Thursday market movements showed some follow through buying from Wednesday’s downturn as New York recovered. I for one do not think that the Greece and even the Portugal situation will affect us that greatly. This issue has been in the market since February and it will no longer be a surprise. As a matter of fact, the policy dilemma has been facing the strong economies in Europe, namely France and Germany, that there are quarters now predicting that the weaker economies will be kicked out of the common currency. Personally, I do not believe that all of Europe could survive with just one currency. It simply takes away a lot of flexibility in managing domestic economies. There was reason why the United Kingdom did not join the Euro even if it was part of the preceding European Monetary System, and it was precisely because they would lose their sovereign powers in steering their domestic economy.
Look what is happening between Greece and Germany. Germany, in order to grant financial aid, wants Greece to make tremendous adjustments in its economic policy which borders on political issues such as budget deficits, the public pension system and unemployment conditions. Germany sees that the Greek government which has a socialist tradition gives higher unemployment and pension benefits to its citizens than Germany in spite of the fact that their fiscal position is in shambles. I do not blame Germany because if Greece continues with its fiscal profligacy, they will never be able to pay Germany back. Bottom-line is either Greece bites the bullet and does a lot of belt-tightening or they get kicked out of the Euro (currency).
Now tell me, why should Greece’s possible departure from the European Monetary Union be bad for the global equities market? I do not really see them permanently affecting the U.S. and most certainly not Emerging Asia, meaning China, India and the ASEAN. To me it only means that the grape juice, feta cheese and olive oil imported from Greece will be cheaper at the supermarkets in Manila. How can that be so bad?
So, where do Philippine stock go from here? Personally, those that I have stuck in my portfolio I think will be higher.
By the way, there is news that Greece will bite the bullet. The government is said to be agreeing to a drastic belt tightening measure including drastically reducing pension benefits.
9:40 Thursday 29 April 2010 Philippine Stock Exchange Index 3299.42 (up 14.64 points from Wednesday close)
After the volatility over the past two days, perhaps the local market will attempt to stall the up trend that we have had since February. There are very strong stocks out there that have been impervious to the shock that the global markets got from the credit downgrade of Portugal and Greece. The major markets were whacked by the downgrade supported by the Goldman Sachs sideshow. Investors got worried that attention would be taken away from the strong earnings report from 79% of S&P companies that have exceeded analyst expectations on their 2010 first quarter earnings.
It is not surprising that people should pocket some profits when signs of trouble arise. The market’s view of the value of prices is a process of never-ending change. The differences of opinions expressed by investors through their buying and selling activity is what results to a collective wisdom of the market place. It is not so much that there are forecasts and views given by personalities such as Nouriel Roubini or Marc Faber. It may not even be the influence of astute investors such as George Soros or Warren Buffet. At the end of the day, there is only so much that these market movers can do. The final arbiter of stock prices is what the breadth of investors decide to pay for them. It is dependent on how people vote stocks with their money.
Locally, investors have been convinced that the place to squeeze out returns is the stock market and that is why local money has been strongly engaged in stocks. Even if you stick it out with just one stock, you would have done much better that keeping it in any government fixed income bond or time deposits in the banks. Some examples are AEV, AP, DMC, MBT and PNB, just to name a few. If you held these stocks from the beginning of the year, each of these stocks would have returned at least 20% regardless of how the global markets behaved.
Going back to the very influential U.S. market, many analysts believe that earnings of the S&P component stocks would be growing by 29% this year. It is no surprising then that with every major sell-off that happens, a comfortable base in prices is built. We saw this when the first news of Greece and the rest of the European PIIGS broke out in the latter half of January this year when stock prices slid until the middle of February. But what did we see after? Was it not a sustained rally until the second wave of bad news about Greece and the problematic Portugal broke out again. This gave investors reason to consolidate their gains by cashing in on some stocks.
The question that remains is whether or not to abandon this market or at least dramatically decrease exposure. My opinion and my money are of the view that we will remain engaged. I see a lot of value remaining in stocks like TEL, FGEN, PX, and MER at present prices. That is not to say that the other stocks should be ignored. I just think that from yesterday’s price action, these stocks are looking like bargains today. For stocks like MBT, URC, RLC and PNB, I think the trend is still intact. i just see them moving sideways in the near-term. Two stocks that look to be steaming ahead above the sum of all fears are DMC and PIP; there is probably something going on in these stocks.
Anyway, yesterday, I thought that the bloodbath on Wall Street would result in similar hemorrhaging here, but it did not. I do not think that local investors were like ostriches burying their heads in the sand. I think they were pretty clever coming to the conclusion that stocks are still the place to be.
7:10pm Tuesday April 27, 2010 Philippine Stock Exchange Index 3307.71 (+0.459%)
We have had two days of strong performance of stocks in the Philippines with most of the sentiment being influenced by the surge in neighboring stock markets as well as the U.S. Analysts in the U.S. are saying that stocks are in their cheapest levels since 1900. First quarter results are beating analyst forecasts by 22% in the U.S. fueling further bullishness. In Asia, a resumption of export activity and a smaller trade surplus from China is making growth prospects even more attractive for countries like the Philippines. At the same time, no investment alternative presents itself as more attractive than equities.
Yesterday, practically all the most active stocks closed higher, and those that did not simply had their prices unchanged. It was one of those days when you just buy anything and it will go up. Today (Tuesday), judging from the behavior of prices, the rising trend remains intact. With other stocks like TEL doing a catch up, the trend is confirming itself even further. For example, MER bottomed out last week at 165 and recover a few days later to 171. Slowly, it crept up to 176 yesterday and has consolidated at the same level today after trading at a high of 178. Even second liners such as PIP and third liner CMT are both showing strength giving further bullish signals to enthusiastic buyers. PIP looks to be headed back to its IPO level of 3.15 where I expect the resistance to emerge. Of course, I could be wrong and PIP could go even higher to 3.50 because of momentum.
I had mentioned in the past that the trend is your friend and for as long as the trend is going our way, we should stay engaged. I mentioned earlier that I was 80 percent in the market. I am tempted to go fully invested, but I will probably chose to be conservative. What I am considering is to sell some slow movers even at a loss and deploy the cash into stocks that could move even stronger. I noticed that AGI could be breaking out soon. MEG and FLI are both looking to be trading buys at this point. Again, I will raise a flag and mention that we should not be careless and be left buying stocks that people are starting to dump.
While I would like to see DMC come down so that I could add to my position, I just may have to pay up for it. There are guys out there who are seeing their EEI positions pretty much in the money. I would like to suggest a switch to DMC since the latter trades a lot better.
FGEN and JGS hardly moved the past two , so they might be good buy candidates. SM and SMDC has been quite strong leaving SMPH behind. Perhaps, SMPH might be a safe bet although I could see SMDC and SM performing. I would probably ignore ALI and AC for the time being but among the Ayala portfolio, I think BPI and MWC may be worth looking at.
For those who are concerned that prices are too high compared toa few days ago, I think what we are seeing is a market that is trying to discount events that are ahead of us. In my case, I would buy whatever weakness emerges for as long as the index stays above 3150. I would like to ride the market’s wave for as long as the momentum is there. My second thoughts would probably hinge on negative political developments and I am not referring to the mudslinging going on.
P.S. Wednesday 9:15 am
Wall Street was dwon over 200 points on account of Greece. Should we be worried? The answer is yes. Should we lose our heads? I would not want to. Remember, I reminded people to keep some cash in their portfolios for a possible drop. Well this is it. There should be some blood on the street, and normally attracts the wolves. The question is are you a wolf or a pussycat?
10:40am Monday 26 April 2010 Philippine Stock Exchange Index 3293.30 (up 48.85 points at mid session)
There were some interesting observable trends that can be seen in the periods approaching elections in 1992 and 2004. Both were presidential elections. The reason that the 1998 elections could not be considered significant was because it happened immediately after the Asian crisis and the Philippine market was in turmoil. What we could see in both elections was that from one month into the elections, the market rallied. In other words, during the peak of election activity, the market seems to adopt a very positive tone. When you look at mid-term elections of 1995, 2001 and 2007, you also have situations of market strength as people prepare to go to the polls. Of course what happens after is a different story depending on the underlying fundamentals of the time. In 2001, for instance, the market became strong as a knee jerk reaction from the change of government, but everything deteriorated soon after elections because the rest of the world went into an economic slowdown.
Anyway, the thoughts remain quite strong in my mind that previous elections had been very profitable for stocks in general. What raised my anxiety in this year’s election exercise is the fact that this is the first automated elections in the country and the process itself rather than the outcome which raises my anxiety. Judging from many news articles in print and on broadcast, thousands of people out there seem to share my anxiety.
With all these thoughts in the back of many people’s minds, why then are stock prices so strong? For one, the trend in the major equities markets remain strong. Furthermore, earnings and economic fundamentals in the U.S. economy support the trend. Locally, earnings and economic fundamentals remain strong as well, so there seems to be reason in the optimism of stock investors. In terms of price action, my instinct tells me that while individual investors have approached this rally will a lot of caution, institutional investors have moved with strong conviction in adding to their portfolios. What you can see is small volume selling and large volume buying up. (Buying up means the trade is initiated with buyers taking the offered volume in the market.) The thin is, most of these buying had been made in the sectors that have strong analyst recommendations.
Notice that MBT surged about the same time at least two analysts from foreign firms as well as a positive note on the Philippine financial sector. MBT was recommended to be the strongest in the sector. Of course, we saw an incredible performance of PNB, but that story was motivated by price recovery and an M&A story. The sector has remained firm with even SECB, UBP and even the odd RCB stayed with the upward momentum.
One very strong move was seen in AC which apparently has some story of buying voting rights over some preferred shares. I do not really understand what the broker was talking about so if any one out there has the right information, please feel free to post it here. My problem is I do not like to buy something that I do not understand.
So this market will be moving ahead until a few days after the Filipinos cast their vote. The shares that I will be following are MBT, PNB, MER, PIP, CMT, DMC, ICT, AP, AEV, SCC, EDC, FGEN, RLC, JGS, SMDC, SM, TEL and URC. I think not much could go wrong with these stocks. The message I want to impart is that investors should keep a portion of their funds in the market depending on their level of comfort on the elections.
Have a good week ahead.
9:15 am Friday 23 April 2010 Philippine Stock Exchange 3237.57 (+1.03%) (yesterday’s close)
The market resumed its course from Wednesday’s 56 point rise. The significance of this move is that it is a strong follow through coming from an already strong surge. If Wednesday’s rise was a mere rebound from a change in trend, then we should have seen profit taking or a new selling wave today. It appears that confidence has remained among investors. If stock prices were already expensive based on valuation measures, then it would be wise to say that this market is starting to be irrational. At first, it did not make a lot of sense to me that the markets was moving higher ahead of the May elections. In other words, I was of the view that risk factor had to be subtracted from stock prices as we approach election day. I am no longer of that view anymore. I think the market has read all the bad news and are willing to overlook whatever political disasters accompany this year’s elections. After all, this country has a history of bouncing back from whatever political turmoil it undergoes.
Having said that, it should not be surprising that I remain engaged in the market although I am setting aside some insurance by keeping cash available. This implies that I am not 100% convinced that everything will go well. Fortunately, up to this point, it seems that the trend is very strong. The domestic economy has resumed its growth path and even the IMF which is always pessimistic about the Philippines has raised its Philippine GDP forecast to 3.8%. My friends at the UA&P believe that growth will exceed 4% and that forecast is shared by a foreign investment bank that made a presentation early this week.
Again, with the risk of being repetitive, I continue to like the strong stocks in the market. An hour ago, I looked at some stock filters which a friend of mine follows and what it tells me is that there is scope for achieving a 15% return on a stock portfolio over the coming six months. Today, we saw stocks like URC, EDC, ICT and AC recover lost ground. We also saw some strong stocks retreat such as MBT and FPH. One of my favorites – PNB – looks to be staying put. Personally, I like it that stocks are moving within reasonable bounds. This strengthens my view that investors are not acting irrationally in the face of potential political uncertainty.
On the fixed income front, the Bureau of Treasury just finished its launch of its multi-currency OFW bonds which has received tremendous response. Again, this is good news for the local financial markets. It tells me that Filipinos want to put their money to work within domestic uses. I have been in the market for a few decades already and it is only now that I can sense a sustained level of demand for Philippine assets. In the years 2000 to 2004, much of Philippine money had been restless and had flown all over the world with very little being left to fuel the domestic capital market. For a few years now, the process seemed to have reversed and domestic wealth has become more comfortable staying in the country. That is a structural and a psychological change that I believe will cause a more speedy development of the local capital markets.
The U.S. market tanked for most of the morning in spite of good earnings result from Microsoft and Amazon.com. It was the good results coming from financial stocks and the data on improved conditions in the housing market that pushed stock prices to recover. In the U.S., investors appear to be wary of having too little in their equity portfolio. I sense that investors in the Philippine market might feel the same. If you ask me now what one should do with investable funds, I would say keep it invested at home (invested in Philippine stocks) because home is where the heart is, and we Filipinos have a lot of heart.
7:00 pm Wednesday 21 April 2010 Philippine Stock Exchange Index 3204.47 (+1.81%)
The big question in people’s minds would probably be whether today’s bounce was a mere rebound or a continuation of the trend. Reviewing the action of the market over the past two weeks, I think prior to the recent consolidation, there were mixed sentiment from investors with small investors revealing their anxiety about the forthcoming elections while the institutional fund managers who needed to deploy investments along global themes continued to buy the market. The focus had been on stocks that had very strong fundamentals that were further supported by the macroeconomic backdrop of the country. This was why the power sector continued to be strong fueling the strength of the market until it closed round 3300 on Thursday, April 14. We could also observe that the rally which started on the second week of February was running out of steam with two straight days of close just a shade below 3300. This was followed by profit taking for two days which was exacerbated by the threat of a U.S. SEC suit against Goldman Sachs. Even on a recovery in Wall Street, this was followed by precipitous selling in the PSEi.
All told, we saw four days of selling-off which took the index lower by 153 points or around a 5% correction. This is good. This tells me that investors continue to be rational. People have not abandoned their prudence in money management and that is reason for strength in stock prices.
On this score, I would like to share a global outlook that was presented by Credit Agricole Investment Bank last Monday in a Seminar sponsored by FINEX. In a nutshell, the economist was saying that we cannot expect strong economic growth in Europe and the U.S. because of the respective fiscal drags in their economies and the level joblessness that is way above the levels in 2006. Furthermore, because of the huge deficits that the U.S. and European governments had incurred during the last financial crisis, the soonest that the ratio of the deficits to GDP would come back to normal would be in 2014. What this implies is a few years of sub-normal growth from the developed economies. In contrast, Asia ( ex-Japan, ex-China and ex-India) is expected to grow around 5 % because of little or no fiscal pressure, resurgence of exports and growth in consumer spending. He also forecasted that the U.S. Dollar, the Euro and the Yen will be weak against the rest of the world.
All of these imply that global asset allocations to Asia will likely increase. The forecast also called for stronger currencies in Asia including the Philippine Peso. So with this kind of outlook, should we be surprised that our market has remained strong. The foregoing ideas tell me that not only will global portfolios increase their weighting in Philippine stocks, local investors should also be careful in investing away from local currency. In short, the outlook tells us that if you are a Philippine investor in financial assets, you should keep it close to home.
Yesterday, on my rebound list were MER, MPI, DMC and SMDC with an eye on MBT and PNB. I would like to expand this list today to include FGEN, EDC, FPH and AP – all power sector stocks. The ones to keep and eye on would be AEV and ICT. I think MER is poised to go above 180 while MPI should easily move to 3.20. DMC traded between 15 and 15.50 in spite of some heavy selling which only proves that many still view the stock as cheap. The power sector stock should continue its relentless drive shortly after elections so I think it will be well supported in any consolidation.
I think that people are keeping tabs on the uncertainty of elections but would not like to ignore the existing trend. That is how I would like to manage my own portfolio – to be attuned to the trend. I think the up trend in Philippine equities is just in line with how global investors see things. I think the market is telling us that we will have a manageable exercise of suffrage in two weeks. It would be easy to ride any bumpiness in the road ahead.
3:55am Tuesday 20 April 2010 Philippine Stock Exchange Index 3147.50 (-1.76)
Although it may be too soon to draw conclusions, I think that we have decoupled from our correlation with the DJIA which we had followed for most of 2010. I think it is about time that investors considered that elections could possibly affect how everybody else views asset prices. I continue to be defensive about this market. Fortunately, I was able to lighten up a few days back and I have room to act on opportunities arising from this sell off.
While many investors and traders would be shaken by a five-day losing streak, a lot really depends on cash positions of people in the market. I reckon that there has been sufficient selling to see a bit of cash back in traders’ hands. Similarly, we are seeing some stock coming down to oversold levels. One stock that fits the bill is MER. It has been on an 8 day sell down that a rebound might be in the making. I think that it is also a very safe stock to punt judging from my latest electricity bill which is up by almost 30%. While not all of the bill remains with Meralco, it nevertheless raises their cash levels when they collect it. I also remember that the in the first 2 months of 2010, Meralco sales were up 22% and 14% respectively. I think it could come back from oversold levels.
Another is MPI which is not only MER related, it also controls Maynilad which is a water utility. controlling both electricity and water should command some kind of a premium price, so it is a safe stock to own as well. I may be rising from its sell-off soon.
DMC is similarly a major holder of Maynilad though a minority to MPI. We think that in comparison to how MPI values Maynilad, DMC has it cheaper in its books reflecting some kind of undervaluation in DMC. DMC also has power generation through SCC and is an active infrastructure, construction and housing player. It is a safe stock to own in times like these. I also think it is oversold.
The final stock in my oversold list is SMDC. It is not a very cheap stock but its growth prospects are very good. With all its existing projects coming to completion and new ones being hatched, it is also a safe stock to own seeing that it is bound to rise from these sell-off levels.
Of course, I am keeping an eye out for PNB having taken profits last week. It traded at 29 today, but I think it can come down to 28 at which price it is dirt cheap again.
I suggest that investors do not ignore MBT which was the strongest stock in the market today. There is good reason for MBT’s strength. It is poised to reach long-term return on equity of 15% based on the speech given by its president to a conference of its branch managers last February.
There are 13 trading days to election day and uncertainty abounds in the political scene. I do not recommend that investors abandon caution. nevertheless, the companies mentioned here have seen the test of many a crises. Life will go on even if elections create some disruption in the country’s economic life. I am an optimist, so in the midst of my prudence, I still look at the bright side.
By the way, with Wall Street bouncing back in the wider S&P 500 index as well as the surge in NADAQ due to the constructive view on technology stocks, I do not discount a shift in sentiment locally to the positive side. Apple shares soared 5.27% on earnings rising by 90% and sales of iPods increasing by 130% for theyear. That is even very good for the Philippine export sector since electronic components make up more than 50% of our exports.
10:00 am Monday 19 April 2010 Philippine Stock Exchange Index 3208.05 ( down 61 points from Friday close)
The 125 point drop in the Dow is what I think is a classic example of buy on expectations and sell on news. A large number of investors had been expecting better than expected results from the blue chip companies that normally report ahead of the less followed stocks. Companies like Alcoa, J.P. Morgan, UPS, GE, BofA, the early results were above expectations. So why did the market sell off because of the news of a Goldman Sachs scandal? For one, Goldman’s are a very powerful force in Wall Street. It influences a lot of fund managers through its sales and trading of stocks and bonds. It also directly moves the market through the firm’s proprietary trading positions and the various hedge funds that it either owns or sponsors. Bottom line, what I see is the market looking to bank some profits before going into the next profit cycle.
In our local market, we have been seeing some profit taking as well. On last Thursday’s trade, we saw a bit of selling which took the index down 21 points. This was followed by another wave of selling taking out another 13 points off the index. Actually, we should not ignore the price actions the days prior to this decline. On Monday last week, we had a very strong rally which took the index 38 points higher. However, on Tuesday and Wednesday, the PSEi got stuck at 3299 – a foreboding sign that buyers are being reluctant to commit at those levels. Anyway, our market saw profit taking ahead of Wall street for our own reasons.
Nevertheless, I do not think that local investors are impervious to what is going on in the major markets. Asian markets have started to slump due to the anxiety brought about by Goldman’s facing U.S. SEC indictment and ongoing probes in Europe. Remember that a few weeks ago, Greece revealed that Goldman’s had engineered financial products for the country to disguise its digression from the standards imposed on the members of the Euro – the common currency of member European nations. Something like this could be very disruptive to the markets. Furthermore, it tends to make investors suspicious of the recommendations they receive from their investment advisers. Trading desks all over the world likewise will be taking a defensive posture which will tend to contract value turnover all over the world. Short-term, this looks bearish for the big picture.
For the domestic picture, things have not changed much is as far as company fundamentals are concerned as well as for the underlying macroeconomic fundamentals. The political picture has also not changed but because of recent global market events, there will be reason to provide more focus to the election factor. Until today, investors have been comfortable that elections will go smoothly despite the various hoopla brought forward by many devil’s advocates in this country. Personally, many of our countrymen appear to prefer the company of devils that the only position they wish to take on national issues is that of the devil’s. At the end of the day, our country has had a good history of resolving political issues peacefully. It just takes time. So whether the various election scenarios play out, there will be a Philippine economy chugging along after May 10 and life and markets will go on.
In the meantime, I would advise careful following of strong stocks. Remember that our economy will continue to hunger for electricity and power so keep an eye on your favorite power producers or distributors – AEV, AP, FGEN, EDC, MER, DMC and SCC. Watch out for the banks as well because some are looking stronger than ever – MBT is one and PNB is another I continue to like. It is helpful to remember also that you should enter at levels where you can handle the volatility. There is no sense putting out money then losing sleep over it.
I think that the fact that markets are consolidating – no matter the reason – is constructive. At the end of the day, in a situation like this, we all win.
9:45 Thursday 15 April 2010 Philippine Stock Exchange Index 3319.67 (a few minutes after opening)
It gets very difficult to stick to ones market convictions when the environment is screaming otherwise. I suspected that the U.S. market would have started to enter a consolidation phase, but it has gone even stronger. What has hurt my position is the fact that we are closely correlated to the movement of the major U.S. indices. Absolutely all the U.S. indices are up except the utilities index and the exuberance of the American investor cannot seem to be dampened. I guess if you read in the business headlines that companies such as UPS reporting earnings that have jumped 33% and J.P. Morgan raising their dividend bar due to sustained improvement in earnings, why should anyone not be encouraged.
On the domestic front, I keep hearing people talking about the fear of election failure, the judiciary being rigged, the Comelec doing some rigging on their own, voting computers possibly conking out, you name it, people are just assuming the worst on the political front. Yet, investors continue to pour money into the more volatile (compared to the boring money market) stock market. Actually, given low interest rates, I do not blame them. My cautiousness led me to reduce my portfolio to 60%, but I could not in my right mind not be exposed to stocks in the Philippines. As an asset class, stocks will be the best performer for 2010, and in spite of real or perceived pessimism, it seems to be so.
So, I think if investors have taken profits already, they should keep whatever they have left in their portfolios. For those who would like to increase holdings in their portfolio, I would suggest sticking to the very strong stocks. If there is one suggestion that I would like to make, it would be MBT. At least two major global investment firms have pointed out that the Philippine financial sector is undervalued and that idea will likely entice fund managers to seek out headline bank stocks, and among the top 3, I think MBT is the cheapest. It also is a large cap stock that shows a lot of promise because of reasonable price to book ratio and steady growth of return on equity. If anything goes wrong in the election, MBT will likely hold its own because it is the only local bank with full banking operations in China through a wholly owned subsidiary. Theoretically, their China operations could eventually approximate the size of the existing business by sheer size of the market in the middle kingdom. Of course, the market share of MBT in the Philippines is also a lot more substantial than any of the top ten banks in this country.
Another stock that people should also keep an eye on is MER. It was showing some weakness the past few days, but if this stock falls close to 170, I think it will be a good buy. Electricity sales has been growing double-digit over the early months of 2010 and with the economy picking up, this growth should be sustained. I also think that under the new management, both revenue and cost could be streamlined to produce a better bottom line. furthermore, I think that because its franchise area produces 60% of the country’s GDP, a premium should be attached to that.
My ideas may sound boring in recent days, but what can I say. There is just too many things to consider, I would not want to lose money just because I missed it.
11:15 am Wednesday 14 April 2010 Philippine Stock exchange Index 3296.30 (down 3.6 points from the previous close)
Yesterday the index traded above 3300 for a while in early trade before we saw profit takers selling. Value turnover was also distorted by close to Php27 billion block sale of SMC and SMCB which was the result of San Miguel’s tender offer. There was also a block trade for SCC amounting to Php1.25 billion. Taking away the block trade, today’s value turnover still amounts to a shade over Php2 billion, so it was not so bad a trading day. Nevertheless, I think that the index is hitting resistance again above 3300.
What I observe is that strong stocks remain strong – AEV, AP, MBT, FPH, DMC. Even today, these stocks remain strong. The index, however, as of this writing has drifted below 3300. The stocks that I mentioned earlier remain firm and has moved better in spite of the broad market.
In the U.S., Intel reported better than expected profits. That should be good for the Philippine economy because it is an indication of renewed demand for electronic component products of which the country is a big exporter of. In the latest export volume report, the statistics show that 58% of total exports were electronic components. An export recovery coming at a time of massive spending by both government and election candidates should bode very well for listed companies particularly consumer stocks. That is why URC has been strong and companies like PIP and JFC. It could also have some positive effects on SPH who is rolling out its direct selling network similar to that of Avon or AmWay. The recovery of exports would also provide a good base for property stocks and even cement companies due to higher disposable incomes available to buy or construct dwellings. The latest figures shown by HLCM and CMT have supported this.
Anyway, I would not want to beat a dead horse again, but in the U.S. last night, I saw some kind of divergence – the S&P 500 went up and the volatility index also went up. Normally, these measures move in opposite directions. I think there are early signs of wariness showing up. The same wariness should have been prevalent in our market but somehow investors have been a lot more optimistic. Given the country’s economic fundamentals, I would not blame them. Unfortunately, the politics in this country has a tendency to create havoc in good times. Many of our countrymen seem to have a penchant for self-flagellation.
What are we to do in time as these? My common sense tells me that no one makes a mistake by being careful. I will choose to be patient and wait for prices to come my way. After all, if this market is really going to be strong, what would missing out on a few points hurt? If something goes very wrong with elections – Murphy’s law says “If anything can go wrong, it probably will” – it could really hurt, and hurt bad.