6:55 pm 27 June 2011

Philippine stocks may be a phenomenon to itself. We saw stock prices sell off slightly at the open, but they soon recovered at mid-session although giving up all these gains to close down. Actually, the 2.15 point set-back is nothing to crow about considering it happened in the back of net foreign selling of Php 136 million. What I see to be a concern is the declining value turnover over the past few trading days. I think as we close the quarter, we can anticipate some window dressing, but I would like to approach the market with greater caution this time.

What I’ve been watching closely recently is the Shanghai Composite Index. I am seeing the Chinese index move with little correlation to the DJIA and the S&P 500. It has also become less correlated to the Hang Seng, but I do not think that that situation will persist. The reason I mention this is because I am hoping that the PSEi will again move away from correlation with the U.S. indices because I do not see any bullishness in he Western markets for the time being. I am hoping that growth drivers in this country will cause greater influence on local stock prices than the DJIA or the S&P. There were instances in 2010 that correlation was very low. I am guessing that in 3Q, the same could happen although 3Q is not a very exciting period for stocks historically. What i would be doing is to keep more cash in my portfolio in anticiaption of another significant drop in the market.

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