Gus Cosio says so

Ideas on the Philippine Stock Market

Gurus like the market

9:35 am  Friday  8 January 2010   Philippine Stock Exchange Index 3075.19 (the market is down a few points minutes after the open)

I wonder if anyone had noticed but in the Asia-Pacific market, only the Philippine stock market was up on Thursday. Every other market had taken profits from the early salvo of buying.  On Monday, we were the only ones down.  I am starting to think that our market is developing a mind of its own. That is very constructive.

Overnight, The DJIA and S&P were moderately up while the Nasdaq was slightly down.  The European markets was mixed. I think investors all over are still trying to make up their minds on what they are trying to do.  What pushed our market up, and I mentioned this yesterday was the very aggressive demand for Philippine sovereign debt.  This comes in a backdrop of another possibly large budget deficit year.  I think what the market is telling us is that the fiscal position of the government is manageable and will likely be addressed by whoever takeover in June 30, 2010.  While I nurture some skepticism in that area, I am not one who would buck the sentiment that is forming in the market – at least for this coming months.  I did mention in earlier posts that there is usually a January effect and I will not run counter to that view because indications are that investors will choose that course this year.

Globally, indications of rising risk appetite are forming.  Among those indicators are the sustained demand for emerging market debt and continuous recommendation by high-profile investment gurus such as Mark Mobius and Bill Gross that emerging markets will deliver the returns investors are hungry for.  In the U.S. market, the VIX, which is the futures price of an index of call and put options, has gone down further from levels it was trading in late 2009.  While the Philippine market is far from the radar screen of the bulk of foreign fund managers, some nevertheless get involved, especially in January.  Local fund managers also estimate the global risk appetite to calibrate their own.  All these taken together with low interest rates that are not likely to rise in the near term, I think the local risk appetite is gaining momentum and at a time when risk has not yet gone expensive.

Yesterday, a few stocks that I like went up – FGEN, EEI, DMC, and even TEL.  I think the banks will play catch up, although this may be limited to the more active ones like MBT, BPI, SECB and even UBP.  While PNB remains my favorite, I think it will remain to be a longer term play.

The market is opening weak this morning, but I would not worry too much about it.  I think the January effect could be well on its way and I’d rather place my bets with it than against it.  Let me remind everyone, however, that you should never ignore the fundamentals of the stocks you buy whether you are buying for core portfolio or simply for momentum or short-term trading.  The market may be bullish right now, but remember that it is also fickle.  Trade with your brain and not with your ears.

Advertisements

January 8, 2010 - Posted by | Financial markets in Asia

18 Comments »

  1. Hello Sir Gus,

    The market may be weak at opening, but it seems that AGI and VLL have jumped quite a long way from their prices yesterday. What’s your take on this?

    Thanks

    Comment by wren | January 8, 2010 | Reply

    • Warren,
      AGI had been sold down in Q4 2009 due to disappointment on the joint venture with the Malaysian gaming company. I think that it was pre-mature to have sold it down, but that was the market’s take on the idea. I think that more and more investors are seeing the joint venture taking shape and the initial projections for the stock to be valued closer to 6.00 rather than 4.00 is starting to creep into the stock’s price. My view is that the wider range for this stock is 4.00 to 6.00. short term, it’s probably 4.40 to 4.70.
      Unfortunately, VLL is a stock that I haven’t followed. I do not see it as an out-performer. I’d be more comfortable with AGI.

      Comment by Gus Cosio | January 8, 2010 | Reply

  2. Hi,

    Is FLI stock good to buy or sell?

    Comment by Kier | January 8, 2010 | Reply

    • Hi Kier,
      FLI is a stock that comes and goes within people’s radar screen. After Ondoy, I thought that it would under-perform and it did. In the near term, I do not think that it is a heavily favored stock. Having said that, I think that if you have a longer horizon, it should move better once people shake out of their minds the negative effects of Ondoy on the stock. alternatively, you could wait for it to trade at .90 or lower to get in because presently, I don’t see any compelling reason to buy the stock. I’d look at AGI or PIP first before looking at FLI.

      Comment by Gus Cosio | January 8, 2010 | Reply

  3. Hi Sir Gus,

    Your posts are very enlightening especially for stock market newbies like me. May I know your thoughts on SPH for this year?

    Thank you and more power to you, Sir Gus.

    Richard

    Comment by Richard | January 8, 2010 | Reply

    • Hi Richard,
      I hope you find this site really useful. On SPH, I like the stock mainly because it is a good consumer play for 2010 and if I;m wrong, it will still pay dividend of at least 21 centavos which yields 6.1% – something difficult to find nowadays.

      Comment by Gus Cosio | January 8, 2010 | Reply

  4. Sir,

    What’s your opinion on MPI? The stock’s heavily traded the past 2 trading sessions after being dumped by investors the last 2 months.

    Comment by Norlan | January 8, 2010 | Reply

    • Norlan,
      In my view, the fair value of MPI at present is around 2.85 to 3.00. It should move higher as the year wears on because it will start to see more earnings from its utilities business of Meralco and Maynilad which are sure fire cash contributors. The stock was dumped because people thought paying Php300 for MER shares was a bit too high. People should realize that they started buying at 65 then 91 then 126. I work it out that their average cost is somewhere around 150 to 160 which is still below today’s market for MER. My take on the stock is that when it is close to 2.50, it is a strong buy. By the way, a stock that is similar to MPI is DMC who is their partner in Maynilad. It is also a cheap stock, but it’s not as heavily traded.

      Comment by Gus Cosio | January 9, 2010 | Reply

  5. Hi Sir Gus. There’s been much activity with LIB this week. I think it had around 600/700 trades just for today, whilst volume reached nearly PHP60m. Is this an indication that the stock is starting to show some movement already? Got some word that the rollout of telco services would already be by mid-2010.

    Appreciate your thoughts on this.
    Thanks! (Btw, was able to sell MPI at 2.95 earlier 🙂

    Comment by J | January 8, 2010 | Reply

    • josh,
      LIB is a Ramon Ang play just like CYBR. Right now, it is still a speculative play so it is difficult to make an educated comment. It is moving purely on momentum. LIB owns a wireless telco franchise and that is where the value is. However, determining its fair value is quite speculative at this point because it has no track record. DGTL has operated Sun Cellular for quite a while. It has had a landline business for almost 20 years. The stock has not performed because the earnings are just not there. In short, go ahead and trade LIB but watch it closely because in my opinion the stock is being squeezed so supply will come out. When that is done, it will be a long wait before you can make some money again. Just be sure you don’t get stuck.

      Comment by Gus Cosio | January 9, 2010 | Reply

      • thank you very much, sir gus.

        Comment by J | January 9, 2010

  6. Hi Sir Gus, what do you think of ICT and PAX? I plan to hold on to my ICT and PAX holdings until I realize some decent profits. Is this a good move. Thank you.

    Comment by Nel | January 8, 2010 | Reply

    • Hi Nelson,
      ICT is a good play on the recovery of global trade. Remember, they operate ports in other countries. Locally, trade is starting to pick up again. Yesterday, during our investment committee meeting, I pointed out to my colleagues that the increased number of ships in the harbor is a positive indicator. Our conference room is on the 45th floor and we have a commanding view of Manila Bay. I noticed that there were more ships than usual which is good for ICT. It is also a well run company. PAX is a specialized play. BPO’s are a different kind of animal as it lives from contract to contract. I used to run one. PAX can be very profitable depending on whether their contracts are becoming more stable. It is one company that has to be researched and right now I do not have much information about them.

      Comment by Gus Cosio | January 9, 2010 | Reply

      • Sir Gus, thank you. I really appreciate the quality of your answer.

        Comment by Nel | January 9, 2010

  7. Hello Gus. Just want to ask what stocks in the market are paying good dividends? Further, if you can suggest a good entry price to buy your suggested stocks. I cannot regularly monitor stock prices so I was thinking of just buying stocks with fairly good dividend return. Thank you.

    Comment by Czar | January 9, 2010 | Reply

    • Hi Czar,
      You can check out the PSE website on individual companies for their dividend record. Off hand, the ones that I am sure pays steady dividends are: TEL, GLO, GMAP, PIP,SPH,UBP, AC, AEV. There are others but I don’t have an active list right now.

      Comment by Gus Cosio | January 13, 2010 | Reply

  8. Sir Gus,

    A colleague of mine was telling me about the scheduled IPO of Globe Asiatique, and he feels that there may be a good story and healthy growth prospects for this company. she claims that GA is founded on a niche in the real estate industry, catering to the low cost housing segment following a township approach, high density development, good quality et cetera.

    I’ve not seen the financials tho, and will try to provide feedback once I’ve reviewed earnings prospects. I was just wondering if you have a take on the IPO of this company and whether you think there really is good story here.

    Thanks as always and more power.

    Jet

    Comment by Jet | January 13, 2010 | Reply

    • Hi Jet,
      Yes, the word that GA was coming to the market had been around for about 9 months. Off the cuff, I think that it is a good company with good image. This being a property company, we have to see its land bank and what the values are. We also have to see its on going projects and how we reckon they will be bought. The real estate market is not really that hot so people will not do this as a real estate play. Bottom line will still be earnings and its growth prospects. We really have to wait for its disclosures.

      Comment by Gus Cosio | January 13, 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: