Gus Cosio says so

Ideas on the Philippine Stock Market

High anxiety

6:00pm  Thursday   18 February 2010    Philippine Stock Exchange Index  2999.94  (-0.62%)

I was quite disappointed that the index took back some of the gains of the last six days.  Actually, I was warned by my broker friend that with the good run that we had from when the index dropped to below 2800, we were vulnerable to profit taking.  I am almost sure that it was profit taking because if the market was turning, then a stock like AC should not have gone through the 290 resistance level.  The same thing for AGI which broke past its 4.75 resistance.  ALI also rose to 11 while AP after threatening to trade below 10.75 early in the session recovered to 11.25.  All told, this does not look to me that sentiment of the last six trading days has changed.  In fact, it strengthens the case for the trend to continue.

What bought down the index was TEL, MER, GLO, FPH, FPH, EDC and URC.  But then, these stocks have moved up quite creditably in the last few trading days.  Seeing the index straddle the 3000 mark is quite encouraging.  After all, most of the neighboring stock markets – Hong Kong, Korea, Singapore, australia, Indonesia, Thailand – with the exception of China and Japan are all down.  With values still attractive, I think the market will still take us to higher ground with 3100 as the next objective.  The stocks that pulled back today could lead the surge later.  I feel that we are being given a buying opportunity here.

There is a chance that the market was spooked by the Php 298 billion budget deficit announced bu the government today although I think it pales in comparison to Greece.  That does not worry me much.  What worries me is the exemption of VAT to senior citizens.  Can you imagine the rest of the family asking their grandparents to do all the purchases for them from cars to Cokes just to escape the VAT?  This is a nightmare for the BIR and will be another loophole for corrupt practices.  When will our government ever learn about these populist decisions that will hurt everybody in the long run in exchange for few pogi points?  Anyway, let us leave it to the Department of Finance to plug all the leaks.

As I write, the major markets in Europe are clawing forward leaving the remnants of the credit scare on the sidelines.  Economists think that this decline in the Euro may in fact be good for Europe because it will make their exports more affordable to the rest of the world. I think that while credit may be a continuing burden for Europe, the tightening of the debt market for erring countries should make the underlying fundamentals better in the long run.  What is positive is that the nervousness among global investors has been diffused for the time being.

I continue to think that this region – Asia – will continue to attract a bigger share of the global investment pie this coming years.  While volatile market will continue to raise our anxieties, at the end of the day, the same volatility is what will make profits for the diligent trader.  My continuing advise is to keep on looking for value in the stocks that you get involved in.  Some readers asked me about PNB, PIP and URC.  I think they are good plays for long-term gains.  Luckily, they are also good for short-term trades.  We are getting the better of both worlds in this market.

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February 18, 2010 - Posted by | Financial markets in Asia

3 Comments »

  1. Sir Gus,

    Do you think that 3100 will hold? Because I probably won’t buy that much during this pullback if it will only run into a stonewall 3100. If anything that only leaves room for a few short term trades and so we should purchase stocks with good momentum. But if 3100 can already be taken out, then maybe we should already accumulate unnoticed value stocks.

    What do you think?

    Comment by Warren | February 18, 2010 | Reply

    • Warren,
      Right now, I am not to confident that we can take out 3100 because there are too many profit takers out there. The rise in the U.S. discount rate and, locally, the decline in M3 will not fuel any type of bubble demand for assets. However, a pull back to 2950 will still give you a 5% upside to 3100 depending on the stock you hold. One thing to keep in mind is not to be fully invested at this point in order to have ammunition in case the market goes back to 2800 or slightly lower. You should also look to lighten up as we approach 3100. We may not get it right all the time, but who does?

      Comment by Gus Cosio | February 19, 2010 | Reply

  2. Thanks.

    Comment by Warren | February 19, 2010 | Reply


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