First Metro Asset Management Inc

Patiently Awaiting a Benchmark IPO

8:31 am   Monday  16 April 2012

The past week showed mixed sentiment among investors in Philippine stocks.  The week started with local stocks taking a cue from the weakness in Wall Street and rebounded strongly when U.S. Investors regained confidence after Alcoa reported better than expected earnings.  On Friday, however, sentiment in the global markets started to grow anxious again as China’s 1Q GDP growth slowed to 8.1% when consensus was for an 8.4% rise.  Nevertheless, the local market did not react as the rest of the world did.  In fact, Friday saw net foreign buying to the tune of Php 414million.  Perhaps, investors are viewing Philippine stocks differently from the main global markets.

Personally, I would prefer if the market opened this week’s trading session on the soft side.  I think there should be room for the large cap issues such as AC, SM, AEV, AP, MER and even TEL to back off a bit.  I actually want to see the likes of JGS, PGOLD and SMPH sell off a little.  Call it self flagellation, but in my view, consolidation is always healthy.  I am also hoping some of the mining counters like NI, DIZ and MARC correct a bit in order to entice a bigger base of small investors into the fold.  For one, ORE has been consolidating enabling more retail investors to get on board the stock.  I am hoping that my view of another 30 to 50 percent run on the stock can be seen this year as ORE more than doubles its production target and shipments this year.

I have also sensed a lot of anxiety over OV due to the earlier naval stand-off on Scarborough Shoal.  If you review your Geography, you will see that the location of OV’s oil fields is more than 300 kilometers away.  It is not close to the disputed area at all.  It may be a good time to accumulate the stock.  For that matter, PCOR is another good petro stock to look at a price anywhere below 11.  Recall that the placement of the block from the company’s retirement fund was redistributed at 11.

If the market starts the week with soft prices, I have no doubt that it would end the week strongly because of the GT Capital listing. I learned that due to over-subscription, most people got only around 20% of their demand.  I anticipate that most institutional investors will try to increase their positions at listing date and onward.  I suspect that further enthusiasm in the PSEi would be fueled by the listing of GT.  After all, the market needs credible large cap stocks to absorb all these investors, local and foreign, that are raising their allocation to Philippine stocks.

For mutual fund investors, I think adding to your fund in the next 4 to 5 weeks could bring better over-all returns when year end comes.  If markets turn soft, it will not be because the direction of stocks has changed.  Simply, there is room for correction, but the bigger move is still to come.

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First Metro Asset Management Inc