Looking for emerging markets and Asian stocks
1:00pm Tuesday 10 November 2009 Philippine Stock exchange Index 2996.71 (+2.78%)
Nobody argues with an 81 point rise in the index. Arguably, this market is very strong. Looking at the details of the move, 17+ points was due to Philex (PX), 12+ points was due to MER , 7+ points was due to ALI and 6+ points due to MBT. That’s over 50 points attributed to 4 stocks. Actually, you had a wide range that had moved higher to cumulatively bring the market higher. It was only AC that proved so disappointing and I’m still trying to figure out why.
Personally, I think TEL should be a buy in spite of the Meralco continuing saga. The way I see it, PLDT bought MER at 126 and that was it. Anything bought at higher prices was done by MPI. Shouldn’t TEL be showing unrealized gains on the MER that it owns at 126? It is MPI who will actually be bearing all the premium at this point. MPI, on the other hand, will continue to be a highly speculative but actively traded stock due to its large public float. I think that the market is already discounting the high price that MPI has agreed to buy MER shares from FPH. Having gone down to 2.50, that should be cheap enough considering that their ownership in MER is not at all speculative in nature. MER has very strong cash flow and whoever controls MER controls its cash. All the more, MPI will be earning some interest income albeit low at 5% with the shares of MER as security until the option to buy is exercised.
I would think that it is better that MER falls into the hands of MVP than RSA. Just look at SMC compared to TEL. SMC has been stagnant for many years now and we really have no idea of what SMC is doing. In contrast, we know exactly what TEL is doing and they have made things worthwhile for all their shareholders. SMC has no opportunity to make such claim. I also think that very soon, RSA will have to throw in the towel.
Incidentally, GSIS should be asked to explain to its members why it sold its MER shares to RSA at 91 pesos per share on a deferred payment basis, then it turns around and buys 4% more in the open market at presumably higher prices was claimed in the papers yesterday. Can this newspaper report on Business World be accurate?
For those who had bought ISM in the past 2 months upon the suggestion given here, congratulations. I hope you are happy with the trade. I suggest not to be too greedy. Always remember that a bird in hand is always better than two in the bush. I am sensing another push coming to SPH. This stock normally trades sideways, but I noticed a spike from last week. I did mention before that this is a stock worth punting because of good underlying fundamentals. Though I have not yet seen their 3Q09 earnings report, I intend to get in touch with their Investors Relations contact in order to check things out. I also noticed a recovery of AGI and strong support for PNB at 23.
I would also recommend that we do not ignore the Henry Sy companies simply because there had been good action in the Lopez and Pangilinan stocks. SMPH, SM and BDO did move today and having been relatively lethargic over the last few months, I think that values are starting to emerge. BDO for one has recovered in earnings for the 9 months to 30 September 2009. SINO is one quiet share that belongs to this group and I did notice it cross the screen a few times today. It is a property play, I believe, but quite speculative for the time being until I can find out more what is behind it.
Anyway, Bill Gross of PIMCO, a global fund manager specializing in bonds, did comment last night that investors should be lightening up on U.S. equities and looking for emerging markets and Asian stocks to invest in. I hope some of the results of that recommendation find its way to our market. It is comments like his that make me constructive on small caps such as TUNA, SPH, COAT and even SINO.
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