Gus Cosio says so

Ideas on the Philippine Stock Market

Generating Ideas

After over 2 weeks of trading into 2010, I’m taking a look at the Philippine market in the backdrop of the MSCI Asia Pacific and the Dow Jones.  Year todate, the MSCI Asia Pacific is up around 2.6% and it appears that the PSEi in just tracking it also at +2.6%.  Ironically, the DJIA is up only 1.4%, while the Shanghai Composite is down around 0.2%.  I guess the emerging markets theme that global analysts are projecting for 2010 is at work and it is going on in the markets outside China.  With the local market coming off since Friday, it is not surprising that some people may be getting anxious of the January effect is not going to happen.  It is not surprising that the beginning of year positioning is not so pronounced in the U.S. as it is in emerging Asia simply because most fund managers are nibbling on their Asia ex Japan favorites.  True to form, the Indonesian market is outperforming Asia ex-japan being up around 3.6% year to date.  Indonesia right now is the darling of many emerging market portfolios.

Where does that leave us?  Does that mean that the January effect had peaked last Thursday – 15 January 2010?  Well, I’m not one to give up at this point.  While I remain cautious, I remain constructive in the market as a whole.  There have been out-performers in the likes of FPH, FGEN and AP.  FPH for one was 46 in the first week of the year; now it is 52.  FGEN was at 9.50; now it is at10.75.  AP was 9.00 and it has moved higher to 9.40.  Even GLO, which I did not think would move much, has started to track TEL.

The big question now is do we hold our breath or has this market left us holding the bag altogether.  I am of the opinion that most strategic buyers of Philippine stocks are of the view that after some correction, last year’s momentum will carry us forward.  It does not look to me that the January effect is over yet.  It looks, however, that some profit taking may be going on in selected stocks like MEG and PIP.  There seems to be some selling as well in AC and BPI as these stocks are starting to look expensive and unexciting.  I’m calling a buy on the market at this point, and if you are a follower of TEL, I think it is presently a buy.  I am also thinking that MER at 192 is not a bad price to own it.

Many local players are looking to the U.S. to provide further direction to the PSEi as the Shanghai composite continues to tank.  However, even as the market opened strong this morning in reaction to a strong rise in the Dow, traders saw the up-tick as an opportunity to sell.  Good thing that there are stocks like AGI who together with the power generating issues seem to be defying the local gravity.  I would still look at DMC because of its power and coal business.  I am not fazed either in holding PIP and I am looking to get GMA7/GMAP for its value and the consumer theme that it represents.

As a parting shot, I am inclined to stick to my view that the market has enough steam packed in it to push it beyond the 3130 level which was the recent high.  I think it is just a matter of finding the right ideas for the day.

Advertisements

January 20, 2010 - Posted by | Financial markets in Asia

10 Comments »

  1. I just would like to thank you for making me see the value in EEI and FPH. I have a full-time day job and have limited amount of time looking around for value stocks. When you highlighted FPH and EEI as good buys, I immediately did some research and liked what I saw.

    Comment by jamie | January 21, 2010 | Reply

    • Jamie,
      that’s the way to do it. Always back up your hunches witha minimum degree of research. never buy anything blind.

      Comment by Gus Cosio | January 21, 2010 | Reply

  2. Sir Gus, what do you think of IMI??? its an IPO. THANKS MUCHOS

    Comment by Princess | January 21, 2010 | Reply

    • Hi Princess,
      I’ve looked at IMI and it has been having some problems making profits over the last two years. I suspect that the Price Earnings ratio will be very demanding. Listing “by introduction,” meaning there will be no supply of shares offered in the market until after one year. The only ones who can sell are the existing shareholders and they can easily ramp up the price because they control supply. I would keep away from this stock for the time being. This is not a classic IPO, so don’t lose sleep over IMI.

      Comment by Gus Cosio | January 21, 2010 | Reply

  3. Hi Gus,

    MEG trend is going down. From prev. days of 1.30 goes to 1.26 today. Do you think this will continue to fall lesser to 1.00? I’m not sure what cause this to decline so fast. Is it time to sell or keep?

    Thanks.

    Comment by Kier | January 22, 2010 | Reply

    • On a TA point of view, MEG is already a buy around 1.20 to 1.24 level as it is already signaling for a reversal soon and that 1.20 or 1.22 could be the bottom. The cause of the sell off probably was due to the dilution effect caused by the SRO shares listed last December.

      Comment by Teodolo Aclao | January 22, 2010 | Reply

  4. Hi Sir Gus,

    I also have something IMI related here:

    “In a briefing after the listing ceremony, IMI and Ayala Corp. chair Jaime Augusto Zobel de Ayala said the company had no need for fresh funds at this time, which was why it listed by way of introduction.”

    So why list in a public exchange? What are the other advatanges of being listed?

    Thanks

    Comment by Oliver Mia | January 22, 2010 | Reply

    • Oliver,
      IMI is not an IPO but a listing by introduction. No shares were offered to the public. Only the existing shareholders can put supply of shares into the market making it a sellers market. Notice how the indicative listing price was 6.20, but it opened at 9.30 with only 7,000 shares traded. The following day, it traded up again to 13.75 on 2,000 shares. What does that tell you, but that the price is dictated by only the sellers. It is being squeezed up by the existing holders, and that is very dangerous for outsiders.

      Comment by Gus Cosio | January 24, 2010 | Reply

  5. Hello sir gus, last thurs and friday was just awful in the US markets. Ours followed US lead and went down 2% last friday. Do you think our market will continue to fall like the US? And Do you think it’s accumulation time again for stocks like PNB (merger storyline), FPH which has at TP of P75 by UBS and COL… Thank you for your advice.

    Comment by richie lim | January 24, 2010 | Reply

    • Richie,
      I have no crystal ball and I can’t predict the future. I make my portfolio moves depending on my appreciation of the risk. There are some stocks where I think the risk-reward profiles are worthwhile considering, but of course there is the broad market sentiment that you have to contend with. Right now, I think investors are reducing risk until the picture gets clearer. I interpret this as traders looking for lower levels to buy. As a tactical move, it would be good to generate cash, i.e. sell the stocks you like the least so that you can use the cash for when your best stock is a lot cheaper or when it starts moving.

      Comment by Gus Cosio | January 24, 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: