First Metro Asset Management Inc

DRIFTING AND DOLDRUMS

2pm  Tuesday   18 August 2009   Philippine Stock exchange Index  2731.55  (-1.43%)

If one did not have a longer time horizon, the last 2 trading days would have chased the uninitiated out of this market.  Putting things in perspective, the index hit a high of 2873 on Wednesday – the 12th – then saw a low today at 2693; that is a 6.3% range from the high.  That is a lot of excitement to take in a matter of days, especially when you have gotten used to seeing the market going one way.

First thing I notice is that the 20 most actively traded stocks are all down except BPC, FPH and FGEN which went the other way.  This despite MER continuously going south;  something must be afoot again.  Next is that in spite of the market losing as much as 78 points for the day, the index closed above the open (2720 open vs. 2731 close).  Finally, I see that the mining stocks are still in fashion.

Generally, the moves that we’d seen over the past few trading days have been defensive in nature.  There are no signs of sentiment shift.  The smart money do not want to get caught in any major correction so they are paring down positions in order to have the cash for stocks that will outperform in the next wave.

For those who were not able to pick up GMAP, GMA7, RLC, MPI, AGI and similar counters, this may be the opportunity to enter.  Stocks like WEB and ISM have been quite strong in this downturn; my gut feel tells me that it has some more to go.  Remember, these are cash rich companies with very strong underlying business franchises.

I believe that there is also a case to be made in banks – UBP, PNB and MBT.  The surge of BPC today also intrigues me; today was the highest value turnover this stock has seen in over a year.  It is in price/volume alert so there must be a good trade behind it.

All told, I perceive further volatility ahead, and therefore, trading opportunities.  I even foresee some doldrum days when the market will just drift because investors may want to avoid wide swings in the market.  In any case, diligence always pays off that is why I follow the market daily.

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First Metro Asset Management Inc