First Metro Asset Management Inc

CASH REVEALED?

9:45am  Tuesday  13 October 2009   Philippine Stock Exchange Index  2945.79(just after opening)

Fortunately, Mondays do not usually set the mood of markets.  We initially had prices racing up at the open as TEL moved from 2605 to 2645 and MER from 190 to 198.  BPI and MWC looked like they were ready move higher and out of the tight range where these two stocks had been trading over the past 5 days.  Somehow, buyers did not move with definite conviction and selling in other issues like ALI and MBT overcame any positive sentiment.  Actually, other Asia-Pacific markets were trading mixed as Tokyo and Shanghai were moving positive while Hong Kong, Korea and Australia sagged.

I think it is too early in the week to say which way this market is headed.  After last weeks tremendous strength, I imagine that the healthy thing to happen is for gains to be pared to affordable levels.  Quite ominously, Wall street behaved similar to how the PSEi did Monday.  The DJIA opened strong, but as the day wore on, sellers came out of the woodwork which leads me to think that new positions are not yet being built up.  I think that it is good that investors are still long cash because the buying power is still in their hands.  When the U.S. markets continued to rally in the final days of 3Q, analysts were commenting that the up ticks were not fueled by too much volume.  I can only surmise that there will be some profit taking coming out of New York.

A bit of good news is that PLDT ADRs in New york was up 1.21%.  TEL will likely set the tone in the local market for the rest of the week.  On the whole, looking at the individual stocks, I can’t help but feel that our market is looking pretty soft.  Prices will not run away from us in the near term.  My choices remain: buy AC at 300- or below; start accumulating MBT prehaps closer to 40;  I’ll wait for MER to come off a bit before buying (I don’t have a number in mind so I’ll just keep an eye on supply demand conditions on the share).

Some quarters are expecting positive news on the government deficit to come out this week.  Indications appear that the deficit will still be on track, in line with the revised target.  The implications are that bond yields will be steady to lower.  In fact, the Treasury was able to sell Php1 billion of 91-day T-bills at 3.897%, Php2 billion of 182-day T-bills at 4.138%, and Php3.5 billion of 364-day T-bills at 4.368.  These yields are pretty much in line with the BSP’s policy rates although the downward bias on yields is revealed by the over subscription on all tenors.  For the Php6.5 billion awarded, the Treasury received around Php22 billion in bids.  What does that say about the amount of cash sloshing around in the market?

If you hear what I’m saying, while we’ll be in for some kind of a shakeout in the next couple of trading days, it would not really be a cause of serious concern.  As I’d said before, in a trending market, we should use times of stalling prices to have a closer look at the stocks we haven’t yet bought or those that we would like to trade.

Have a good one.

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First Metro Asset Management Inc