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.