible manner, whether they are speculators, momentum traders, value traders or simply buyers and holders of stocks. If i am helping you trade sensibly and you’re making some money from it, I am very pleased.
      God bless you,
      Gus

      Comment by Gus Cosio | November 4, 2009 | Reply

  2. Yeah, you helped a lot sir gus. Thanks!

    Comment by wren | November 4, 2009 | Reply

  3. Prof. Roubini in a recent article in FT warned against a possible unwinding of carry trades in the event that the US dollar appreciates continuously. He says that such unwinding will be most felt in the equities markets of emerging economies, which have been recipients of these carry plays.

    I remember reading in one of your previous entries that the Philippine market has been somehow ignored by foreign investors for most of this year’s rally (although for the past month or so, they have been net buyers), and you were confident that despite their absence, local monies would be enough to sustain the market.

    While Prof. Roubini did say that the unwinding scenario may still be a long ways off, how do you think this will play out for the Philippine market? Off-hand, during sell-offs, markets all seem to be correlated with one another. But I think that’s more a function of portfolio fund flows, so maybe any sell offs this time may not be accompanied by sell offs in the PSEi?

    Would love to hear your thoughts on this.

    Thank you.

    – Jet

    Comment by Jet | November 4, 2009 | Reply

    • Hi Jet,
      On carry trade, my thoughts are that most of carry trades that come to our shores normally go to bonds because for carry trades to make sense, it must be done in lots of US$5million. That is easier achieved in FXTNs and the positive carry is easily measurable. In fact, this October, we saw unwinding of trades done in September. Notice how the Php moved from above 48 to 46 early in September and bond yields had moved lower. In mid-October, the trades slowly unwound. That was why the Php moved way above 47 again and bond yields edged higher.
      You can do carry trade on Philippine stocks as well, but just like in bonds, you have to time it as well. I think that in this cycle though, our market has been dominated by locals so the timing will be greatly influenced by the locals. I have been very cautious these past few weeks and wait for prices to come my way rather than chase it. My underlying view of the market is still constructive but I do not discount that there may be sell-offs from time to time. At the end of the day, people will still come back to local stocks because low dollar and peso interest rates make it possible even for locals to do their own mthods of carry trade.

      Comment by Gus Cosio | November 4, 2009 | Reply

  4. The market can be so unpredictable, but at times I think that is the best part that keep our blood going. Us truly not knowing if we made the right decision or not even though we did our research. It will forever keep us on our toes.

    The article was great but even better the comments following the articles.

    Thanks.
    Pedro

    Comment by Pedro | November 8, 2009 | Reply

  5. Pedro,
    You are absolutely right to think that we have to do our homework and still be on our toes. Volatility is what gives investors and traders alike the opportunity to make money.
    what is very important is for each of us to develop a keen market sense which is what really separates the men from the boys (the ladies from the girls).

    Comment by Gus Cosio | November 9, 2009 | Reply


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