Gus Cosio says so

Ideas on the Philippine Stock Market

A path to power

9:45 am  Wednesday  23 June 2010   Philippine stock Exchange Index  3336.79

The Philippine market may have gone down a touch Tuesday, but from where I sit, it did not seem that it did.  The stocks that I was very positive with – MBT, DMC and PNB were all up.  Only EDC was down and by only a fluctuation.  I came to the conclusion when the market closed that all was still well.  I reckon the ones holding TEL and ICT were the only ones that felt the drop of the market.

Anyway, I cannot instinctively reduce my positions for the time being because I cannot help but feel that money is still finding its way into the Philippine market from abroad.  The Asian and European markets are all easing from their bounce yesterday.  It might be that the initial spurt arising from the more flexible reminbi could be running into trouble.  Personally, I like the skepticism.  It tells me that many are underestimating the stronger weight of reminbi in the market.  Many western investment portfolios are probably under allocated in East Asian markets.  Unfortunately, much of their European portfolios could be underwater and funds are unable to rotate out of old positions.  The irony in the local market is that players are always waiting for the foreigners to make the first move.  People have such short memories; if you look back to last year’s rally, it was fueled first and foremost by local funds.

I maintain the view that what would take us to the next higher level will be the locals with greater participation of institutional funds.  The westerners are just too zapped out with one financial crisis after another.  In the meantime, the money that has come home to the Philippines is still waiting to be put to work.

I would approach the market with some caution by continuing to avoid speculative plays or stocks that are being jockeyed.  There will be special situations or recovery plays, but one has to be very careful in picking them out.  It could be a day to buy on weakness as stocks like DGTL, DMC, AP, JGS, URC and MBT are pulling back a touch.  There had been some interest in BPC as the stock starts to recover.  I think BPC, EDC, FGEN and MPI are similarly resting at the lows of their trading ranges.  If I am correct and today’s weakness is a simple consolidation, then we could be up for good times ahead.  I guess, you just have to trade the ranges considering that this sector – the power sector – is firmly in its growth path.

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June 23, 2010 - Posted by | Financial markets in Asia

25 Comments »

  1. Sir Gus,

    Awesome performance from SCC today haha 😀

    Anyways, i took profits with MBT at 59.50 and got some EDC at 4.7 instead. But that does not mean i’m leaving MBT completely. I sold it because i dont have any cash left to buy EDC. I will eventually get some MBT back in the near future. Your ideas on this move would be highly appreciated.

    Comment by JohnTheMan | June 23, 2010 | Reply

    • Sir gus is right!SCC going to 100/share…..my Globe is goimg to 1000..haha…

      Comment by nadia | June 23, 2010 | Reply

  2. Gus,

    Thanks for helping me decide on selling my MER in exchange for SCC. Im up more than 17%.

    By the way how does a 1:5 stock rights offering work?

    Comment by Ryan | June 23, 2010 | Reply

    • For every 5 SCC shares you hold, you are entitled to buy 1 SCC share at a lower price – SRO price. This would mean at exdate, price would adjust and get lower. So whether you avail the SRO or not, your holdings would lose some “value.”

      Assume the following:

      June 27 SCC @ P100 per share
      Your holdings, 1000 shares
      Entitled for 200 SRO shares (1000/5)

      On June 28, price would likely be..

      1000 shares * P100 = P100,000
      200 * 74 = P14,800

      P100,000 + 14800 / 1,200 shares = P 95.666

      Adjusted price would be close to P 95 – 96

      Pakitama na lang kung may mali. Thanks.

      Comment by Oliver Mia | June 23, 2010 | Reply

      • Oliver,

        For online traders, how are we going to purchase the SRO?

        Comment by JohnTheMan | June 23, 2010

      • JohnTheMan

        CitisecOnline allowed me to join / purchase FGEN SRO. My friends using the same online broker were also able to join NI SRO. I am not sure with other online brokers. It is better if you would call your broker.

        Comment by Oliver Mia | June 23, 2010

      • Thanks Oliver Mia.

        Comment by Ryan | June 23, 2010

  3. Hi sir Gus, my GLOBe is trending up…happy lunch..

    Comment by nadia | June 23, 2010 | Reply

    • Hi nadia,

      Congrats on you GLO 🙂

      Comment by JohnTheMan | June 23, 2010 | Reply

      • Hi john.. Congrats on your MBT…im planning also to buy EDC..maybe next week..

        Comment by nadia | June 23, 2010

  4. Sir Gus,

    SCC closed at 90. What’s your thought on this? I’m a long term investor but trades occasionally.

    By the way, your blog is wonderfully informative and easy to understand. Thank you for sharing your insigts.

    Comment by thewingedpalate | June 23, 2010 | Reply

    • Thewingedpalate,
      In my view SCC could go all the way past 100. It is an excellent stock to own since it is in the energy/power sector which is still poised to grow up to 2012 mabe even a few years after. Keep in mind as well that the parent company of SCC is DMC, so you can benefit from SCC through DMC which is also very cheap. DMC could go as high as 28 or 29 in the next 6 months.

      Comment by Gus Cosio | June 23, 2010 | Reply

  5. Hi sir Gus. Can you share your INSIGHTS as to why MPI is moving in such a NARROW range? Its fundamentals are intact and potentials still solid. Thanks.

    Comment by jojo | June 23, 2010 | Reply

    • Jojo,
      There is no new developments on MPI neither is there any clear direction as to where the broad market is going. while I am positive on a 6 month horizon, I foresee a lot of volatility in the coming 3 months. It is not unusual then that a widely held stock like MPI is still looking for direction; that is why it is trading in a narrow range. If you ask me, this would be a good opportunity to get into the stock because, nothing has changed in its fundamentals yet it is trading near the low end of its range.

      Comment by Gus Cosio | June 23, 2010 | Reply

      • Thanks sir Gus. Your confirmation is a real confidence builder.

        Comment by jojo | June 24, 2010

  6. is the market gonna come crashing down again?

    Comment by analyst | June 23, 2010 | Reply

    • I think no crash will happen as long as DOW is above 9500..

      Comment by Jim | June 23, 2010 | Reply

    • Unfortunately, I have no crystal ball to tell me. I rely completely on the fundamental macroeconomic picture and the guidance that the companies announce. The information tells me that it is profitable to be engaged in the market and that is why I trade.

      Comment by Gus Cosio | June 23, 2010 | Reply

  7. Hi Sir Gus, Thanks for all the inputs and guidance as regards our stock market. May I know your position with AEV? you’ve mentioned AP but not AEV, should I assume that your view is the same with AEV? Appreciate your inputs.

    Comment by newbie | June 23, 2010 | Reply

    • I am as positive with AEV as I am with AP.

      Comment by Gus Cosio | June 23, 2010 | Reply

  8. Sir Gus,

    With regards to SCC going all the way up to 100, is this still true even after the SRO come Friday? Or you mean, on a medium-term basis?

    Thanks sir for your constant help especially on newbies like me.

    Comment by herecomesthebaby | June 23, 2010 | Reply

    • It could come this month, it could come in December, I cannot know when; except, I know that when people realize the strength in earnings, 100 is an easy target.

      Comment by Gus Cosio | June 23, 2010 | Reply

  9. Hi Sir Gus,

    May I ask, what are your thoughts on FPH? Is it going to reach 58 on Friday or next week? Thanks.

    -Kris

    Comment by Kris | June 23, 2010 | Reply

    • Kris,
      I cannot answer questions that people normally ask crystal balls. Is FPH a good buy? My answer is yes. Is it undervalued at today’s price of 56? Yes, I think so. Will it go to 58 on Friday? It could, but it could also drop to 54. Your guess is as good as mine. My advise is that you not treat your trading strategy like a guessing game. Watch values and trends to educate yourself in investing in the market.

      Comment by Gus Cosio | June 24, 2010 | Reply

      • Sir Gus,

        Thank you for your advise. I also see FPH as a good buy. I’ll put into heart your words of wisdom. Thanks again. 🙂

        Comment by Kris | June 24, 2010


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