Who’s throwing the party?
7:00pm 1 December 2009 Philippine Stock Exchange Index 3097.92 (+1.74%)
If Dubai was such a big mess, then why did the markets rebound just after 2 days. Like I said, people already knew that Dubai was a bubble way before this debt re-structuring was revealed. It was like an accident that people were waiting to happen. The Dubai construction boom was a gambit that if Dubai threw a party, everybody would come. In fact many did come to the party as Dubai became the Middle East destination for the rich and famous. People paid US$2,500.00 a night for the general admission hotel and as high as US$25,000 a night for the super deluxe butler appointed suite. Dubai organized globally broadcasted car races, yacht and power boat regattas, tennis matches and golf tournaments featuring the likes of Kimi Raikenen, Roger Federer and Tiger Woods. Anyway, the party is over, at least for now. Dubai has to put logic in all its development in order to sustain the long-term flow of locators to the emirate.
The local market remains pretty solid. The mining issues are being squirreled away by some investors from Mainland China which is consistent with the view that China is really bent on stockpiling all sorts of commodities. That explains why PX and CPM continues to be firm. I should keep an eye on LC/LCB as well; while volume was not so large today, the cummulative volume last week prior to the Dubai plunge is worth taking notice of.
Banking share PNB was probably a victim of the Dubai anxiety as well with people associating OFW remittances from the middle east with PNB. Yes PNB is a strong traditional remittance bank in the middle east but most of that cash is coming from the Kingdom of Saudi Arabia where business is still booming. AGI also staged a recovery that is strong and volume driven; for candlestick chart followers, the stock had a bullish engulfing day today which is a very strong signal.
Another stock that got hit with the Dubai danger was EEI. I think people should be looking more towards the company’s contracts in the Pacific (Papua New Guinea and Guam) and locally. EEI is a specialist in mechanical engineering rather than civil engineering. I think that is why they wer able to get the gas pipeline project in Papua New Guinea. Dubai construction is mostly civil engineering.
For the strong hearted whose blood pressure is not threatened, MER looks to be a trading buy again. I think it will assault 230 again if there is no bad news from overseas. There are guys still accumulating MER for some surreptitious reasons which I think we can figure out soon enough. Of course, when MER rises, it is good for TEL because PLDT owns a lot of the stock at an average cost of 91 – don’t forget what happened in May this year. On its own, TEL should probably go to 2800 by year’s end purely on rebalancing of global portfolios. Given its good dividend yield, I suspect many foreign and local institutional funds will take up more TEL in their portfolios. I expect the same portfolios to be accumulating AC, MBT, SM & SMPH as well.
As we approach year-end, I should warn you to take greater caution on those stocks that are on pure play. This means that if you buy mining shares, make sure that they actually own a producing mine not merely a paper mine. If it is an industrial company, make sure that the earnings and cash flows are there so that there is a light at the end of the tunnel. Don’t go groping in the dark, after all a little digging could yield a lot of information. The party is still going on in this part of the world, but you must keep you eyes open.
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