First Metro Asset Management Inc

HERE COMES THE SUN

The local market was down 33 points for the week; that’s only a 1.1% decline for the week.  Of course, the market caught the jitters Thursday when an overnight decline of the DJIA by 120 points caused the PSEi to sell off by 46 points.  A 200 point recovery in the DJIA on the day they released a 3.5% rise in quarterly GDP brought about a strong recovery locally, a 47 point rise in the PSEi.  But on Friday, the Dow took back all the gains and more, declining 249%, erasing all its gains for the month.  This leaves me thinking about what the local investors are going to do.

So the Dow was flat for October while the PSEi is up 3.8%.  Even if we measure the index only for the month ending October 29, we would still be up 2.1%. For the same period, the broader S&P lost 2.8% while European indices were down 1% and Asia, led by Shanghai and Hong Kong, was up around 5%.

It looks to me that while our markets react to each other, the end results need not be the same.  The Philippine market was pretty lethargic from the end of July to the end of September.  It was only in October when our market came back to real life.  Should we really have the guys in New York spoil our party.  Unfortunately, the Hang Seng, having been pretty strong over the last 2 months, is looking pretty precarious.  It seems that the property bubble that has been setting the mood in their equity market is looking to be deflated by the Hong Kong Monetary Authorities.  They think that too much speculation is being fueled by money from the mainland, and they want to be cautious about the health of the property market which up to this day provides a strong back bone for the Hong Kong economy.  Soaring property prices have always made people nervous because speculation usually ends in a sell-off when affordability levels become unreachable.  Unfortunately, when the authorities turn off the money tap for property, other sectors inadvertently get hurt.  When the Hang Seng tanks, we should also be wary.

It is not so much that the U.S. had dropped last Friday that has me worried, it’s the likely negative reaction coming from the various markets that look at the U.S. for direction.  The expected market reaction is to turn cautious, that is, to pare down exposures and sell.  That will likely be the initial reaction if the market would have opened Monday morning.  Fortunately, we’re closed Monday leaving us more time to think about factors closer to home.  As I was preparing for an early long weekend, news about a 300 peso bid by a group led by Henry Sy’s son and the low-keyed Joselito Campos for Meralco was announced.  This means that there would be a  bidding war versus MVP.  That should set the price for MER winding up again.  That would also mean price catch up again for FPH and BPC while MPI would come under serious scrutiny again not to mention a suspicious price movement on TEL. Then you have BPI reporting earnings for the 9-month period ending 30 September 2009 up 38% to 7.3B.  Are we going to ignore such fundamentals such as these simply because markets around us are languishing?

Well, movement is always good because it is market dynamics that ultimately leads to price discoveries.  In the meantime, investors and traders will either be gun shy or trigger happy.  Depending what you want to do, there will be something worth doing.  I am sure that when we open on Tuesday, those stocks that are out of the MER play will start to trade easy.  I think that it should give us a good opportunity to pick up some cheap AC, BPI and ALI.  I would try to avoid TEL and MPI until it is revealed what MVP will be doing. 

As for a lot of the lesser volatile stocks, I see new buying windows – stocks like URC, GMA7/GMAP, RLC, MBT, I can go on and on.  I am almost sure that we will be declining for the week, but I prefer to look further where the sun is shining brighter.

http://guscosio.wordpress.com

Speak Your Mind

Tell us what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!

You must be logged in to post a comment.

First Metro Asset Management Inc