First Metro Asset Management Inc

KEEPING MY FINGERS CROSSED by Gus Cosio

6:35 pm  Wednesday  18 August 2010  Philippine Stock Exchange Index  3534.80

What is useful to note at this point in time is that the rises in the market in the past three days have gone higher.  It was around 10 points on Monday, 22 points on Tuesday, and 32 points today.  That is a sign of a strong trend.  It comes quite unusually given that this is the ghost month.  I guess the listless performance of prior weeks had manged to put investors fears into the price.  Now that there is enough cash in investors hands, it seems that the fear is not to be invested in a market that is cheap.

Notice also that even if there had been marked daily declines the major markets, our market remains resilient giving further credence to the values that investors can find in local equities.  Today, stock like EDC and MPI were solidly being bought.  The Lopez suite continued to attract money as volume and prices were all up.  I am happy that EDC is starting to outperform because I still see it as the growth driver for the remaining Lopez power business.  Of course FGEN will be a big beneficiary of EDC’s fortunes and so will FPH be.  People are asking whether or not EDC will break the 5 peso level.  My hunch is that it will since my valuation of the stock is at least 5.60.

MPI is probably the main infrastructure play in the Philippines given the breadth of its portfolio.  I am not surprised that it is forging ahead.  It will likely continue into the rest of the week.  I was suggesting that people take positions on the stock after I attended their investors briefing 2 weeks ago.  I believe in trading on sound information and I think we received a very good picture during that briefing.  Will we eventually be moving towards 4 in this stock?  I believe so.

PNB finally hit 45 today on strong institutional buying after an announcement of Allied Bank’s 10% increase in 1H2010 profits.  People should be reminded about what the score is.  PNB is worth at least 48, and some even hold the view that the dynamic valuation should go as high as 55.  Anyway, the long and short  of it is that PNB is still undervalued given the emerging strength of its operations.

UBP also sae a big jump while MBT and BDO have kept the momentum received from the beginning of the week.  This solidifies the view that the banking sector would be a strong beneficiary of the good GDP figures for the 2nd quarter that is due to be announced on the 26 August.  I will suggest additional weighting in your favorite banking stock given this outlook.

GLO is gathering some support below 770.  I will continue to be wary of GLO until they present figures that show a reversal of business trend.  DGTL appears to be facing some hurdles as the total telco picture has become to look crowded.  My only take on this stock is that it is one that is gathering support at the 1.40 level.  I need to look deeper into what the company is doing but I believe taking a small position in the stock may be rewarding.

Overall, I think we have a market that seems to be defying common notions.  We are not that sensitive to the U.S.  We have stocks that are bargains by any textbook analysis.  There is a lot of money sloshing around the economy.  Consumer and business spending continues to grow.  Government is trying to put its act together.  No wonder common notions are being defied; things are actually changing in this country.  I’m keeping my fingers crossed (and my prayers silent).

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First Metro Asset Management Inc