Gus Cosio says so

Ideas on the Philippine Stock Market

Manipulating Philippine GDP

10:20  Wednesday  1 September 2010

There have been some comments questioning the integrity of GDP numbers released by the government.  I know that these figures are generated from statistics gathered by the National Census and Statistics Board.  A few years back, I am not sure whether it was the World Bank, the IMF or the ADB or all of them cited the National Census and statistics Bureau for their good work in providing the government with the National Accounts at a timely pace and with good quality.

My own assessment of the situation is this:  Will it benefit the government to manipulate the data?  The answer is no.  Whether the numbers are good or not, people will react negatively or positively if there is trust in the sitting administration.  During the past administration, the economy was doing very well – a fact that was verified by the strong earnings of companies that profit from a robust economy.  These are telcos, power generators and distributors, real estate firms, banks, consumer goods, retailers, exporters, hotels, you name it.  These figures are meant to help business decisions and not merely to give adulation to government.  At the end of the day, it is what is in people’s wallets that confirms to them that the GDP figures are true or not; and this can be judged from the amount of money people are spending from the wet markets, the 168 Mall in Divisoria, the SM and Robinson’s Malls and all these commercial hubs that have mushroomed around the country.

Anyway, from where I am sitting, I can see an economy that is growing fueled by strong consumer spending in metropolitan areas where much of the jobs are.  In the NCR, much of spending is fueled by BPO workers as well as the retail establishments that surround them.  The same goes on in Cebu and activity is even supported by strong tourism traffic.  In Davao, you can literally say that their local economy is going bananas as China is now importing 85% of their banana consumption from the Philippines.

Of course we will be vulnerable to any global economic slowdown and most businesses are prepared for that possibility already since everybody has been talking about it for a few months now.  What surprises me is the strong price surges in hard commodities such as gold, silver, copper, nickel and iron ore.  Yesterday, I saw on Bloomberg Television that Australia’s coal and iron ore exports are surging again.  If that is happening, then some country or a group of countries are buying; and if they are buying, that means they are using these commodities.  That to me signals economic activity.

The recent hard commodity spike is what has caused mining stocks like PX and AT to surge lately.  I think in the next few days, we will see more movements in mining shares including the speculative ones like ORE, CPM and GEO.  Even if enthusiasm cools down a bit on some of the market’s favorites, the rotation into mining stocks could keep trading interest going.

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September 1, 2010 - Posted by | Uncategorized

53 Comments »

  1. Good Day Sir Gus!

    Is it still ok to buy PNB? This stock seems to be slowing down =(

    Comment by Pinoy Na Bigbrother | September 1, 2010 | Reply

    • Pinoy,
      Yes, in fact I had posted at 41 earlier today.

      Comment by Gus Cosio | September 1, 2010 | Reply

      • Hello Sir Gus,

        PNB is being battered recently, for more than a week which seems to be a lot. Ive read the technical s but it is still pointing for a decline. But fundamentally speaking, is it just being valued at 48 or above just because of the take over of Allied Bank? or are their any other reasons fundamentally.

        Thanks

        Comment by Foreign Investor | September 1, 2010

      • HI Sir Gus, Do you think the recent news about Globe Asiatique’s 1.2Bn past due loan with PNB will affect the stock price? Same thing with RCB wherein they have about 2.8Bn loan exposure (likely to go sour also) to GA? Just curious!

        Comment by Cholo | September 2, 2010

      • If the loan goes sour and the stocks of RCBC and PNB goes south, then that would be a very welcome development since I’ve been looking to acquire some RCBC for some time now.

        :expectant:

        Comment by jasper | September 2, 2010

      • stock price just intercepted with its 32 day moving average, expect it to be hovering in between moving average boundaries, it will breakthrough its resistance if theres any good news, or go down its support when the correction finally surfaces

        Comment by cliffhanger | September 2, 2010

  2. i cash in some little gains from BDO, LND, FGEN, i want to a new positioning and re-align my portfolio. I am thinking of getting a bigger chunk in MBT, is the price of MBT reasonable at this time? I have DGTL which represents 9% of my current pfolio, there is a convertible loan that will expire in the medium term ( I think 2011-2014). What is your view on the dilution of ownership in DGTL? thanks sir…

    Comment by jerry | September 1, 2010 | Reply

  3. Jerry,
    I mentioned in an earlier note that I have no problem with the convertible note. It is actually to the better interest of the note holder to see the price higher because his return will be higher. I am not worried about dilution because the company will be paying less interest which instead can be paid out in dividends.

    Comment by Gus Cosio | September 1, 2010 | Reply

  4. Hi Sir Gus,

    I am an avid reader of your blog. I wonder if you do seminar about stocks in general or maybe your trading style. It will be inspiring to know your insights and hear it from you specially to a newbie like me. Thanks.

    Comment by rick | September 1, 2010 | Reply

  5. Sir,
    Would you recommend to be 100% invested esp we are now entering Q4, exiting the ghost month Sept 7? Forward looking would you also recommend positions by early Jan’11?

    Comment by mark anthony | September 1, 2010 | Reply

  6. Hi Sir Gus, everyone…anyone here who knows what’s wrong with the PSE website? when do u think will it resume it’s web?

    Thanks

    Comment by artinvesting | September 1, 2010 | Reply

  7. DOW is up by 2.3% in early trading, if this trend continues, we might be breaking the 3600 psychological resistance tomorrow. Stocks with momentum and volume (i’m biased towards AP and MPI), i think, will strongly shine in tomorrow’s trading IF this surge of US market is maintained.

    Comment by Chris M. | September 1, 2010 | Reply

  8. Indeed, our economy is growing however it looks like buying sentiment in our stocks is dependent on the performance of the Dow to a high degree. I guess the local players have become accustomed to this habit so much so that they have a hard time weaning themselves out of it. I wish for the day when local stocks could decouple from the performance of the Dow.

    Comment by roy_roger | September 2, 2010 | Reply

  9. Sir Gus,

    Thanks a lot and please continue sharing your ideas.

    NSCB is the policy making body on statistical matters of our beloved country (National Statistical Coordination Board) and Dr. Virola will not allow the data to be manipulated to project a good image of the state of our economy…

    Comment by Totoy | September 2, 2010 | Reply

  10. Hi sir,

    My friend of mine told me that trading in the US market is also a good place to diversify. How would I enable myself to trade there? Im sure there are also a lot of online providers for this service?

    Thanks

    Comment by PiggyBank | September 2, 2010 | Reply

    • You can try http://www.tdameritrade.com They just have different fees (I think they charge on a per trade basis vs. here where it’s a fixed percentage of your trade value). Also, I think they require a much bigger maintaining balance.

      Comment by marts | September 2, 2010 | Reply

    • if you’re an american citizen or can get a joint account with someont no problem, pick and choose. but for filipinos they’re few and far between. if you don’t trade much and want your stocks to sit and grow, http://www.firstrade.com is not bad and they also offer DRIPs. for wide access and really cheap commissions (save for a monthly maintenance fee) IB is good and lets you trade forex as well. otherwise most other brokers are not accomodating and too bad really because they have really nice services and features.

      Comment by ed | September 2, 2010 | Reply

      • another advantage that is available is that a number of chinese companies are trying to list on us stock exchanges or in lieu of that they get listed as an adr. you can buy the pink sheets, adrs or nasdaq issues, of course research them well. my suggestion is to keep track of one stock for at least a year before you buy it.

        Comment by ed | September 2, 2010

      • it’s also good practice to do background checks on the broker. aside from user reviews which may or may not be reliable, finra provides brokerage reports. for example they will show if a broker has violations, what the broker is allowed to trade or engage in, approvals, etc., it’s very useful.

        Comment by ed | September 12, 2010

  11. thanks sir gus for your excellent management of fami equity
    fund, a real effects of gdp is felt over the air.i am happy
    you are the captain of the ship.

    on my part it is a good combination of trading my own equity and channeling a little portion of my trading gain to a mutual trust fund. its like having a stocks and bonds{trust fund) in my portfolio. the only difference is my bonds earned 36% year to date.

    Comment by richard | September 2, 2010 | Reply

    • just make sure that your individual stock picks don’t overlap the positions/holdings in the mutual fund. otherwise you’re paying a management fee for something you are already doing on your own. one of the other readers on this blog i think did exactly that. 36% is tough to beat.

      Comment by ed | September 2, 2010 | Reply

      • my caveat for those who lean a little towards gus-worship, that comment wasn’t a dig on him, his skills or the fee structure of mutual funds. like any manager or businessman you know who your clients or target market are. it’s worth the cost having someone else manage your funds if a persons time is more valuable doing something else, it just doesn’t make financial sense to indulge in overlap. just contructive criticism.

        Comment by ed | September 2, 2010

      • ed,

        thanks for your comment. i am fully aware of those things and had already taken into considerations those things even before i make this strategy of diversifying on the same venture with a different boat but one mission.

        my only purpose is to have a reserve cash for future use,
        instead of saving it in a bank or reinvesting in stocks or bonds by my own. i have proven this strategy for almost a decade and it pays. the result is i become a full time investor earning my living tru this way. beside i only discovered this blogsite by May of this year and posted my first comment by july.

        i hope it clears your understanding on the perception that you are trying to project.

        Comment by richard | September 3, 2010

      • that’s why i like reading this blog, good quality opinions and people are open to comments. i appreciate the respect given to my comment and i hope i showed the same to yours. cheers.

        Comment by ed | September 4, 2010

  12. Hi Sir Gus/anybody

    Is the PSE website down? I can’t see the stock quote report. Is there a way to get this report.

    Comment by Cliff | September 2, 2010 | Reply

    • Hi Cliff,

      try http://www.pse.com.ph

      Comment by john | September 2, 2010 | Reply

    • Yes it is. Access to the website has been intermittent at best during the past few days. Unfortunately I have no idea what time it’s best to check again.

      Comment by marts | September 2, 2010 | Reply

    • bloomberg has it.

      Comment by ed | September 2, 2010 | Reply

  13. hi sir gus,

    i think u forgot to mention that one of the main reasons why the GDP is up is because of the elections last may…

    Comment by cliffhanger | September 2, 2010 | Reply

  14. you say sir, that its time to raise some cash because there might be a downward pattern in the months ahead, when do you think this would happen? if so how low will mpi and dgtl go down to.

    Comment by gerald | September 2, 2010 | Reply

  15. good pm everyone… Sir Gus… any idea on CMT? thanks a lot.

    Comment by tatels | September 2, 2010 | Reply

  16. Hi guys,

    Is it a good time to take profits today? Everythings up up up and we all know whats next but is this already the peak? Or should i still look forward to monday?

    Comment by James | September 3, 2010 | Reply

    • just take profits today, its a friday, some news could come up over the weekend which could serve as a correction, PSEi as at its all time high, i say go out when your on top…

      Comment by cliffhanger | September 3, 2010 | Reply

  17. James,

    I agree with cliffhanger but not on all fronts. The all time high of the PSE is 38XX which was made October 2007. Maybe he was referring to the 52-week high. As to profit-taking, I would do so in some select stocks but not all. Today I sold BEL because of its recent intraday weakness. But I am keeping DMC. I’ll sit on DMC for at least a few more months because I don’t think Deutsche will buy 3M+ shares at this price only to sell in a few days time. As for my other holdings, my strategy varies.

    Comment by richard | September 3, 2010 | Reply

    • I am also holding my DMC & PNB for a little bit longer but what do you think about MPI, AGI and DGTL? Ive already reached 30% gain so maybe i should realize but maybe i should also just leave it be?

      Comment by PiggyBank | September 3, 2010 | Reply

      • PiggyBank,

        I haven’t been monitoring AGI so I wouldn’t be in the position to comment on it. As for MPI, when I held it before, volatility was very very low despite the consistenly good volume. After the implementation of the NTS, I’ve noticed that its price movement has improved significantly. I doubt there is a correlation between the two, all I know is that there has been a change in how it moves since late July. Like what Gus has been repeatedly saying, it has excellent cash-flow and enjoys the benefits of monopolies, which are very rare nowadays. For DGTL, it has maintained its current price despite continuous selling. I believe this is a good thing because it tells me that those buying now have longer holding periods thus making the support quite sturdy. These things are just based on my observations on their respective price movements. Fundamentally, I haven’t done much research on MPI and DGTL.

        Comment by richard | September 3, 2010

  18. hmm. it seems that Gus’s suspicion that MBT is at least worth 70 is proving to be true.. I still remember this when it was at mid-50’s..

    Comment by jasper | September 3, 2010 | Reply

    • I remember it also. Same thing with MPI@4.0 (currently at 3.72) and DMC@25 (currently at 23.20). Thanks Sir Gus for the insights!

      Comment by pinoyinvestor | September 3, 2010 | Reply

      • Same here! Thanks Sir Gus!

        Comment by Anthony | September 3, 2010

  19. I sold my DGTL shares at 1.45. Got it at 1.41. Will buy again at around 1.37

    Comment by trixia | September 3, 2010 | Reply

    • Something fishy is going on here… Volume is increasing but NFB is still close to flat

      Comment by Foreign Investor | September 3, 2010 | Reply

      • Domestic accumulation does not always mean something fishy is going on. It might be that fellow Filipinos who actually see how good Sun’s business is doing are buying more and more for long-term growth play. Foreign funds focus more on big caps particularly index constituents. But these companies are not the only ones worth looking into. Sometimes, local investors have to take the lead before foreigners notice the potential.

        Comment by richard | September 3, 2010

    • With regards for DGTL, I’m waiting for the 3rd Quarter results. If they’re still in the black, I’ll consider adding to my portfolio. And then again when the 4th quarter results comes in.

      It’s interesting to note how fidgity some are with regards to DGTL. They just bought last week, and then they need to sell again today. what gives.. even Gus have said repeatedly that this is a turnaround and that it takes time for value to be realized by the market.

      There is precedence for this. If you read Gus’s old posts he’s been hyping PNB since 2009 and price is on the low 20’s. If someone accumulated PNB since then and just held on to it, he might be a very happy fellow by now.

      It could be the same with DGTL. If they are indeed turning around, someone who accumulates it now will be very happy in the end.Or at least thats what we hope to be.. 🙂

      Comment by jasper | September 3, 2010 | Reply

      • Technical analysis on DGTL…

        if it surfaces to 1.47-1.48, i think thats the time it will be on its way up.

        its 3 month trend is obviously going down for, but maybe thats just its way of correcting itself for the mid june high of 1.7.

        if ever prices will continue to go down with respect to its trend, 1.35 would definitely be its support..

        Comment by cliffhanger | September 4, 2010

      • Hi Jasper im also waiting for the 3rd Qtr. result of Dgtl if it makes at least 75 Million frm july-sept that means it will make money in the coming years….

        Comment by jenny | September 4, 2010

  20. the ultimate break-out for DGTL is the P1.54 level… all heavens will break loose if that level gets taken out… hopefully the BIG volume from last Friday is a pre-cursor of this magnificent break…

    Comment by longneck | September 4, 2010 | Reply

  21. Dont want to raise the alarm, but doesnt anyone fear that the market has already gone up faster than expected; looks like dejavu all over again…..

    Comment by gerald | September 5, 2010 | Reply

    • im just really waiting for it to happen so that we can buy again

      Comment by cliffhanger | September 5, 2010 | Reply

  22. Sir Gus,
    What’s your take on AT? its production becoming steady, copper prices is rising and LME/COMEX stock declining…thanks.

    Comment by chinky | September 5, 2010 | Reply

    • Chinky,
      I think AT is worth a trade, but you have to watch and time it closely. I think if it dips a bit, you can take a punt. I think the company itself believe that their stock ought to trade at 20, but I think if you buy now and it goes to 15 and above, that should be a meaningful return. Mining shares will tend to be be volatile and liquidity in trading will ebb and flow depending on metal prices. Since metal prices are just coming off their flat base, you may be right in getting into mining plays. The safer bet in my opinion is PX which I understand will be making good profits this year. Another mining stock which has been speculative for a while is ORE, but I learned from reliable sources that they have had good production and will be shipping in November.

      Comment by Gus Cosio | September 6, 2010 | Reply

      • Hello Sir Gus,
        With regards to ORE, which is a speculative stock. But fundamentally speaking.. do you think it has a strong base at these levels 2.7-2.75? Since shipments are due on November. Volume is still quite low. Do you expect any big swings soon?

        Thanks for your thoughts

        Comment by Foreign Investor | September 6, 2010

      • Thank you for the very good insight sir. I will try to accumulate ORE and hold until year end.

        Comment by chinky | September 6, 2010

  23. Hi Sir,

    I am wary with the movement of ALI, last week it went down by 15% after closing, now it close to a new high of 18 peso level. Can we say freely that there are few who are playing to manipulate the market? When will the surveilance division of SEC intervene in cases of stock price manipulations? I remember BW resources in 2001, many small investors left behind for nothing. Thank you sir.

    Comment by jerry | September 7, 2010 | Reply


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