Gus Cosio says so

Ideas on the Philippine Stock Market

Our small corner of the world

6:45 pm  Monday 21 June 2010 Philippine Stock Exchange Index  3357.88  (+0.67%)

The news that hugged the international financial headlines today was China’s decision to allow greater flexibility in the renminbi.  This caught many by surprise and the initial reaction  in equity markets is likely to be positive.  Beijing sees this as a re-balancing of the global economy, and it has been welcomed by the U.S. and other trading partners as it should ease trade tensions among them for a while.  It will also reduce the need for aggressive hikes in Chinese interest rates, which had worried commodity markets.

This should also reduce the pressure on the safe haven demand for the U.S. dollar because of the positive effect of China’s move on global sentiment.  The reduced Chinese intervention on its own currency should lower demand for US Treasuries, and that other Asian countries including Japan will now be more tolerant of strength in their own currencies against the dollar.

The world is indeed changing and values of financial markets continue to adjust.  Markets are no longer U.S. and Europe centric as investors choose to diversify into the Asia.  Since last year, after the financial crisis in the western hemisphere started to resolve itself, I had mentioned that money will be flowing into our hemisphere.  We are seeing a confirmation of this trend, and I think the benefits will be further felt by our market.  I would continue to be constructive in Philippine stocks as a result.

I think that MBT could breakout above 58 soon as more investors realize that this is one stock that could be a proxy for the banking sector in the market.  I would avoid being underweight in this stock.  Among power stocks, EDC is a definite buy and momentum looks to be growing for this stock.  My senses also tell me that PNB might be popping up anytime soon.  There has been steady volume and strong support at 29 that it could just jump out of this range anytime now.

While DMC has been very strong and looks overbought, I would also be careful not to be without this stock because it could be breaking out soon.  Again, its energy and utility components are just too strong to ignore, not to mention the strength of its property and construction businesses.  MPI looks oversold and could turn up anytime soon.  MPI is in similar businesses as DMC such as water utilities and power.

Among the mining stocks, LC pierced through its 50-day moving average.  I would keep an eye on LC because it may have gone past its doldrums already. I would not ignore PX also because of some recovery in mineral prices and the stratospheric price of gold which hit a record high last Friday.

Looking at its chart, MEG might be trading at the high of its range already.  I would sell MEG and buy AGI, which is appears to have seen strong support at 5.60.  I hear that the hotel and gaming business has gone level up already.    URC is also gathering renewed strength with average volume moving up in the past two days.  If you like the consumer story, URC will be a strong beneficiary.

I think the China story today will be positive on the whole to the global sentiment.  We just have to make the response in our small corner of the world.

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

23 Comments »

  1. Sir Gus,

    Would it be a good move to sell MBT and pick up EDC at these levels?

    What could be lagging MPI at P2.8? TIA Master Gus! 🙂

    Comment by JohnTheMan | June 21, 2010 | Reply

  2. @johntheman only time will tell if i made a wrong decision in buying GLO @ 850/share….thanks for your concern..Godbless..

    Comment by nadia | June 21, 2010 | Reply

    • Nadia,

      I agree. Those were just my personal thoughts. Good luck in you future trades! Hope we all get lucky 🙂

      Comment by JohnTheMan | June 22, 2010 | Reply

    • Nadia,
      Trade GLO but do not fall in love with it. Sell it when you’ve made some money.

      Comment by Gus Cosio | June 22, 2010 | Reply

      • Thanks sir Gus….Trade the range..

        Comment by nadia | June 22, 2010

  3. Sir… i remembered last week that you mentioned that “MEG seems to have shaken off the anxiety coming from the last installment of their rights issue. It should resume on its march to 1.60 to 1.75.”. yet with your article now you mentioned that “MEG might be trading at the high of its range already. I would sell MEG and buy AGI, which is appears to have seen strong support at 5.60” … am i bit puzzled.

    Comment by tatels | June 22, 2010 | Reply

    • Hi tatels,
      With a trading stock direction is more important than price. For MEG, 1.74 was the high this year, so theoretically, it could get there. When I made my comment, MEG had just bounced above 1.20 and is now at 1.40. It is looking close to overbought levels. On the other hand, AGI looks like it is sitting on a strong support at 5.60 and is looking oversold. My idea of selling MEG is not because I think that MEG is a sell. My view is that if I’ve made some profit on MEG already, my money will do better from here on in sitting in AGI which by the way owns a big chunk of MEG.

      Comment by Gus Cosio | June 22, 2010 | Reply

      • Sir Gus,

        You’re awesome on this kind of analysis. I could’nt agree more 🙂

        Comment by JohnTheMan | June 22, 2010

      • thank you very much Sir Gus…. your analysis is really of great help specially to beginners like me…. thanks a million…

        Comment by tatels | June 23, 2010

  4. Good morning Sir Gus! This website is very helpful and enlightening. Kudos 🙂

    I just wanted to ask what your insights are on SMC and its sudden decline? I’m kind of worried since I’ve invested in it. Ideally its diversification gives it a positive outlook and for me it means that it’s a good long term buy. I may have missed something on why it’s declining. Currently I think it’s just apprehensions of investors in the decisions SMC has been making. Just wondering what your views are on this.

    Thank you! 🙂

    Comment by empress_liu | June 22, 2010 | Reply

    • Empress,
      SMC has been in a state of transformation over the last few years. It was undoubtedly the foremost food and beverage company in the country and even in the Asean. Lately, it has transformed itself into a power sector holding company and very little information has really been available to me. It is very difficult to value SMC nowadays and analysts have not been covering the company due to this lack of a definite identity. I, personally, am avoiding SMC until I get a better idea of what the core business is going to be and how it is going to be valued.

      Comment by Gus Cosio | June 23, 2010 | Reply

  5. good day Sir Gus,

    Based on PSE website, UBP is trading on very low trailing P/E.
    Whats the possible reason for this? Thanks

    Comment by Mike W | June 22, 2010 | Reply

    • Actually, PSE P/E computations are not very reliable so you have to verify from other sources. UBP is fundamentally sound except that it is not a highly traded stock. You will not lose money holding this stock, but you could get bored waiting for it to move.

      Comment by Gus Cosio | June 22, 2010 | Reply

  6. Hi Sir Gus.

    MBT closed at 59.50 today. You were right when you said that it can go up to 60. In fact, it reached 60 during the intra-day. My question is, since it’s almost 60, is it still wise to add more positions on the coming days? How far do you project MBT can still go? Will it consolidate after the rally? Thank you. 🙂

    Comment by Tubski | June 22, 2010 | Reply

    • Tubski,
      I bought MBT at 52 and I’m willing to hold it til it goes above 65. In my view, MBT is worth 70 but it will not be one straight line getting there. You could pick up some PNB to diversify while keeping your old position in MBT until it goes up another 10%.

      Comment by Gus Cosio | June 22, 2010 | Reply

  7. Do you have an idea as to why the foreigns keep on gobbling up Meg?

    Comment by Mark | June 22, 2010 | Reply

    • MEG is a very good property play in the Philippines. It is a very liquid and volatile stock so it is always an interesting trade. Then there are the warrants which can leverage the stock further.

      Comment by Gus Cosio | June 22, 2010 | Reply

  8. Hi Sir Gus,

    What is your view regarding SCC SRO, will this push its price upwards? Also for DMC, do you think its price will be dragged down after its record date(June 22).

    I’m planning to sell all my DMC and buy SCC before the ex-date.

    Thanks in advance.

    Comment by Olive | June 22, 2010 | Reply

    • Olive,
      I do not think that SCC will drop significantly after the rights offering. In my case, I would rather buy SCC ex rights because it will add up to the same thing.

      Comment by Gus Cosio | June 22, 2010 | Reply

  9. Hi Sir Gus,

    A few weeks back, you recommended MER (@170+) over MPI(@2.9?). MER has recovered since, is it advisable now to switch to MPI?

    Mal

    P.S. To BPITrade users: Is the BPITrade site down today?

    Comment by Mal | June 22, 2010 | Reply

    • Mal,

      I think BPI, the bank itself is offline today. They wont let me make any transaction because of “system problems”.

      Comment by JohnTheMan | June 22, 2010 | Reply

      • Thanks, JohnTheMan!

        Comment by Mal | June 22, 2010

    • Mal,
      Why don’t you give firstmetrosec.com.ph a look. You will find their tradins system a lot better than BPITrade. I use both, but firstmetrosec.com.ph is a lot more superior.

      Comment by Gus Cosio | June 23, 2010 | Reply


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