Gus Cosio says so

Ideas on the Philippine Stock Market

There’s a new horizon

8:00pm   Friday   5 February  2010    Philippine Stock Exchange Index   2855.64 (-2.03%)

Trade today (Friday) would have been nerve shattering for most or heart breaking for some at the very least.  After seeing encouraging signs of recovery during Thursday’s session, we get hit with a 270 point plunge in Wall Street and similar drops through all of Europe.  Actually, it looks like it was the Europeans that pulled the rug from under a potential U.S. recovery.  Investors are now raising doubt on the ability of various governments in the European Union to cover their debt obligations.

In my view, the value of risk imputed in asset prices of developed economies are starting to be viewed differently by investors.  The paradigm had always been that Europe and U.S. were the indubitable store of asset values.  Now that there seems to be an insatiable need to issue debt to finance structural deficiencies arising from these countries, risk appreciation, therefore relative pricing of assets, has dramatically shifted.

Twenty years ago, the U.S. was ground zero for economic and political stability and Western Europe was in the next circle of stability.  With yawning government deficit among these countries no different from the Less Developed countries (LDC) of the past, former LDCs like China, India, Taiwan, Brazil, Chile and the Asean are looking to be in better shape nowadays.

The Philippine stock market got creamed at the opening of trading session, plunging by 55 points or almost 2 percent.  Fortunately, I was  actually wanting the market to decline in order to buy the stocks I was watching at cheaper levels.  I managed to successfully buy MPI at 2.22 which is something I can live with for a while.  I tried buying MBT at 37 but supply ran out at the close before I got served.  MBT closed at 37.50 with very good volume traded.  I was also thinking of picking up MEG at 1.08 but changed my mind.  MEGW1 came closer to earth with the decline of MEG which leads me to think that both counters could be a god trading buy for next week.  I think that some of the blue chips stocks offer excellent value already.  AP, EDC, FGEN, FPH and MER look like good buys at this point.  TEL is probably very cheap already at its close of 2535, but this is the main stock holding of foreign funds and would be vulnerable to further lightening up by those guys.

Most of the jitters are coming from the developed countries because their belief systems in the market has been going out of whack over the last two years.  The shifting fundamentals favoring the emerging markets should be looked at more closely because fundamentals are strong in these countries.  I think that Asia lead by the strength of China and India, supported by robust performance of Asean as a whole and complimented by Korea, Hong Kong and Taiwan are the places to be.  It will be just a matter of time before investors shift greater portfolio weight in this region, re-allocating what they take out from the western countries.  To my mind, we in this part of the world ought to use this shake out in the west to feather our nest eggs.  It is a matter of looking farther into the horizon which really looks bright from where Asia is standing.  The Philippines will surely reap some of the benefits.

Advertisements

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

10 Comments »

  1. Sir Gus, I am new in the stock market trading. I just like to know if you have a holding period for your stock positions. Do you not sell until a stock has not reached its true value? Like for exmaple, PNB, how long will you hold it?

    Thank you so much.

    Comment by jolly | February 5, 2010 | Reply

    • Jolly,
      It really depends on the stocks role in my portfolio. I have PNB for growth in my portfolio. Analysts that I trust estimates the Book Value of the unmerged bank at 50 pesos and the merged with Allied at 75. If I hold PNB for 6 months to 2 years with a cost of 23 and it goes to 50 or even just 40, I’ll be very happy. As another example, I bought AC in October at an average cost of 293 thinking that it will go to 320 by January. It never did, so I was wrong. I sold it at 290 for a 3 peso loss. Now it is down to 265, but I don’t want to buy it again because it does not seem to have the dynamism of other holding company stocks. In its place, I bought MPI instead at 2.22 because my analysis is that the stock is worth at least 3.50.

      Comment by Gus Cosio | February 7, 2010 | Reply

  2. Sir Gus,

    Would it be good to average down on MEG?

    Comment by Norlan | February 5, 2010 | Reply

    • Norlan,
      At this point MEG has gone oversold. I think it is a good trading buy. You can buy some and sell when you have a profit, that way your average cost of existing position will be lower by the profit on the trade.

      Comment by Gus Cosio | February 7, 2010 | Reply

  3. Thank you sir gus for this tip:), It’s good I hesitated buying TEL today >>

    TEL is probably very cheap already at its close of 2535, but this is the main stock holding of foreign funds and would be vulnerable to further lightening up by those guys.

    Comment by jek | February 6, 2010 | Reply

    • Jek,
      TEL is a good buy at this level. They’ll be paying cash div in the next 2 months. While the strongest support is likely at 2400, it will probably not get there unless there is a another crash like late 2008/early 2009. If you have holding power, TEL is a good stock to own.

      Comment by Gus Cosio | February 7, 2010 | Reply

  4. Sir Gus,

    Right now my PNB holdings is 25% of my fund at an ave. cost of P23.98. I lightened up on my other main holdings like PAX, ICT and MAB but I did not sell any of my PNB. My latest purchase was at 22.50 last feb 3. Do you see PNB going down further? What do you think is its bottom? Would you recommend that I also lighten up on PNB. Thanks.

    Comment by Nel | February 6, 2010 | Reply

    • Nel,
      I think you did well for not selling PNB. I mentioned earlier that in my analysis PNB’s book value is at least 50 pesos. That is why I don’t want to sell my position. When the merger with Allied pulls through, the Book value of the combined bank will be 75 pesos according to a very trusted stock analyst. When you own a stock that is this cheap, you should not be anxious when it goes down. If you have money, buy some more rather than put it in stocks where you are not sure.

      Comment by Gus Cosio | February 7, 2010 | Reply

  5. sir gus,

    Could you please help me figure out MEG and MEGW1. How do I know which one of them to buy? When do I buy meg instead of megw1 and vice versa? Again, thanks a lot for extending your hand to us clueless on stocks. 🙂

    Comment by jovy | February 6, 2010 | Reply

    • Jovy,
      MEGW1 trades on both sentiment and fundamentals. It is a warrant so it trades on what is called volatility and cost of carry. In short, it takes .49 to enjoy the movement of the underlying MEG stock which costs 1.04. at this point, however, I think MEG is cheaper in value than MEGW1 because at .49, you are paying a lot for MEG’s volatility

      Comment by Gus Cosio | February 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: