Gus Cosio says so

Ideas on the Philippine Stock Market

Worried about getting Hungary?

6:15 pm  Monday  7 June 2010  Philippine Stock Exchange Index  3266.11 (-2.71%)

The 323 point drop in Wall Street sent the markets all over the globe reeling once more.  Again another case of New York sneezing and the whole world catching a flu.  The initial impetus on stock prices was Hungary, but how can this country, whose GDP is smaller than that of the Philippines and whose population is only 10 million and declining, really affect the global economy.  At best, the default is a grim reminder that serious problems continue to exist in Europe and that the austerity program adopted by some countries may extend to others.  the global effect is less contribution to world growth by Europe.

Of course, that would cause some concern for the U.S. based investor because most DJIA companies are global in scope.  These companies could be facing greater challenges beyond the difficulties in the U.S. consumer market.  The employment numbers provided no comfort either since much of the improvement in employment figures apparently had come from temporary government programs which will be expiring as soon as the federal government start reducing stimulus expenditures.

While we cannot ignore global predicaments, we should not forget the things that are going for us.  For one, our GDP had grown by 7.3% in the first quarter of 2010 and GNP by 9.5%.  These are numbers that imply some momentum in economic activity.  I was on the phone with a noted economist last week, and he was of the opinion that GDP growth momentum could provide stimulus well into the second quarter giving rise to a similar growth in GDP.  There is sufficient economic activity in the country to allow much of the PSE listed companies to turn in good earnings figures.

While the index dropped by 91 points or 2.7%, there appeared to be  a lot of  accumulation buying of stocks like MBT, EDC, TEL, AP, FGEN, and ICT .  The drop looks more like a buying opportunity rather than a cause to panic.  My view is that for this week and next, we should remain in a tight range in the main PSE index probably between 3200 and 3300.  There are stocks that may nevertheless trade profitably for the next few days.   On my list are: MPI (2.75 -2.95); EDC (4.65-4.85);  MBT (55-57.50); TEL (2400 – 2450); and BPC(3.60-3.80).  I believe AP, DMC, RLC, URC and JGS will either continue to trend or correct slightly.

I am not really worried about the market in spite of the weakness of the world equities market.  I am sticking to the view that liquidity and money is coming our way.  Fund managers will always be attracted to strong fundamentals, and I continue to sense strength in the Philippine economy, for the time being.

Advertisements

June 7, 2010 - Posted by | Financial markets in Asia

19 Comments »

  1. Hi Sir,

    Allow me to be an early one to comment as follows:

    Peter Lynch in his book, Beating the Street have this to say, ” There is always something to worry about.Avoid week end thinking and avoid dire predictions of the newscasters. Sell a stock because the company fundamentals have deteriorate, not because the sky is falling”.

    Of course, he is a fund manager and its not realy his direct savings. But we being new bies, well we need all the thoughts we can get.

    Regards

    Comment by alex | June 7, 2010 | Reply

    • Alex,
      In my view, if you get into positions at times when you are comfortable, it is pointless to even worry. Whether you are an investor or just a short term trader, you should touch only stocks that you understand and like. That way, there is no point in getting nervous or jittery.

      Comment by Gus Cosio | June 8, 2010 | Reply

  2. Hello Sir Gus,

    Just as everybody seems so pessimistic, afraid, worried & spread their weakness to me, but after reading your article I saw the bright side & lessened that fear, thanks for always being an optimist.

    regards

    Comment by steve | June 7, 2010 | Reply

    • Steve,
      The fear indicator is really a sign that markets are approaching bottom. when everybody is running scared or there is blood in the streets, it s normally a good time to buy. That is not my opinion; those are the thoughts of great investors such as John D. Rockefeller, Baron Rothschild and Franklin Templeton.

      Comment by Gus Cosio | June 8, 2010 | Reply

  3. Today I had the opportunity to buy MPI @ 2.8, JGS @15 RLC @ 13.5 and DGTL @1.52… with DOW futures now in the positive territory, I am of the opinion that PSEI will resume its upward trek… but then again, i may be wrong..

    Comment by mike | June 7, 2010 | Reply

    • Mike,
      Remember, investors need not be perfect in their timing. What is important is that they buy the right stock during the right trend.

      Comment by Gus Cosio | June 8, 2010 | Reply

  4. Hi Sir Gus,

    I got RCB at 18.75, it hasnt been moving much, should I trade it in favor of JGS or PNB? Heard that RCBC will be releasing common stock this year though… is that a good sign? Will really appreciate your advice on this. Thank you!

    Comment by Jude | June 7, 2010 | Reply

    • Jude,
      you should not be that impatient with RCB. I do not know whether they will be issuing new stocks, but if they do, they’ll probably ask the underwriters to try to make the stock more interesting.

      Comment by Gus Cosio | June 8, 2010 | Reply

  5. “Worried about getting Hungary?” — Hehe very cute title! 🙂

    Comment by Chris M. | June 8, 2010 | Reply

  6. Hi Gus,

    Yesterday, I further lightened on my positions mainly because I had the hunch that the PSE will be weak at least for the early part of this week. Though I saw some bargains yesterday, I restrained myself from buying because I felt that the Dow’s drop won’t be limited to Friday. When the US markets opened last night, I thought I had been wrong but still had conviction in my decision. When I woke up this morning and saw that the Dow had closed on its lows giving away 115 pts, I felt excited.

    Today, I am 60% ready to reposition myself although there is still a part of me that wants to wait a couple more days before diving head first. Perhaps I will buy but keep some cash just in case another red day happens in the US.

    Comment by richard | June 8, 2010 | Reply

    • Prudent cash management is always desirable. Good job, Richard.

      Comment by Gus Cosio | June 8, 2010 | Reply

  7. Sir,
    While property, power & banking sector seems pretty strong, any thoughts on the service sector particularly those in the call center/IT industry? Was looking particularly at PAX and IP. They used to be very strong 2005-2007. I myself gained a lot from these 2 stocks. They have barely moved and are in the Mar’09 levels. Was asking what if these stocks suddenly turn from garbage to gold? What will it take? Only a veteran like you sir might have interesting thoughts about this particular scenario.

    Comment by Mark Anthony | June 8, 2010 | Reply

    • Mark,
      You’ll have to look deeper into the BPO business under your own initiative because I haven’t seen much in-depth research there.

      Comment by Gus Cosio | June 8, 2010 | Reply

  8. Any thoughts on PCEV?

    Comment by Mark Anthony | June 8, 2010 | Reply

    • I’m afraid I don’t follow PCEV.

      Comment by Gus Cosio | June 8, 2010 | Reply

  9. Hi Gus,

    Any chance that the ‘strong’ 1Q10 figures were buoyed by elections? If not, where can we look to kind of strip out the effect of elections so that we can say – with conviction – that the economy is vibrant?

    Cheers.

    Comment by Rob | June 8, 2010 | Reply

    • Hi Rob,
      I have been following the economy closely on a regular basis. The 1Q10 figures were surprisingly strong, but in can be verified through other indicators. Exports increased by over 40% each month from January to April. Electricity sales by Meralco increased by 14% for the period and the growth came mostly from industrial users highlighting the demand from industrial producers also consistent with export growth as well as higher sales volumes of BPOs. Investments and inventory growth was also strong, figures which cannot be simply concocted. Of course, elections would have fueled consumer spending further, but according to private economists that I had spoken to recently, there seems to be enough momentum in the economy despite the negative growth in agriculture. With the rains filling up the hydroelectric reservoirs, we will probably have better growth in Mindanao and northern Luzon in 2Q10.

      Comment by Gus Cosio | June 8, 2010 | Reply

  10. Hi Sir,

    I have recently unloaded some of my holdings and decided to position to PNB. Due to whats happening to Hungary and its effects on our market, would it be a reasonable bet to settle at 30? Based on my research, it is expected to pullback to 28.5 this week then rev up to 29-32 in the following weeks. My gut tells me to wait a few more days but another part of me is saying to loading up.

    Thanks!

    Comment by James | June 8, 2010 | Reply

    • Hi James,
      I think that prices in general should not run away from us over the next 2 or 3 trading days. Having said that, the PNB/Allied merger can happen anytime as well. May I suggest that you manage your position by accumulating or slowly buying your position over the next few days.

      Comment by Gus Cosio | June 9, 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: