11:00 am Tuesday 30 November 2010
I think the local market is become very edgy, not so much because fundamentals among locally listed companies have changed but because the consolidation mood has taken hold. I am quite sure that many portfolios are paring down positions to protect the gains this year. If I were a fund manager and have given superior returns to my fund holders, I will not hesitate to lock in my gains now. We are approaching year-end which is a time of traditional book squaring by both position traders and portfolio managers. It is not unusual that markets become less liquid this time of the year. While, theoretically, there are about 19 trading days left in the local market, some of those days are very low in terms of volume because there are not enough orders coming from end customers.
There had been quite a number of questions on whether or not to run with positions on ORE and SLI due to some changes in assumptions. For ORE, the assumption was for a shipment to be made in December. Unfortunately, the company made a disclosure that due to heavy rains in Palawan, shipment will have to be postponed to 1Q2011. I cannot but help be anxious about this development. I would suggest for those who have weak holding power for this stock to reduce holdings for the time being and re-establish it as a time when the shipments are more certain. Investing in a mining company that has very little track record, I believe that one must be prudent in managing risk. If you have profits in the ORE position, I suggest that you bank some for the time being.
I feel somewhat anxious as well in SLI because of talks that there will be no follow on offering. An analyst told me, however, that based on the latest disclosure, the follow on offering will go through except perhaps the target offering price may be lowered somewhat. I have no clue as to where the new shares would be priced but the lingering anxiety will likely cause punters to shed some positions. I will probably do the same although I do not think I will wind down positions completely; I will simply reduce to comfortable levels.
As far as the strong stocks are concerned, I think I am comfortable accumulating MER at these levels. I feel the same way about MPI, DMC and AP. I would try to follow some of the banks that should be slightly cheaper compared to the past month such as MBT and UBP. In short, I think it would be good to raise some cash and use it to reposition in the strongly performing stocks notably those that have strong prospects or recurring earnings in 2011. Having said that I would add that the mining stories of NIKL and PX are worth a bet for the coming months due to what I feel to be a recovery in the U.S. economy.
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