Gus Cosio says so

Ideas on the Philippine Stock Market

So what do we have to careful about?

7:30 pm   Thursday   25 February 2010    Philippine Stock Exchange Index   3031.26  (+1.68%)

It is one of those days when the Philippine market outperformed its neighbors.  The Hang Seng, Nikkei, Kospi, Singapore and Jakarta were all down.  It was only the Shanghai and Thailand markets that were up today.  I find this very encouraging, and it feels good when our market reacts differently to global influences.  Today’s 50.12 rise in the PSEi was broad-based as at least half of the index components contributed positively to the gain.  What this tells me is that local investors are constructive about our market in general.

Unfortunately, we cannot be impervious to what goes on around us.  I have always maintained that money has the same characteristics of water such that it tends to seeks its own level.  This translates to expected market returns.  Right now, there is no doubt that a good number of local companies are seeing more comfortable bottom line profits.  MER for one reported core net income for 2009 of Php 7 billion compared to previous year’s figure of Php 2.6 billion.  They have also announced a dividend policy that will pay out 50% of core net income to share holders.  What is important to us investors is that as a response to the company’s earnings results a number of brokers have upgraded their rating on MER from a sell to a hold.  Full year earnings will be reported by most of the index companies in March and I expect them to all be positive especially the power and utilities companies.

So what do we have to careful about?  I think we should not be lulled to believe that stocks can move to expensive valuation levels before they get re-rated upwards.  I did mention that I see the market ranging between 3100 and 2800; and given that we are closer to 3100, our inclination should be to selling those stocks in our portfolio that have gone expensive and have high betas.  We can see this information in the free internet sites of Bloomberg.com and reuters.com.

What is creating a drag in the markets again is the Greek debt crisis in Europe.  People are now demonstrating in Athens because of possible draconian measures that the Greek government would be doing such as raising taxes and cutting bureaucratic jobs.  Their currency – the Euro – has gone to a 2-year low in reaction.  The good news, on the other hand, is coming from the U.S. where the FED is assuring congress that they will not scuttle whatever recovery that is going on by raising interest rates.  Again, because money will chase yield just like water seeks its levels, the U.S. equity market should be well supported which is normally good for the Philippines.  Similarly, China’s markets are also finding strong support at these levels.  China and the U.S. are our biggest trading partners so we can find correlation with their markets.

I do not want to give confusing signals.  I just want to remind investors to be mindful of the negative effects of fear and greed which are only mitigated if we keep ourselves well-informed.

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February 25, 2010 - Posted by | Financial markets in Asia

12 Comments »

  1. where in bloomberg.com can i access info you referred to about pse stocks? TIA

    Comment by alabanger | February 26, 2010 | Reply

    • Hi. Just type in the stock ticker in Bloomberg’s search bar at below the banner at the top of the page followed by :PM

      Example: for ICTSI you can type ICT:PM then press enter.

      Hope this helps.

      Comment by Jet | February 26, 2010 | Reply

  2. Alabanger,
    When you go to bllomberg.com, you will see a small window near the upper left hand corner where it says “symbol look up.” Type in the stock or the index that you are looking for and wait for it to come out. Alternatively, you can memorize the tickers of stocks on pse.com.ph and type it on the small bloomberg window.

    Comment by Gus Cosio | February 26, 2010 | Reply

    • thanks….got it

      Comment by alabanger | February 26, 2010 | Reply

  3. Hello sir gus, do you think PNB is still a good stock? Im still at a loss having bought it at 24, and now lucio tan goes off selling fortune tobacco because nobody is there to succeed him and he’s having health problems.. What do you think about pnb if in case lucio tan lets go?

    Comment by Wren | February 26, 2010 | Reply

    • Wren,
      PNB was established in 1907. Being 100 years in the business, it has an invaluable franchise. When it was in government hands, it was inevitable that thing went wrong because of politics and government making decisions not based on business but based on political favors. That has not been the case with PNB for 10 years now. The legacy of government has been squeezed out. Top management of PNB today are veterans from top multinational and local banks. Any major financial giant would be interested in PNB if Lucio Tan wanted to sell it.

      Comment by Gus Cosio | February 26, 2010 | Reply

      • What if Bong is the one who takes over the company, I heard he’s a megaplayboy? 😛

        Comment by wren | February 27, 2010

      • Wren,
        Bong is now the president of Tanduay. I think that is what turns him on. PNB since Lucio Tan took over had been managed by seasoned and reputable professionals whose experience in the financial field ranges from international to domestic exposure. Even the Lucio Tan appointed directors have been very reputable. Bong may eventually have influence but he has to abide by BSP mandated DOSRI rules, risk management guidelines, and the entire rigmarole of prudential standards in banking. With stiffer regulations from Basel II arising from the recent international fiasco, it will be very difficult tomuck things up in a bank. The only challenge would be profitability.

        Comment by Gus Cosio | February 27, 2010

  4. Oliver,
    A beta of 1.0 means that a stock will move practically in lock step with the market or the index. This means that a stock with a beta of 1.2 will be more volatile than a stock with a beta of 0.8. I have seen betas in the Philippine market as high as 1.8 which means that the stock’s price can go all over the place even if the index stood still. I hope you get the concept of beta.
    As to the difference in reuters and bloomberg, that really depends on when they update their data. It is really better to get several sources and make your reasonable assumptions. In the investing and trading game, you have to come up with your own style.

    Comment by Gus Cosio | February 26, 2010 | Reply

  5. Regarding your concern about a normal delivery for your daughters…truth is we can never know for sure what kind of birth they will have. The best they can do is to prepare for it by reading as much as they could and attending childbirth classes where they will be taught proper nutrition and pregnancy exercises as well as what to expect in labor. I hope I was able to help.

    Comment by Chiqui Brosas-Hahn | March 9, 2010 | Reply

    • Chiqui,
      I directed my daughter to your website. She said that her Ob-Gyn recommended that she go see you, but was unable to go. I think for her next pregnancy, she’ll probably be more diligent. My son is getting married in 2 weeks to a very athletic woman – a Kinetic Science instructor in U.P. She plays rugby and soccer and many other sports. Do you suppose she’ll be the type who will have easy natural delivery given her physical activity.

      Comment by Gus Cosio | March 9, 2010 | Reply


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