9:15 am   Friday   28 August 2009   Philippine Stock Exchange Index – 2881.40 (Thursday close)

Philippine GDP rose 1.5 percent in 2Q09 from a year earlier.  A good portion of this figure was accounted for by consumer spending which many economists attribute to OFW remittances.  In our view, the economy is probably doing better than this figure; the statistics board is not able to capture the full effect of consumer spending.

The market was slipping in early trade since a lot of participants had been waiting for consolidation.  This bit of news on GDP which was announced at 10am – the time when trading trading heats up – turned investor sentiment around.  Blue chip stocks that started to slide on further profit taking all of a sudden bounced back to life.  All the banks except BPI went up in price today.  Property stocks regained strength due to expectations that OFW money will continue to pour into the mid range residential sector.  TEL and GLO, however, were down today because their prospects remain no better than it was at the beginning of this quarter.  Personally, I think the telcos will pick up again in 4Q09.  Right now, the market is going for second liners so second line telco play ISM who runs the profitable Eastern Telecom should come into play again.

With consumer spending expected to recover, mid cap counters PIP and TUNA performed extremely well. I think other consumer plays like GMAP (GMA7), URC, SPH, and maybe JFC will be good plays as well.  The consumer sector has not yet played out its theme especially because the 2010 election, which will be one of its drivers, is still 9 months away.  Compounded by potentially strong fourth quarter spending, the consumer theme should extend all the way to 1Q10.

I guess the question to ask is how much more can be squeezed out of this rally.  I can understand investors’ anxiety with China and the rest of Asia looking to be in correction mode.  Shouldn’t the Philippine market do its bit of consolidating?  My answer is a resounding yes.  Unfortunately, there are those who do not share my opinion, and that’s the beauty of the market.  In the past, it was foreign fund managers that strongly swayed our market.  In this current rally, that has not been the case.  In the last 2 weeks, our market was seeing net foreign selling; yet, our market keeps rising.  I can only attribute this to the wider participation of local investors either directly in stocks or through the various institutional funds.

Overnight, the European markets were down following the decline in Asia. ( Would you believe, it was only the Philippine market that was up in Asia yesterday.)  In New York, after a lethargic morning session, markets started to turn and U.S. stocks ended up – DJIA +0.39% and S & P + 0.28 – with the financial sector showing the largest gains.

I think that our market will follow through the positive sentiment developed yesterday.  Economic growth has returned and the prospects are that it will accelerate into next year.  My expectations is that analysts will rerate their favorite stocks into higher earnings looking forward.  In short, I like the market.


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