Gus Cosio says so

Ideas on the Philippine Stock Market

On the first day of 11

11:38  Monday  3 January 2011

What do I reckon is up for us in 2011?

I cannot help but recall the headline on the Business Section of the Philippine Star Sunday morning.  It emblazoned the phrase “SDA funds parked in BSP vault reach P 1.22 Trillion,” a fact which many in the market place was already conscious of except that now there is a definite amount mentioned.  Apparently, there is a clamor for some quarters for the BSP to lower interest rates on SDA so that funds could be freed up to bankroll productive projects including infrastructure programs by the Aquino administration.

How is this significant to the market?  I say extremely.  The immediate effect of a cut in SDA rates would be a deluge of investments in blue chip stocks.  You see, most of the money in SDAs are from the very wealthy and the very liquid who do not have very strong risk appetites.  Actually, I think many of them are simply too narrow minded about looking at constructive direction of investments in the Philippines.  many of our high net worth countrymen have been used to living on interest which had been very high in the past.  Many of them were also used to seeing the US dollar simply appreciate every year that they can comfortably put their money in interest bearing instruments and get satisfactory returns.

I do not really see how people could turn a blind eye at local equities.  These past two years have simply been phenomenal and I think the trend has just taken hold in 2010.  In the year that is starting, a positive environment coupled with very low interest rates could bring stock prices of at least 100 stocks in our market to greater heights.  It may be bold for me to say that but I think when BSP cuts SDA rates by one percent, people will have no choice but rush to stocks.  First it will be the bluest of chips, so I suggest that people hold on to their TEL, MBT, AC, BPI, SM and the like.  Next it will be the stocks with good recall like JFC, JGS, URC and the like.  Then it will be those that look cheap.  Of course many will look at mining because in decades past, mining had earned fortunes for a lot of the older people.

I cannot but emphasize the power that a cut in SDA rates can unleash toward our equities market.  That is not to say that our market will simply be liquidity propelled.  I certainly have some economic fundamentals that I work with based on very reliable research which is provided to me by a very deep think tank which for prudence sake I cannot mention.

From a global perspective, while there will be a drag coming from Europe as a whole, North America has started to show signs of brewing strength.  East Asia also remains in its growth path although China is showing some signs of growth slower than the double-digit path it has marked over the last two decades.  My senior economic analyst says:  “Given only a minor slowdown in China from 10.3% GDP growth in 2010 to 9.0% in 2011, and the U.S.  Likely to perform better-than-expected in 2011, we think that the export sector will continue to provide fuel to the economy, albeit slower at 12-15% growth for 2011.  Electronics, minerals, and fruits exports should continue to pace the pack.”

As I write, the Dow is up over 100 points; I think the January effect is going to be pretty much in place. MER was the top performer in value turnover today; it also closed up 17 or 7.5%.  Why am I not surprised?  Probably because the economic numbers that will be coming out soon will reveal that industrial production is growing at quite a robust pace which means electricity use will be rising faster with system loss is being reduced.  We use MER as an industrial indicator because it supplies electricity to the region which produces 50% of the country’s GDP.  Obviously, MPI is going to benefit and that is why it is second in value turnover and up 26 cents or 6.7%.

Expect more from the high-profile stocks and blue chips in the next couple of days.  I do not know yet what to expect from the RSA stocks but CYBR looks like it could run above the curve since it is still a penny stock and many players will be willing to punt it.  Just be careful that you are not the last man out.  I believe women make smarter traders, so they’ll know what to do ahead of the men.

 

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January 3, 2011 - Posted by | Uncategorized

24 Comments »

  1. Sir Gus, Meralco performed so well today. I’ll hold on to this. And yes, DOW is now up by 119 pts or 1.03. This must be a good year! 🙂

    Comment by Shan | January 3, 2011 | Reply

  2. Just want to share this article: http://www.dailyfinance.com/story/streetwise/best-and-worst-global-stock-markets-of-2010/19777184/
    “the Philippines was the best-performing equity market in the world this year”.

    More than a million thanks Sir Gus for a wonderful 2010! 🙂 JGS is my best bet in the next few trading days. Of course, i`m biased, i accumulated significantly today.

    Comment by Chris M. | January 3, 2011 | Reply

  3. PSE was up 63% last 2009, then again 37% last year. It has doubled in two years. A two bagger in 2 years? That would be unheard of in a savings account.

    Although, going forward I wonder how much higher it would climb.

    TEL and MBT – the two that got away :sigh:

    JGS – its trading now at 7.5x PEx (3Q eps 1.88, full year eps 2.5). I think gokongwei discount or not, the numbers are starting to look pretty compelling. I mean, they just hoarded lots of money due to the CEB ipo too. What more can you ask for right?

    Comment by jasper | January 4, 2011 | Reply

    • btw, I think most people has this misconception of stocks as being very difficult. In my office, a lot of people are curious because they see me trading and hear me talking about stocks all the time. But when I ask if they would like to try, most of them say the same thing – ‘Parang hindi ko kaya. Mukhang mahirap e’.

      Comment by jasper | January 4, 2011 | Reply

      • Not all the people will be convice to invest in stock market that’s we’re just the people who profit by investing in stock market.lolz Just focus your attention on the people who have the interest to invest in the market. I experienced that too. But right now, there are few people that letting me manage their money in stock market. If they can’t do it alone, you could do it for them if they want you to manage their money and you can get some commision.

        Comment by marketbeginner | January 4, 2011

  4. I compared CEB vs. AirAsia Malaysia. ASK including fuel is 4.84 vs. 3.62. # of planes in 2010, 32 vs. 53. Airasia is cheaper compared to CEB as it has a PE of 10 vs CEB of 10-11. For growth, Airasia has a
    better prospect.

    Airasia has a lower cost but it will take time for them to enter the Philippine market. Philippines can be a challenge but airasia is already successful in Indonesia with the same geographical challenge as ours. The only PLUS is CEB entered our market earlier. Once Airsia is in, it will be like TEL and SMART vs. DGTL. It takes time for filipinos to love a certain product.

    My own target is 135 as I own this stock for a 33% gain from my entry price.

    Ramon Ang of SMC may have a golden hand. Each company it touches turns into gold, but I am afraid of his stocks as I do not know if I am entering at the top. CYBR was at my radar yesterday but was afraid at 0.70. Lost opportunity again but I will not always catch all the fishes in the market.

    Comment by alexis | January 4, 2011 | Reply

    • CEB should bring back the dancing FAs before AirAsia makes first flight

      Comment by Nik | January 4, 2011 | Reply

  5. thanks MPI…

    Comment by Tony | January 4, 2011 | Reply

  6. Sir Gus,
    Any comments on some of RSA stocks?

    Comment by jofoler | January 4, 2011 | Reply

  7. Sir Gus,
    I have another question regarding SLI not meeting the minimum public shares percentage required by PSE. what are the possible implications?

    Comment by jofoler | January 4, 2011 | Reply

    • jofoler,
      SLI, as well as other issues that do not have at least 10% of their shares floating in the public hands, will have to offer shares to the public whether via a special rights offering (SRO) or a re-offer of existing shares. I think SLI had already announced that they will do and SRO which is surely going to happen sometime this year.

      Comment by Gus Cosio | January 5, 2011 | Reply

  8. what can you say on FPH, especially 2011 is a year for green energy.

    Comment by yanyan | January 4, 2011 | Reply

    • This stock is way undervalued with a PE of only 1.6. Way below it’s peers AEV (PE 10.9) and DMC (PE 13.4).

      Comment by Seth | January 5, 2011 | Reply

      • PE of 1.6 is for 2010. However PE ratio for 2011 increased catastrophically at 15.6 becoming very overvalued against aev and dmc if one is using p/e as sole basis. SO while it was undervalued this year. It will be overvalued by the end of the year

        Comment by Cris | January 5, 2011

      • Just additional info. Earnings per share in 2010 is P40ish, this is expected to drop like a meteorite to P4.34 in 2011. The company may have alot of things going for them, but growth from 2010 isn’t it 😀

        Comment by Cris | January 5, 2011

      • sorry for the tyo, what I meant to say was “So while it was undervalued last year. It will be overvalued by the end of this year.

        Comment by Cris | January 5, 2011

  9. I just read that FLI will do a secondary offering.

    > will launch a follow-on equity offering of up to 2.5 billion FDC shares

    Hey cliffhanger, perhaps its time for you to save some for this? :p

    As for me, I dunno.. I don’t feel anything towards the stock. Odd. For some I take a liking. But for others, theres nothing there at all. But I’m taking a look at the quarterly reports ‘just-in-case’

    Comment by jasper | January 4, 2011 | Reply

    • Kindly clarify this, isn’t it FDC that will conduct the secondary offering?

      Comment by Forte | January 5, 2011 | Reply

  10. is it a good time to enter MBT now?

    Comment by Jude | January 4, 2011 | Reply

    • Jude,
      I think it is a good time. You’ll see it in good demand by next week when the new shares are available.

      Comment by Gus Cosio | January 5, 2011 | Reply

  11. …mmmm i think it’s seem a very good facts to ponder again… sir gus, all the best!

    Comment by ottrho | January 5, 2011 | Reply

  12. Sir Gus,

    Thanks for your comment regarding SLI, I will wait for further activities for this stock.

    Comment by jofoler | January 5, 2011 | Reply

  13. sir gus,

    whom shall i contact for the mutual fund placements? I have some uitf, which works similar to a mutual fund, I feel that uitf are more conservative.

    I am planning to put in regularly for my children.

    thanks & best regards,

    benjamin

    Comment by benjamin | January 6, 2011 | Reply

    • Benjamin,
      I suggest that you send an email to belle.pajarillo@fami.com.ph and give her your telephone contact number so she can call you. Or you can drop by our office at the 18th Floor PSBank Center Paseo de Roxas corner Sedeno, Makati City.

      Comment by Gus Cosio | January 6, 2011 | Reply


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