Gus Cosio says so

Ideas on the Philippine Stock Market

In good shape

7:00 am    Monday   22 March 2010         Philippine Stock Market Index     3097.23   (+0.12%)

I was out of my office last Friday due to meetings, but  I tried to catch a glimpse of the market from time to time by having a look at the ticker on television at ANC.   The index opened weak in spite of positive undertones in markets all over the world.  On careful observation, what looked to have dragged the market down was  TEL which was down 30.  A good number of stocks which I follow were up – MPI, MER, AC, AP, AGI, ALI, FGEN, GLO, MEG, and SECB.

Friday’s move somehow supports my view that MPI’s support level has moved from 2.70 up to 2.90 with the stock closing at 3.10.  It appears to me that most weak holders have been squeezed out at prices below  3.00 that only a sharp downturn could produce any sell-off below 2.90.  This should make traders of this stock very happy.

We saw a pull-back in PIP from the previous close of 2.44 to 2.38.  I am not worried.  I was wanting for it to consolidate in order to build a stronger base for its move higher.  I think the base will develop around 2.440 to 2.42 which should be a good spring-board for a move to 2.55 or higher.  I’m still hoping for 3.00 for PIP.

Stellar performers for  Friday were PNB and DMC.  Followers of PNB are probably gaining more confidence in the stock given current announcements of a new CEO and a more accessible merger date.  My thoughts are that the value of PNB has become even more validated by the improved performance of its financial operations for full year 2009.  It just broke out of the 24 level and I think the nearby technical objective is 26.  Another breakout situation is DMC whose long-term resistance had been 12.  It has been trading over the past few days between 12 and 13 in which seems to be a base building activity.  Given DMC’s strong fundamentals, i.e. its control of SCC, its acquisition of the Calaca power plant, its stake in Maynilad, its profitable housing business, and its strong construction order book, I would say DMC is bound for higher levels in the coming months.

With some consolidation in the global markets on Friday, I do not foresee a strong market that can be sustained in the coming week.  We are approaching Easter holidays and fund managers both here and abroad would not be too aggressive in taking additional risk in their portfolios.  Domestically, every guy in different trading desks is waiting for a holy week sell-off to happen in order to pick up cheap stocks.  The psychology does not seem to favor a rally to come yet.  Situations like this, however, are favorable for building strong base support in prices.  When cash balances are high in traders’ or fund manager’s positions, the dynamics develop in favor of the up-trend.  When investors are not in a hurry to sell, indications are that they still have a lot of investable funds.

For those who had been asking about SMDC, this pull-back we saw last Friday on the stock could be a buying opportunity especially for those who have holding power of a few months.  CYBR and PCOR could be a good bet for those who believe te San Miguel diversification into power and energy.  CYBR is speculative but PCOR’s return can be measured based on the 6.85 tender offer.  If that happens in less than a year, it would be a 12% p.a. return which is miles better than a one year corporate bond.

Anyway, it appears to me that any broad-based decline in prices are not in the horizon.  There are no earth-shaking news as yet.  There is also no “irrational exuberance” in sight.  The market is in good shape, as far as I am concerned.

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March 21, 2010 - Posted by | Financial markets in Asia

7 Comments »

  1. Hi! sir gus what will happen to equity market if inflation goes up because of el nino ….a friend of mine tells me that it might trigger a market correction or a sideway to downward market..

    Comment by cindy | March 22, 2010 | Reply

    • Cindy,
      The market always goes through is the process of discounting. This means that players anticipate probable outcomes based on available information. The El Nino had been expected by the market as early as January this year. Whatever effect it will have on stocks have are already reflected in today’s prices. what you have to be careful about is information that has not yet been discounted by the market.

      Comment by Gus Cosio | March 23, 2010 | Reply

  2. Good morning Sir Gus!

    Just one quick question:

    http://www.pse.com.ph/html/NewsRoom/memos/2010/MEMO_2010-0118.pdf

    What does it mean to be under Category A and Category B?

    Thanks!

    Comment by Oliver Mia | March 22, 2010 | Reply

    • You know Oliver, I don’t really know. I don’t even know if it matters. I reckon that you do all your trading on-line and likely with a reputable broker. If not, may I suggest you check out my favorite on-line broker – firstmetrosec.com.ph where you have seamless access to both your securities account and Metrobank cash account.

      Comment by Gus Cosio | March 23, 2010 | Reply

      • Yeah, I also think that it does not matter. I’m just curious. 🙂

        Thanks Sir Gus!

        Comment by Oliver Mia | March 23, 2010

  3. Hi guys, any reader out there who can explain VLL’s down today?

    Comment by wren | March 22, 2010 | Reply

  4. Sir Gus,

    I could never automatically discern the effects of rights offers of listed companies on their stock prices. Sometimes I read they’re good, other times they are not because of shareholder dilution. For example, I read that the Php5 billion rights offer of MEG in May is expected to put downward pressure on prices again in the absence of other catalysts.

    I guess my question is, is there a shortcut we can use to assess the impact of rights offerings on prices as soon as such are announced, and conclude definitely whether such stocks are a BUY, SELL or HOLD? Corporate actions like this are always confusing, and any advise you could provide will be of great help.

    Thanks, thanks! 🙂

    Comment by Jet | March 23, 2010 | Reply


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