Gus Cosio says so

Ideas on the Philippine Stock Market

Risk is Cheap

9:45am Tuesday 5 January 2010  Philippine Stock Exchange Index  3029.50 (+0.85)

The market movement yesterday was quite unusual for a first day of trade.  In the past few years, the index barely moves on opening day of the year.  Usually we see a few points up or down but never the 47.67  point decline or 1.56% drop that we had yesterday.  What is even more appalling is that we did not really see year-end window dressing in a big way.  Only two index stocks – boring ones at that – went up: JFC and GLO.  This is a picture of yesterday’s index performance:

JFC +0.58 pts SMC -0.2155 pts MEG -0.61 pts FPH -1.46 pts
GLO +0.43 pts SECB -0.2429 pts FGEN -0.66 pts MBT -2.47 pts
AEV PSE -0.29 pts RLC -0.82 pts PX -3.79 pts
AP GMA7 -0.30 pts MWC -1.06 pts ALI -4.44 pts
ICT FLI -0.32 pts SMPH -1.11 pts MER -4.86 pts
LCB LC -0.50 pts URC -1.17 pts TEL -5.45 pts
SM AGI -0.58 pts BDO -1.18 pts BPI -6.67 pts
SMCB -0.1375 pts DMC -0.58 pts AC -1.41 pts EDC -8.37 pts

This table tells me that local investors have not yet formulated any conviction in their minds.  The breadth of this market’s movements tells me that investors are not really in a hurry to load up for that January effect.  In my last post, I did mention that should the market go down on the first week of the year, it may be a good time to enter the market.  Among the stocks listed in the index, I think the safest and likely most profitable bets are the power sector stocks.  These would be AP, EDC, and FGEN.  There is definitely a structural improvement in the operations of these three companies that would make them a good bet this early in the year.  Demand for electricity in the country is still growing and many places had experienced shortages late in 2009.  These power companies have a good portion of their generating portfolio in renewable energy sources such as geothermal and hydro-electric dams.

I would also reiterate consumer plays for the forthcoming elections and my chips would fall on GMA&/GMAP.  They were very profitable in 2009 and there is no reason for that not to improve in 2010.  I liked PIP early last year;  I like it again at these levels again generally for the consumer play.  Also, El Nino is already being felt in some regions.  Historically, consumption of bottled drinks soar during El Nino years.  Definitely, soft drink consumption goes up during elections.

As to the market in general, I don’t feel very negative at this point fundamentally because there are a lot of cautious investors out there.  That is always a positive sign that the money is still on the sideline and barring any unforeseen disasters, these funds will likely flow into the stock market this month.  There’s a reason why there’s a January effect, and that because early in the game people can afford to take risks.  This means that risk is cheap at this time and, therefore, should be bought; i.e. go out and take a risk because it’s not going to cost you much.

Advertisements

January 5, 2010 - Posted by | Financial markets in Asia

12 Comments »

  1. Thanks for explaining the January effect! Was just about to ask you about that.

    Comment by Nicole | January 6, 2010 | Reply

    • You’re welcome.

      Comment by Gus Cosio | January 6, 2010 | Reply

  2. Is it just me, or have you noticed all the glitches on the new Reuters website?

    Comment by Nicole | January 6, 2010 | Reply

    • I also noticed that they have not updated the charts on Philippine stocks. I’ve been going to Bloomberg.com

      Comment by Gus Cosio | January 6, 2010 | Reply

  3. Hi Sir Gus!

    What’s your take on URC’s rally today? What do you think was the cause of it? I’m holding URC for a long time now, hehehe.

    Thanks

    Comment by wren | January 6, 2010 | Reply

    • Hi warren,
      URC is a stock that I like. I did mention it way back in my earlier posts as a consumer stocks with excellent fundamentals. I think it has someway to go but not as much as what we’ve already seen. It pays good dividends so it’s a good hold stock>

      Comment by Gus Cosio | January 6, 2010 | Reply

      • Thanks Sir Gus!

        Comment by wren | January 6, 2010

  4. Sir,

    What do you think of JGS? It has a good 2009 PE even if you use only three months earnings and the full price. I haven’t really computed the forward PE but it just seems like it ought to improve since URC and RLC seem to have been on a tear lately and Cebu Pacific is expected to have a very strong 2010. I guess the only thing that really holds JGS back us Sun Cellular/Digitel right? Or is there a reason why it hasnt been going up lately?

    I also noticed that on the last few trading days of 2009,Macquarie seems to have bought around 89 million shares without selling any.

    Thanks

    Comment by Warren | January 6, 2010 | Reply

    • Warren,
      First of all JGS is not a trading stock because being Gokongwei’s holding company, people hold the impression that Big John uses this company as parking lot for his bad deals. Nevertheless, the stock moves to catch up with the rest of the market eventually. If you like the stock, I suggest you buy it after a market sell off when it gets sold down as well.If you look at where it is today, if you parked some cash on JGS sometime in May, you’d at least have doubled your money. I think buying it at these levels (6.30) can reap around 10% to 12% profit before 2010 is over.

      Comment by Gus Cosio | January 7, 2010 | Reply

      • That was very helpful. Thanks.

        Comment by Warren | January 7, 2010

  5. sir, Im wondering about ANI. it went really down since 2 weeks ago.. how long will it take to get back to 30?? thank you. I would appreciate your opinion

    Comment by Princess | January 7, 2010 | Reply

  6. Princess,
    ANI was listed by introduction which means it got listed without offering shares to the public. It was essentially a sellers market and because supply was very scant, it was easy to push up the stock. Personally, I have no feel for the stock. I really do not like to buy stocks that are listed by introduction because the price is so easily manipulated. This is a company that trades in mangoes. I think that at today’s price, it is very expensive. I don’t think it will go up in the near term. If at all, it could go doen even further.

    Comment by Gus Cosio | January 7, 2010 | 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: