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9:47 am Tuesday  9 November 2010

It appears to me that the much awaited consolidation has come.  Obviously, it is being led by TEL which had been the traditional direction setter in the market for many years except this year.  TEL is no longer as influential and its role which used to be one-third of the index is diminished to half of what used to be.  I welcome the development because institutions both local and foreign have come to diversify well out of TEL.  Rightly so, since stocks like AEV have become more representative of the country’s macroeconomics and combining this with DMC, SM, MPI, MBT and JGS, you’ll come up with a portfolio that captures the wide range of sectors contributing to the growth of the economy.

Surely, mining is a very important sector, particularly at this stage of the global cycle.  While the signs of recovery are slow to show up in the U.S. and the developed economies, emerging markets which really constitute a critical mass base of global manufacturing, will be taking a lot more of materials and metals in their inventory to supply the demands of their local economies.  We are seeing this happen in China and perhaps India and in various of Southeast Asia, Latin America and Eastern Europe.

The IPO subscription period of Nickel Asia started yesterday.  I believe that this will be an issue that is generous to its subscribers.  I believe it is priced to leave enough money on the table for punters.  What is more significant to the market is the enthusiasm it could bring to the mining sector.  So far, the good plays have been AT, PX, and ORE.  LC/LCB was a play for a brief moment, but I think many have given up on this stock because they are distrustful of existing management.

Nevertheless, I think that in spite of the market correcting, mining stocks will continue to go better.  That is the beauty of a market that is starting to diversify, correlations start to become disjoint and sectors begin to trade on their own.

It could be time to look at some third liners that have been ignored but have started to show some life.  A few weeks back, one reader had asked about RFM to which I replied that I was not following the stock.  having been alerted by the reader, I noticed a marked change indirection of both the stock price and its underlying fundamentals based on disclosures with the PSE.  I asked a fund manager about it and he agrees.  I think it would be good if RFM develops a following because it will beef up the market’s consumer sector.

I cannot help but mention DGTL today.  One of our followers, Jasper,  commented yesterday “2. double DGTL” which I think, given the recent price stability and the price and volume spike yesterday, makes a lot of sense.  I am also thinking of a buy program for TEL, something like a peso cost averaging because if it is trading at 2400, it should be cheap and will provide steady returns of around 20% over time.