First Metro Asset Management Inc

Keeping an eye by Gus Cosio

7:22 pm  Monday  18 July 2011

Another strong day in Philippine stocks.  This time, another bank stole the limelight – BDO.  I did mention in an earlier blog that the banks may be worth a look.  I think people are positioning for a good earnings report, but that is an old story altogether.  We had been saying that for a couple of weeks already.  It seems that the regional markets are diverging a bit.  The Shanghai Composite, the Hang Seng and the Singapore STI are down slightly while the PSEi, Jakarta and the Nikkei are up.  On a global view, I think there is differentiation going on in as far as strong and weak economies are concerned.  For the weak, it is not anymore a matter of growth rates, but a matter of how well a country’s financial system can preserve asset values and prices.

Most European markets are down as I write.  We all feel that while fixed income yields for Greece is very attractive, around 18 percent for 10 year bonds; nevertheless, we would not want to touch most asset classes in Greece because we have no clue up to when this downward spiral will continue.  Take for example when the U.S. property bubble burst in 2008.  Some speculators took real estate positions thinking that property prices will quickly rebound.  Three years later, we are still waiting for the property market in the U.S. to recover.  I think Greece could even take longer.

What I want to point out is that the money surplus traipsing all over the globe has to find a home – even if only in the short-run.  Obviously, emerging Asia continues to be the viable alternative.  Then ASEAN as a bloc is one of the biggest markets with close to 500 million in the region.  There is also free trade within this region so markets are quite open.  I think that this leads to greater attraction to this region as the weaker European economies deteriorate.  Furthermore, a lot of unpolished gems are yet to be found in the stock markets of the ASEAN.  Frankly, the Philippines has yet to get the attention of the major money flows.  So far, we have been receiving mostly trickles.  Fortunately, because our stock market is tiny, any foreign buying will tend to buoy up local equities.

Today, Philippine stocks rose 17.27 points or 0.39%.  What is significant is that it comes after last Friday’s close at its all time high.  We are actually trading at all time highs in the broad market and enthusiasm has not seemed to die down.  The market has momentum on the back of traders making a bit of profit in the mining sector.  There is cash in the hands of market participants seeking to position themselves in stocks that would display good earnings for 2Q-2011.  DMC, SCC, EDC, FGEN, AGI, ALI and even AP did well today.  Value turnover was also very encouraging.

I think that because our market broke out of its range, people will surely be chasing the market higher.  It is a very rewarding time for those who kept the faith by nurturing positions in a wide range of stocks.  Personally, I think there is some ways to go.  Keep an eye on TEL because it did very well today closing at 2400.

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First Metro Asset Management Inc