First Metro Asset Management Inc

“WE WALK BY SIGHT”

2:30pm  Wednesday  June 10, 2009   PSEi 2530.72 (+1.706%)

Yesterday, Philippine stock prices declined as the index dropped by roughly 30 points.  I was starting to get overjoyed because I thought that the much needed correction was already here.  Then, I took a look at wall Street just before I went to bed.  Things were also looking good as prices in New York were slightly soft.  Unfortunately, sometime in the afternoon in the U.S., 10 U.S. banks said that they were going to pay off their TARP advances and  U.S. stocks started rising again.  So much for consolidation.  Nevertheless, I was still thinking that the local market would take a breather because of a political rally that would take place right on the street where the stock exchange was.

In a huddle yesterday afternoon, one of my colleagues showed me the relative performance of equity markets around the world.  As it turns out, Philippine stocks have been the second best performer on a 52-week period.  On a year-to-date performance, our index has been the fifth best globally.  Earlier today, I looked at the yearly data on net foreign buying of stocks in the local market and it appeared that foreigners were still selling our market while we were rallying in late March and all of April.  In May, however, the situation reversed; foreign buying started to pick up.  Lately, it even seems to be accelerating.  Essentially, what started as a purely domestic driven rally is now being followed through by funds coming from investment managers abroad.

I had told my colleagues yesterday that the performance results such as what was mentioned earlier will not be left neglected by hedge funds and opportunistic investors.  This explains why foreign investors are back in our market.  There looks to be good momentum in the market and momentum traders cannot ignore such dynamics.  The evidence is screaming at us in the face – a 30 point decline followed by a 40 point acceleration.  Furthermore, the stock that led today’s charge was TEL – the stock that most foreign funds use as a proxy for the entire market.  I also noticed a PHP1 (7.1%)  rise in MWC a slow moving but a fundamentally strong stock.

Perhaps, the story of our market is that consolidation periods will be pretty short.  Maybe, one day at a time or even intra-day as we saw last month.  One thing is for sure, we have a very strong market.  The buyers are always in the wings waiting for any dip to buy whatever is cheap.  I think serious investors should not stop picking their winners and should try to time their entries.  This market is just to strong to ignore.

An ostrich uses its eyes, never its brain.  Maybe it’s time to be an ostrich?

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First Metro Asset Management Inc