First Metro Asset Management Inc

WHAT’S THE CHALLENGE?

10:20 Tuesday    25 August 2009  Philippine Stock Exchange Index  2864.01 (in the middle of trading session)

Frankly, I have never seen a single day rally of the magnitude that we saw Monday in the Philippine stock market ever.  This was a 5.11% rally where you had practically all the blue chips (TEL, AC, ALI, MER, MBT, BPI, SM, SMPH, BDO, GLO, AP, & MWC) gaining creditably.  You also had second line property issues (MEG, FLI, RLC, & AGI) rising strongly.  Then you have the mines (PX, NI, and GEO) drawing a lot of enthusiasm.  You also have consumer stocks (PIP, GMAP, GMA7 & URC) gaining handsomely.  It is just euphoria out there.

If you observe buy/sell activity, you’ll notice that the sellers never gave way to buyers such that before the close of session, a buying frenzy of sorts was seen.  The positive element that I attribute to this rally is that traders took profits at high prices leaving them more cash to support the market should a correction come.

Essentially, the bullish case for the market remains strong.  the GDP numbers expected to be released on Thursday should support the view that the underlying economy is resilient.  My only concern is the usual reaction of astute market players who buy on the expectation and sell on the news.

Nevertheless, since we are all aware that markets do not go up in a straight line, it is good to diversify the plays.  Yesterday, the move apparently was made by investors  simply wanting to buy the market which means most of the plays were in the blue chip issues.  In succeeding days, I think top slicing on previously profitable trades will allow players to get into theme plays like mining  and the cyclical move of real estate firms.  From what I am seeing, there seems to be strong interest in MEG, AGI, RLC and VLL particularly because ALI has gone through the roof already.

When the mood is as good as this, market plays will inevitably happen.  Money is always looking for assets in a strong market and ideas are what drive the search.  This is why issues like WEB and ISM are attracting a number of players.  MPI, which has been hogging the news lately, will also be a buying target. People will follow the momentum because it usually works for them.

Anyway, we are pretty close to the near term resistance of 2897 in the PSEi.  If we break that number, we’ll likely surge another 100 points.  If we don’t, I think it will be another buying opportunity because it is just a matter of time before we challenge the 3000 level of the PSEi.

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First Metro Asset Management Inc