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.