Gus Cosio says so

Ideas on the Philippine Stock Market

By Shinny Chen
Sept. 7 (Bloomberg) — Philippine and Malaysian stock
markets may soon end 16 years of stagnation and enter a “golden
era,” according to CLSA Asia-Pacific Markets technical analysts.
The Philippine Stock Exchange Index is testing its record
high reached on Oct. 8, 2007, after fluctuating between support
at 975 to 1,075 and resistance at 3,447 to 3,896 since 1993,
CLSA analysts led by Laurence Balanco said. The FTSE Bursa
Malaysia KLCI Index is also poised for a breakout after it
“drifted net-sideways” below the 1,332 to 1,524 range since
1994, the analysts wrote in a report.
The “secular bear markets” in the two Southeast Asian
countries may be similar to ones in South Korea from 1989 to
2005, Indonesia from 1990 to 2004, India from 1992 to 2004,
Singapore from 1994 to 2006, and the U.S. from 1966 to 1982,
according to CLSA. Since then, benchmark indexes in the five
countries have rallied at least 51 percent and posted gains of
as much as 282 percent, the analysts said.
“If the PSE index and the KLCI are to adhere to these
common secular bear market patterns, then both markets are on
the cusp of entering a new long-term bull market phase,” the
analysts wrote.
A “conclusive” breakout above 3,896 could take the
Philippine gauge to 6,752 “in the years to come,” according to
the analysts. Still, they said the market may yet pause as it
approaches the resistance zone and as the benchmark index
completes a five-wave sequence from the October 2008 low.
The Philippine index lost 0.6 percent to 3,723.45 at 11:14
a.m. local time.

Cyclical Correction

“A partial retracement from the 3,447 to 3,896 resistance
zone will mark the end of a 16-year secular bear market,” they
wrote. “We would look at accumulating stocks during this
cyclical correction.”
Resistance refers to the upper boundary of a trading range,
where sell orders may be clustered, while support is where there
may be buy orders. Elliott Wave Theory, created by U.S. market
analyst Ralph Elliott in 1938, concludes that market swings, or
waves, follow a predictable, five-stage structure of three steps
forward and two steps back.
In Malaysia, a breakout may suggest a long-term minimum
target of 2,610 for the KLCI index, according to the analysts,
who didn’t specify a time frame. The gauge was little changed at
1,433.68.
Still, an “extreme” reading for the gauge’s 14-day
relative strength index may be a warning sign of a pullback in
the near term, the analysts said. The KLCI’s RSI, tracking how
rapidly prices advanced or declined, was at 77.6 today, higher
than the 70-level seen by some analysts as a signal that prices
are poised to fall.

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September 8, 2010 - Posted by | Uncategorized

51 Comments »

  1. I’m having such a hard time posting on the site. There is something wrong with wordpress and I can’t seem to type anything in the posting box so I pasted this article which I thought should give people something to chew on.
    I’m still trying to figure out how I can do my regular posts on the blog. Please bear with me.
    Gus

    Comment by Gus Cosio | September 8, 2010 | Reply

    • Just a suggestion sir Gus. Maybe its time for you to have your own WEBSITE? Costs maybe defrayed by subscriptions (you have considerable following sir) and/or ad revenues. Count me in as subscriber #1, if ever. More power to you sir!

      Comment by jojo | September 9, 2010 | Reply

      • count me in..(“,)

        Comment by alssy | September 9, 2010

    • hmm.. paid website is a.. an interesting idea. However, An exchange of money carries with it certain guarantees/promises. As in.. I paid you xxx pesos, now give me yyyy.. If someone is not prepared to give that yyyy, it could get hairy.. just imho

      Comment by jasper | September 9, 2010 | Reply

      • really none of my business to suggest how to run the site but since a few have thrown out their opinions i’d like to push mine out as well, albeit with as little damage as possible. a paid website would almost immediately restrict the free flow of information as well as hamper independent thought. if you make a pre-payment for something, the tendency is to assume there is value and it is correct as opposed to making the value judgment in the reverse. unfortunately payment schemes promote elitism and will attract a disproportionate amount of “the herd”. in my opinion nobody should be precluded from participating on the basis of financial capacity. besides, most savvy investors don’t share everything anyway and there are things that an investor should really keep close to the chest. finally my personal evaluation of gus’ posts is that he makes broad-stroke commentaries which, i have to be honest, should elicit more varied responses here rather than agreement. disagreement is healthy and please keep up the dissents. as always this is written in the spirit of constructive criticism.

        Comment by ed | September 14, 2010

  2. Sir Gus,

    What is the “16-year secular bear market”?

    Thanks.

    Comment by jovy | September 8, 2010 | Reply

    • A market trending upward is called a “bull market” while one trending downward is a “bear market.” Once a trend continues for years, it is referred to as a “secular market.”

      In other word, PSE has been categorized as bear market in the last 16 years. That’s how I understand, please correct me if I am wrong.

      Comment by jerry | September 9, 2010 | Reply

      • PSE had been in a bear market from 1997 to 2003, the year that it bottomed out. I had been on an up-trend from around October 2003 to October 2007 when the global financial crisis started to rock the global economy. It went down until around March 2009; it has been on a bullish trend since then.

        Comment by Gus Cosio | September 9, 2010

  3. I profit take for the last few days and cashed 40% of my portfolio. I want to re-align my position, I got ORE and it jumps to 6% in 3 days, I should have put big chunk but I am reluctant for the company’s fundamentals. Among my prospecte are: BDO, MBT, SECB in financials, RLC, VLL, FLI, MEG in property, AC and AGI in holding, EDC, FPH, AP in energy. (waiting for the timing to enter) In mining, I have sufficient stocks in GEO, NI, OM, PX, but, performing well, my GEO slept for almost a year now, hope it will move upward soon.

    With the global market mixed performances, do you think it’s worth to slice my stocks exposure and allocate 20% in retail bonds?

    Comment by jerry | September 9, 2010 | Reply

  4. Hi sir,

    With the news last week about the shaky european banks and then the sudden surge in Asian markets then the also unstable DOW, what do you think is the general trend of our market? I was accustomed to seeing our market fall when the DOW dips, but for some reason, we have been operating independently for the past couple of days. I am now kinda confused on what news to rely on…

    Thanks

    Comment by Ronald | September 9, 2010 | Reply

  5. Hi sir,

    What would happen if for example, in the future, all the stocks that we have been buying have now reached their maturity level (forecasted future price values). Like PNB at 60, MPI at 6 etc. What now would be our next move? In the book the Intelligent Investor, it is said that profit is also earned thru dividends but in our case, only few companies offer attractive rates.. Should we now then just wait for new companies to enter the market?

    Thanks

    Comment by Gem | September 9, 2010 | Reply

  6. Sir Gus, please enlighten us on this particular insight from the article….A “conclusive” breakout above 3,896 could take the Philippine gauge to 6,752. How do we classified a “conclusive” breakout?

    Comment by Alex | September 9, 2010 | Reply

    • Alex,
      A conclusive break-out is one that takes us above 4100. I am a believer that we are in a dynamic bull market that started in March 2009. Bull markets, such as this on we have, could last for 5 years. It will not be a ride in the park, but if you play it right, there is very little to lose and so much to gain.

      Comment by Gus Cosio | September 9, 2010 | Reply

  7. Is it still advisable to buy stocks at this point?

    Comment by trixia | September 9, 2010 | Reply

    • Categoraically, yes.

      Comment by Gus Cosio | September 9, 2010 | Reply

      • Sir Gus,
        Is there a reason to be cautious now that PSEI in unchartered territories? Im 74% invested. Current holdings are DMC(12%), MPI (25%), AP (12%) , PNB (25%) and Cash (26%). Do I need to slash anything before correction happen? or just add position?

        Comment by mark | September 9, 2010

  8. Sir Gus,

    EDC is performimg very well today. I’m thingking if it’s still cheap at 5.32? Can I still accumulate some more?

    Comment by Len | September 9, 2010 | Reply

  9. Hi Sir Gus,
    On Philippine stock market, which sector/s do you think have best growth potential/opportunity 5-10 years down the road.

    Thanks

    Comment by Jun | September 9, 2010 | Reply

  10. DMC is incredible. I bought at 20.xx a few weeks back. But only a little cause I thought it was high already (Remember, it already doubled in value for the past year), and yet here it is at 25 now.. In so short a span of time it climbs so high..

    makes me nervous a little though.. :paranoid:

    Comment by jasper | September 9, 2010 | Reply

  11. HI Sir Gus, Is it a good time to take profits from PNB?

    Comment by Cholo | September 9, 2010 | Reply

    • I think so, Cholo.

      Comment by Gus Cosio | October 22, 2010 | Reply

  12. Sir Gus,

    At today’s prices, would you be a buyer of PNB?

    Comment by KennyV | September 9, 2010 | Reply

    • Not anymore, Kenny.

      Comment by Gus Cosio | October 22, 2010 | Reply

  13. Hi guys, instead of being fixated at PSEi you may want to take a look at the price action of your individual stocks.

    MPI consolidated at 3.52 -3.6 after a high of 3.76 and should be gearing towards 3.80 to 3.9 now. VLL consolidated close to 3.0 yesterday when most stocks are green and might move to 3.2 soon. Both stocks are definitely undervalued and appeared as a conviction BUY in all the reports i have seen. I included today VLL in my portfolio that also has AP, DGTL and MPI.

    PLDT and AYALA made up a great chunk of PSEi and to some extent may be a misleading gauge to the actual PSE market dynamics.

    Comment by Chris M. | September 9, 2010 | Reply

    • Chris,

      You may have a point, there are cases where the index was up and down due mainly to 1 stock, AlI.

      Thanks

      Comment by alex | September 9, 2010 | Reply

      • Hi Alex, what amazes me is that during this climb the RSI hovered but remained below 70 which means the market was in the edge but still not overbought. In contrast during the last wave prior to 2007 peak run to 2893, RSI went up to 90 that fueled tremendous selling all the way to RSI =30 – an oversold level. In fact my estimate is if it consolidates by a mere 2%, we might be in the neutral zone immediately (RSI~50). Note: the near 70% increase in average transaction value in the last few trading days is not even factored correctly in RSI statistics.

        Macquarie projects ALI to be 24 (now its 18.7), TEL is currently a laggard stock and its US shares is priced better than here! If both increased by an average of 5% in the next few trading days, then these two stocks are sufficient to propel us to PSEi =4000.

        My opinion is that we will be moving above 4000 or even 4100 soon. While i do not buy the report of CLSA regarding the cyclical corrections and “Elliot wave theory” since such ideas are mathematically deficient, i know that if everyone puts their money on it, it becomes self-fulfilling. I`m still fully engaged and i think its prudent that i should top slice soon, but i firmly believed that the momentum of PSE is intact and will not falter in the next few weeks.

        Comment by Chris M. | September 10, 2010

      • its 3873 NOT 2893, the PSE all time high prior to sept 9 trading.

        Comment by Chris M. | September 10, 2010

  14. WOW! Congrats to everyone! PSE is now on an ALL-TIME high at 3902! 4000 by 0ct? =D hehe broke the previous record set last Oct. 2007. =) too bad my officemates here cant relate to stocks =S

    Comment by raymund | September 9, 2010 | Reply

    • Mee to! I was the only one smiling today 🙂

      Comment by Rim | September 9, 2010 | Reply

    • Same here!

      Comment by Anthony | September 10, 2010 | Reply

    • Same here! 🙂

      Comment by KennyV | September 11, 2010 | Reply

  15. Sir Gus,
    Do you think we are in for a correction next week? How do you handle this? how many % of your portfolio have you converted to cash before any correction? Have you done this today?

    Comment by mark | September 9, 2010 | Reply

  16. It says in the Bloomberg write up ” A “conclusive” breakout above 3,896 could take the
    Philippine gauge to 6,752 “in the years to come,” according to
    the analysts. Still, they said the market may yet pause as it
    approaches the resistance zone and as the benchmark index
    completes a five-wave sequence from the October 2008 low.
    The Philippine index lost 0.6 percent to 3,723.45 at 11:14
    a.m. local time.

    WE ARE IN 3900 level…are we in for a correction?…or a break-out….?

    Comment by mark | September 9, 2010 | Reply

  17. Hi Sir Gus,

    What is your upside estimate for AP and DMC? I still have 30% cash, what stock do u think will outperform in 6 months?

    Thank you and more power!

    Comment by Mike | September 9, 2010 | Reply

  18. Regarding a “Correction”, its not something to be feared. Provided you do something like – Buy DMC@20pesos when the fair value is at 30p. It could correct at 23, 25, 27.. or at whatever price, it wont matter as long as you left yourself with a wide-margin of safety. But I think if you bought at 30, and its FV is 29 – then you should be quaking in your boots..

    Comment by jasper | September 9, 2010 | Reply

  19. Sir Gus, Thank you for your wonderful analysis most of my stocks are all green..We all should thank The Lord that our Market is up up in a way now..One thing I want to ask why is it that the DGTL was left behind? Fellow investors do we still HOLD this stock and be more patient specially when the correction comes?

    Comment by ronaldo | September 9, 2010 | Reply

  20. I beg to disagree sir Jasper. Personally, I would be willing to pay to know just what guru Gus has in mind, but not necessarily ask or expect for any kind of buy reco. The wealth of information in his blog should be more than enough to give anyone the confidence to decide for themselves. But as most, if not all, of us should know, WE always decide our trades or buy at our OWN risk.

    Comment by jojo | September 10, 2010 | Reply

  21. Hi Gus,

    Thanks for all your insights, as a newbie, would like to ask for your help. In your practice on what % of profit do you consider selling or reinvesting your stocks?
    Because I’ve been earning but don’t know if I have to reinvest it, get it or just leave it, I only have 5 stocks that I’m happy with – MPI, DGTL, PX, AP and SMDC. Hope for your opinion.

    Comment by James | September 10, 2010 | Reply

  22. Hello Gus,

    Thanks for all your insights, as a newbie, would like to ask for your help. In your practice on what % of profit do you consider selling or reinvesting your stocks?
    Because I’ve been earning but don’t know if I have to reinvest it, get it or just leave it, I only have 5 stocks that I’m happy with – MPI, DGTL, PX, AP and SMDC. Hope for your opinion.

    Comment by James | September 10, 2010 | Reply

  23. am i the only one here that thinks were at an oversold levels and headed for a correction? everyone seems to be euphoriatic that we will be breaking 4000 pts

    Comment by gerald | September 10, 2010 | Reply

    • Gerald,

      Technically speaking I believe we are at overBOUGHT levels rather than oversold. In fact, I think the entire market is quite oversold that we might need to have a correction soon. However, the momentum is still quite strong so instead of selling, I would closely watch volume and price action to better time the peak. Last tuesday I sold all my DMC shares at 23.9 thinking it would go down. And it did, when I saw it at 23 I wanted to buy but didn’t hoping for cheaper prices. Man do I regret that decision.

      Fundamentally speaking, some stocks might still be undervalued actually. But it’s not just any one school of thought that moves stock prices. There are value investors, momentum traders and trend followers; and together, their opinions make markets move. Try to get their sentiment and you could outsmart them all.

      Comment by richard | September 11, 2010 | Reply

      • The holiday gave me extra time to think whether to sell or not. My current action is to sell half of all my shares then wait for the correction which for me, would definitely happen late next week. Are you guys feeling the same thing? Or are you still thinking of another big breakout? Well the DOW is up so that also made me think twice…

        Comment by Ardy | September 11, 2010

  24. we really need to here gus on this..

    i think most of us are a bit lost on what to do next..

    share us your thoughts gus!

    Comment by cliffhanger | September 10, 2010 | Reply

  25. I agree, Cliffhanger.. if it is not too much to ask, we newbies need your more active participation in the blog to give us specific direction and guidance at this time, Gus. Thank you for your valuable insights.

    Comment by Bobby | September 11, 2010 | Reply

  26. Hello Gus,

    Thanks for the wonderful information you have been providing in your blog. I am learning a lot from your blog. I am interested in investing in TEL, my question at what price do you think should I buy TEL? Also, what do you think about forex investing?, is it wise to invest in forex?

    Comment by cons | September 11, 2010 | Reply

  27. Regarding when to sell if the FV of a company was reached – I think the FV of a company is always changing. For example, surely MPI’s intrinsic value is different before and after they acquired meralco. So if the company I own a stock in is still performing, I’ll probably hang on to it as long as the fundamentals are good.

    A colleague who also plays the stock market is of the opinion that one should time the market – i.e. sell when its very high, then buy again when it ‘corrects’. But for me personally, I feel that this is a very hard thing to do consistently. Even if one apparently can probably do it time to time. And as I don’t really like to take chances with my money I’ve stayed away from such a practice.

    But time will tell who’s is the better investing strategy. If after 3-5 years he had the better track record, I’ll change my thinking and follow him. But for now, its ‘buy a good stock and hold on’ for me.

    Comment by jasper | September 11, 2010 | Reply

    • I agreed with Jasper… as long as you are comfortable with the company’s fundamentals…i think its better to hold you stocks and think on adding more money into your investment portfolio.

      Comment by jopard | September 12, 2010 | Reply

  28. guys follow up question lang, whoever can answer..

    when was the last time we have been waiting for a big correction in the market? and what happened? did the correction arrive on time? or did the correction occur only on certain stocks and not on the PHISIX as a whole?

    if anyone can enlighten us on this…we could surely use a little history lesson..

    Comment by cliffhanger | September 12, 2010 | Reply

    • cliffhanger,

      IMO, all things being equal, the more people are waiting for a correction, the longer the uptrend will be sustained. When investors are waiting for a correction to buy, it means they have taken profits and are very liquid. It means there are more buyers than sellers and therefore, corrections tend to be shallow and immediately met with huge buying volume. This may not always be the case but more often than not, this is what happens.

      Comment by richard | September 13, 2010 | Reply

  29. i think this time market is very unstable nice article

    Comment by forexhug | September 26, 2010 | Reply

    • Forexhug,
      On the contrary, the market looks to me that it is generating more breadth.

      Comment by Gus Cosio | September 27, 2010 | Reply


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