Gus Cosio says so

Ideas on the Philippine Stock Market

Here we come a caroling

5:00pm  Thursday  10 December 2009  Philippine stock Exchange Index  3006.57 (+0.85%)

What we saw today is not the same market we had been seeing over the last 8 months.  The market appears not just to have  run out of steam, it has run out of ideas.  Although we closed above the 3000 and gyrated above and below that level a few times today, market is not convincingly strong with no new stories.

The stocks in the most active list have been pretty much the same for the last few trading days.  Looks like people are still waiting for something to happen in counters like ISM, I, ACR, NI, CPM and LIHC.  Activity in the sister mining companies LC/LCB and MA/MAB seems to have died down.  People apparently seems to trade with short-term nostalgia in PX hoping that a new story will develop.  My story and fearless forecast on the stock (PX) is to sell it now because you can by it back in a few months below 14 since this is the average cost of the Pangilinan group on the stock.

TEL and MER are showing quite a bit of resilience due to global investor sentiment moving toward utilities and telcos which have strong recurring earnings.  What the global investors are thinking is that we are coming to a period of strong gravitational pull.  If you are going to get stuck on a stock, make sure they are those that have recurring earnings and cash flows so you can at least look forward to dividend yields.  Between the two, my money goes to TEL for now because my level of comfort on MER at the moment is below 190.  Having said that, should this stock go to 180, I would see it as a screaming buy.

Since we are on the dividend yield idea, I would take a very close look at GLO at these prices on pure valuation measures.  At today’s close of 895, GLO is trading around 10X trailing PE and close to 9X 2010 earnings with dividend yield estimated around 7%.  The reason that GLO was sold down was because the 6 second pulse billing came to effect this week.  Some analysts think that this new billing structure will hurt GLO.  I believe otherwise because I think people will use voice calls more when they think they are getting a better deal.

There will surely be some movement on the smaller cap shares as we get to the end of the trading year, but they seem to be sitting on the back burner for the time being.  I’m referring to SPH, PIP, TUNA, and the like.  when volumes are light, it does not take much to ramp up prices.

Looking at the Asian region, it seems that the equity markets are really slowing down and the Philippine market is not alone.  In my experience trading volume decreases as we approach Christmas for the simple logistical reason that people concentrate less on work and more on Christmas season stuff.  Traders and investors have to squeeze in time for Christmas shopping and making the necessary plans for the holidays.  In my house, we have to do our traditional Christmas stuff like baking cookies, choosing a turkey, planning the Christmas dinner and other stuff that take some time and attention from our daily routine.  I imagine other stock market people are doing the same.

Anyway, I think time is on our side if we wait for prices to come are way.  Be aware, however, of the possible Santa Claus rally and the January effect for the stocks you like because as sure as Christmas celebrations come, stocks will have their bit of celebration also.

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December 10, 2009 - Posted by | Financial markets in Asia

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