Banking on excitement

7:20 pm  Thursday 22 July 2010

The market simply took its cue from the negative sentiment in Wall Street, and Wall Street simply took their cue from Fed Chairman Ben Bernanke who testified in the U.S. Congress that the economy is still in the tank.  Most Asian markets eased in sympathy except China and Hong Kong which are mutually benefiting from easier capital movement rules between them.  While it did not fuel any aggressive selling in the PSE, there was a reason for some people to take profits.  I am just relating some of my observations.

The volume spike in MPI the yesterday and prices holding around 2.60 today gives some reassurance that the stock is at the bottom of its trading range.  If this does not hold, I think the support is not far behind.  My guess is that it is at 2.40.  I suppose people are wary of the company’s debt load; but don’t forget that most of its assets are in infrastructure which is long gestating, but when they do they become cash cows.  Debt is an integral part of any infrastructure play.

MER, a sister company of MPI, may be worth watching as it approaches 180 which is where its 50 day moving average lies.  I think there are a lot of interested parties waiting for it to touch 180 or lower to accumulate positions.

The sell off in MBT suggests to me that a consolidation process is going on.  I do not think that the next earnings reports will be negative for MBT.  I suspect that major portfolios are just making room for other banking issues given the new excitement has been generated by PNB.  I expect bustling activity in banking stocks soon after floor traders at the PSE become comfortable with the new trading system.

With SCC soaring some more, it is no surprise that DMC continues to be strong.  The interest in SCC continues to grow as more information on the excellent results of the Calaca acquisition flows to the public.  Some analysts see SCC to be worth at least 126 which leads me to believe that DMC, even at 19.50, is poised to move higher supported by further strong buying.

Another stock that is gathering support is EDC.  At around 4.55, EDC looks to be bottoming although range could be narrow with upper range only at 4.80.  Its grandparent, LPZ,  could have run its course already.  People are looking to take profits at 3.80, and there is no new impetus to take it higher.

The nervous trading in DGTL with a wide price range today is nothing to be worried about.  With volume rising as it is, I think it may be worth the risk posting at 1.44 to 1.46 even if foreign selling is detected in the stock.  You could get lucky because I think new players will be coming to have a look.  There are lots of reasons to be hopeful on Philippine stocks.  You just have to choose them right.