Gus Cosio says so

Ideas on the Philippine Stock Market

If the pasta wiggles, will you eat it?

10:10am  Monday  24 January 2010

Economic indicators are a very tricky set of information.  Economic figures tend to distract people from short-term realities.  Take what is happening in our local stock market of late.  The underlying macroeconomic forecasts have been very cerebral ranging from 4.5% to 7% growth in GDP in 2011.  Exports growth is seen to be slowing down due to base effects, i.e. the higher level reached in 2010 will make absolute export numbers lower in percentage terms.  The same is likely to be seen from percentage increases in OFW remittances.

I am not going to dwell on these indicators or the likelihood of these factors out-performing or becoming a disappointment.  What appears to matter in the recent days is not the domestic outlook.  The reason that market has been tanking is obviously because global portfolio managers have been re-balancing portfolios in favor of the large cap high-profile stocks in the developed markets.  This explains the solid performance of the Dow Jones Industrial Average (DJIA) over the S&P 500.  We have also been seeing the Euro STOXX – the European counterpart of the DJIA representing the blue chips of the continent – moving sharply higher in the beginning of the year.

Basically, it has become obvious that international investors are not looking at existing on the ground fundamentals in each country.  The over-all strategic move appears to be to move into the global brand names and not seek the outperformance that was given by emerging markets Asia in 2010.  In down to earth arithmetic in the Philippine market, there was approximately Php 24 billion net foreign buying in all of 2010.  Around Php 8 billion was seen in 4Q 2010.  In the first three weeks of 2011, we’ve already had Php 4 billion net foreign selling.  I think in the coming week or so, we will see a further Php 4 billion selling related to portfolio rebalancing.  It is obvious that most of the selling will come from the best performing stocks like AEV, AP, DMC and AGI not because these stocks have gone out of favor.  Simply said, these stocks are where the money is, and money flow has been ruling our market of late.

When will this selling abate?  I just want to remind people of what happened around this time of the month January last year.  The Greek crisis caused the market to plunge a touch past 10%.  As of this writing, we are only down around 6% since the beginning of the year.  I reckon we will come down the full 10% before foreign selling slows down.  In plain arithmetic, I think it will be 3,800 on the index with AP dropping to 26, AEV to 35, AGI to 10 and DMC to 30.  These are my best guesstimates, but when markets are panicking like this, it is really anybody’s guess.

Is it time to exit the market already?  I think the best thing to do is raise cash even if you have some losses.  I took some losses on CEB because it may be a laggard for some time to come.  The point is, you must have extra cash at this point.

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January 24, 2011 - Posted by | Financial markets in Asia

40 Comments »

  1. Hi sir Gus.. Im little nervous right now. Im holding AGI, EDC, MPI, SMC, FLI and PCOR. I want to raise money and cut some of my position on PCOR but it is currently down by 20%. Your thought will be highly appreciated. Thank you.

    Comment by jaayem | January 24, 2011 | Reply

    • Your smallest loss is probably in EDC. Perhaps you could raise cash by selling portions of PCOR and EDC. You could also sell a portion of SMC. The thing is to raise cash for the time being.

      Comment by Gus Cosio | January 24, 2011 | Reply

      • Thanks sir, Break even ako sa AGI, next is EDC -5%, more than -10% on SMC and PCOR.

        Comment by jaayem | January 24, 2011

  2. Hi Sir,

    I am down 13% to this date. I have extra cash in my account but I have not yet decided when to buy since there may be further consolidation ahead. Would you think that I should simply just wait it out for things to get better or for you long term view, its advisable to sell? I wont be needing the cash this year anyway…

    Thanks

    Comment by Shane | January 24, 2011 | Reply

    • Shane,
      If you are less than 70% invested, i.e if your capital is 100,000 and you only have 70,000 in the market, you can slowly pick favorites and come in slowly rather than making one large purchase.

      Comment by Gus Cosio | January 24, 2011 | Reply

  3. Re: Extra cash,
    Yes that’s my game plan but the moolah comes in later than i had thought. i guess i am benefiting for the delays rather than of using had i have it already. Sometimes, mother luck has her own way of saying… be patient, your time will come! 🙂

    Comment by haribon2007 | January 24, 2011 | Reply

  4. Wow…what is happening with PCOR…

    Comment by aCas | January 24, 2011 | Reply

  5. I was just thinking about this. The blog post gave me the necessary kick to just sell something and raise cash for the time being. So now I sold all my DMC at 32 (I was really stupid for not selling it at 36 when I had the chance)

    Although I could not resist it. I just plunked down some for VLL at 2.65.

    Comment by jasper | January 24, 2011 | Reply

    • Hi Jasper,

      I have the same sentiment as yours with DMC. I sold it at 32.65 I wonder when and how much will this bottom out.I ll wait again to get back to DMC. heads up! =)

      Comment by Mike | January 24, 2011 | Reply

    • Jasper, I should also have unloaded my DMC when it was 41. I bought most of them at 20.60 last August. I am still holding to it since I believe in it. Actually, DMC and AGI are my core stocks. I must be greedy since I haven’t unloaded MER which I bought at 187 to date. urghhhh

      Comment by Shan | January 24, 2011 | Reply

    • I also bought DMC at 20.xx last year. But then bought some more at 35.x – talk about wrong timing.

      Comment by jasper | January 24, 2011 | Reply

  6. Hi Sir Gus,

    I took advantage of the market. Bought SMC at 153 and VLL at 2.60. Hope I got the best price ever. 🙂

    Comment by Shan | January 24, 2011 | Reply

    • VLL rebounded at the close and stayed close at it’s support levels. That could mean a change in the stock sentiment. Technically, this could be in a long term bullish flag. Caveat.

      Comment by Seth | January 24, 2011 | Reply

      • Oh, I hope so, Seth. Yes, VLL closed at 2.74 while its lowest was 2.57. I hope the index will be green on most issues tomorrow. 🙂

        Comment by Shan | January 24, 2011

  7. ALL-IN today Bought SMC @ 151.5, ALI @14.18, MEG@ 2.0 and FDC @4.40…

    Comment by MIKO | January 24, 2011 | Reply

  8. liquidated 40% of my cash from Mer and Nikl.
    will use the cash to finance some favorites that is dragged down.
    Can I accumulate slowly now?
    Or wait until PSE bounce back to its support?
    thanks!

    Stocks Planning Accumulate:
    1.ALI
    2.DMC
    3.MPI
    4.MBT
    5.JFC
    6.PCOR
    7.FGEN

    Comment by irving | January 24, 2011 | Reply

  9. I’m all red except for vll which I bought today for 2.62. I need to raise cash for the coming days. Which should I taper off? These are the percentages of loss..

    FLI (-12.23%)
    ALI (-11.01%)
    DMC (-7.82%)
    AGI (-4.92%)
    DGTL (-4.36%)
    SMPH (-2.49%)
    MPI (-1.14%)

    The biggest pie cuts are in AGI, DMC and ALI.

    Comment by weena | January 24, 2011 | Reply

    • Your portfolio is so heavy on property.

      Comment by Seth | January 24, 2011 | Reply

    • maybe i would dispose some or all of ALI…

      Comment by rickyyahoo.com | January 24, 2011 | Reply

  10. Also, if I have extra cash in the coming days, would it be advisable to just average down (buy more of what I already have?) or buy new ones that are really ridiculously cheap?

    Comment by weena | January 24, 2011 | Reply

    • You need to compare them and determine which ones would be the best for your portfolio. Also, have you determined which ones of these are your long-term and short-term holdings? i.e. I think for MPI, if you are prepared to take a 10 year position like I do, you would not worry about it and even buy some.

      Comment by jasper | January 24, 2011 | Reply

      • For the long haul, I want to hold on to ALI, DMC, DGTL and MPI. I was thinking of using FLI,VLL, AGI and SMPH for trading. I am just bothered because my trading stocks are battered. So i’m thinking of already selling at a loss. But couldn’t quite decide which to let go and when?

        Comment by weena | January 24, 2011

  11. Hi Gus,

    I just noticed that for the past few trading days, ASIASEC EQUITIES, INC keeps on purchasing lots of VLL stocks at the closing (volume in millions). Does this mean they are accumulating or are they just managing the drop?

    Bottomline, is this a sign to buy or to sell?

    Comment by noob | January 24, 2011 | Reply

  12. Hello Sir Gus! Would you please suggest a technical indicator (let’s say, for example, Money Flow Index) for evaluating NFS/ NFB?
    I programmed my own trading/ charting application system and I wish to incorporate those indicator(s) in my program. Thank you and More Power!

    Comment by Ai-ai | January 24, 2011 | Reply

  13. Gus,

    I have almost half a million in Fami account (80% in equity and 20% in balance). Should I start moving it to Fixed Income Fund? I started Sept last year and started adding 100k every month..earned profit of almost 32k…then November rain hits up and as of this writing, i already lose 7k+..paper lost that is.

    In order to at least protect the value of my fund, you think its wise to move it now?

    let me know.thanks!

    Scared Investor

    Comment by Scared Investor | January 24, 2011 | Reply

    • If I can put 100k a month on my porfolio I will not stop, I will put some more to avarage down…

      But then again thats just me.

      ps. i already lost 49k today but I am not in a hurry to run away, I can stand still and/or buy some more until next year.

      Comment by rYan | January 24, 2011 | Reply

    • wow, thats a very tough decision. good luck.

      Comment by cliffy | January 24, 2011 | Reply

    • this would be a good time to put some more now that prices are lower

      Comment by rodimus | January 24, 2011 | Reply

    • Wow yaman ah.

      Comment by Poor Investor | January 24, 2011 | Reply

    • with all thats been said by mr. cosio, i refuse to believe that at the end of the year the return of mutual funds and uitfs would be zero. that’s why i havent moved my funds to “safer” havens like bonds.

      Comment by footballer | January 28, 2011 | Reply

  14. Sir Gus, did you happen to attend the Splash party last Friday? I thought I saw someone who looks like you..:)

    Comment by Jolly | January 24, 2011 | Reply

    • yes jolly,
      that was me. i actually like splash as a company and i like doc hortaleza’s vision. I keep some SPH which i slowly accumulated at these levels. I’m holding on to it because i like the people in the company and who knows, they may really turn out to be a philippine multi national in a few years. So what’s a few thousand pesos tucked away.

      Comment by Gus Cosio | January 24, 2011 | Reply

      • Sayang. I hesitated pa to approach you. Because I only see your face in your blog and I might be wrong.

        Comment by Jolly | January 25, 2011

      • next time jolly.

        Comment by Gus Cosio | January 26, 2011

  15. good day sir gus, what’s a good entry price for fdc? is it good to enter it now? may I have your other ideas about fdc. thanks

    Comment by jovy | January 24, 2011 | Reply

    • I’d rather punt on FLI rather than FDC. Operating companies have a tendency to do better than holding companies. Holding companies tend to perform only after a significant period of under valuation.

      Comment by Gus Cosio | January 24, 2011 | Reply

  16. Hi, sir

    My concern is about CEB. I went long when it was still 107. A few weeks after that it went down to 93, I bought shares again to pull down the average cost while the stock pulled up a few basis points. But now it’s back to 93 and I don’t know if it will go any lower. Basically, I’m bottom-fishing right now. Do you have any more insights on the stock? Thank you!

    Comment by Daniel Camagay | January 24, 2011 | Reply

    • Daniel,
      the reason why portfolio managers diversify into several stocks is because you do not really want to concentrate your hunches in one stock. I like CEB but I do not mind selling it at a loss if I can use the money on another stock that will help me recoup the loss.

      Comment by Gus Cosio | January 26, 2011 | Reply

  17. Hi Sir Gus, my take is If PSE recovers to 3950 tomorrow it will signify that the 3900 to 4250 range is intact and i will slowly accumulate back some of our favorite blue chips like MBT, DMC, MPI, to name a few.

    I`m keeping ~35-40% cash and my current positions include: JGS(20%), VLL(20%), EEI(5%), SINO (5%), ORE (4%), V(4%), LC (5%, SRO oversubscription request). I`m still upbeat of good times ahead.

    Comment by Chris M. | January 24, 2011 | Reply

  18. What can you say about CHIB? Are they scheduled to give dividends soon?

    Comment by Cathy | January 25, 2011 | Reply


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