First Metro Asset Management Inc

A time to be reaping by Gus Cosio

8:45 am  Monday  13 Feb 2012

After seeing a string of weeks where we had nothing but net foreign buying in Philippine stocks, we had net foreign selling last week.  I think such a development is very healthy for our market as profit taking or consolidation has the effect of strengthening the base of the market which would allow it to move to the next level.  there is nothing that tells me that the general bullish sentiment in the market is waning.  As a matter of fact, the strong close after some weakness during the morning session tells us that some of those that did their selling earlier in the week or the previous week may be re-establishing positions.  The top index gainers last Friday were MEG (4.4%), SMPH (4.08%), AGI (3.09%), BPI (2.94%) and RLC (1.94%).  The biggest index losers were URC (-3.43%), SM -(3.2%), AP (-2.17%), SMC (-1.11%) and JFC (-0.9%).  I think the composition of this list merely confirms that people are re-positioning on the index stocks.

The main game in the market since the beginning of the year has really been the index stocks.  Of course there have been selective mining stocks such as NI, MARC, OV and ORE that have been outperforming.  Of course the surge of NI has been phenomenal and has overshadowed other stocks; but when we look at the broad performance of the market, the biggest flows have been into index stocks.  This only means that we cannot ignore being involved in the large capitalization stocks as core holdings.  The fast moving mining and recently oil stocks also have a place.  They should improve portfolio performance substantially, but remember that the broad market movement should not be neglected.

Personally, I use market dips to get into some favorite index stocks.  For example, the recent weakness in DMC, JGS and MBT are classic examples of buying on dips for me.  There were lots of anxieties in the real estate sector which I feel is now being squeezed out with the recovery of MEG.  Actually, the earlier bounce of SMDC should have already told us that the mass market real estate stocks should already be recovering.  Note that ALI did not suffer from the sentiment that brought MEG, SMDC and the rest of the property stocks down.  On gaming stocks, the decline of AGI, BEL and LR appear to have been arrested already.  People got wary of gaming because they thought that it was getting too crowded.  Actually, there is very little substance in the view that there will be too many players in the gaming space because the industry is expected to grow by leaps and bounds into 2015.  With the government’s target of bringing in 10 million tourists, we may not even have enough of these up scale gaming facilities to accommodate the influx of tourists.  Note as well that the bigger portion of gaming revenues are derived from organized junkets.  These are tourists brought in by the operators precisely for the casinos alone, not to mention the high rollers who trot the globe for excitement of very high stakes.  I think the rebound seen in LR and AGI last Friday would allay fears in the sector.  BEL will likely benefit as well since the company is a sure winner being the landlord of LR entitled a large piece of the action.

The fears of a delay in the Far South East exploration activities has spurred selling of LC/B.  actually, most of the selling was technically driven.  I think that this is good for the market because we will be taking off from a lower base.  Yes there has been some delays but from what I gather, it will not be a long delay at all.  The project is proceeding as planned.

I think we can look forward to another exciting and bullish week particularly because international headwinds such as the Greek austerity vote is already out of the way.  With foreign funds ready to come in and local investors pretty light in their positions, the market has only one way to go.  I am sure you guys have an idea where that would be.

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First Metro Asset Management Inc