1:47 pm  Thursday  19 January 2012

This week is quite historic in as far Philippine financial markets are concerned.  Last Tuesday, the government auctioned 10 year FXTNs at a record low yield of 5.17%; yet, it was many times oversubscribed that the Bureau of Treasury agreed to open a tap for another Php 9 billion according to bond dealers.  This weak was also a huge turning point to the US$/Php exchange rate and the peso is soaring again together with the stellar performer of the local stock market.

Last night, PHI (the ticker of the PLDT ADRs listed in New York) traded at all time highs of $65 and closed at $64.88.  This is on the back of Morgan Stanley raising price expectations of TEL to Php3400.  Their analyst believe that post merger with DGTL earnings from broadband services will fly and TEL will enjoy similar values to regional telcos.

This is looking to be the month of the index stocks as TEL leads with AC, SM, SMPH, MBT, BPI, ALI and MWC following closely behind.  What we are seeing is the definitely the January effect which historically sets the tone for the year.  Disappointments may come during the year, but investors seem to be of the mindset that things will be going in favor of being in the market rather than being out of it.  The huge interest in the government bond auctions indicate both the low level of risk involved in investing in the country, and the strong peso confirms it.  This also tells us that capital inflows are growing, and investors are voting with their money that the Philippines is a safer place to be.  The publication Seeking Alpha has rated the Philippine ETF listed in New York – ticker EPHE – as one of the  Best Non-China Asia ETFs For 2012.  We should be prepared for higher foreign funds inflow to our market this year.

One reader commented: “Do you think the PSEI will reach 5600 in 5 months from now, as what the others have predicted. Maybe it’s time to buy some more.” My answer is look to buy rather than sell.  This is why portfolios have been loading up on index stocks these past few weeks.  My personal strategy is to be close to fully invested in order to ride the January wave and take profits before the end of the month.  I would top slice rather than be naked of positions because there is an obvious bullish trend.

Another comment:  ”What is you opinion on the recent selloff of EDC? Does the delay of BacMan rehab?” I think investors have become wary of the company’s unfulfilled goals although company sources said that their in-house target for the rehab was 2 years and it was only the analysts who thought that it could come earlier.  In short, EDC was probably hyped and things have come to roost.  Nevertheless, the company is good and because it is in the index, there will always be attention to the stock.  I do not expect it to outperform.  Ironically, I think the slow moving MWC can finally give good showing this year; after all, every dog has its day.

someone asked me what I thought of MARC.  I mentioned before that MARC indeed has production in Mindanao and has managed to produce and sell its nickel at exceptional prices last year.  However, it could be just a one off thing.  If nickel mining is concerned, I would be inclined to go for ORE and NI.  ORE has proven itself in 2011 in as far as production and delivery is concerned.  They should be on track for around a 50% increase in EPS in 2012.  NI on the other hand, has the tight relationship with Glencore and a handful of foreign direct investors which assure them excellent access to markets and capital.  I believe one can actively trade the volatility of NI during the year, and if done properly, could bring exceptional returns for the investor.  NI just had a good series of run ups in the past few weeks.  Remember, we had similar behavior of ORE in the past, and patience bore us out to earn good profits.

Finally, people had been asking about PCOR after it dropped to lows of 11.  I think the drop gives a good opportunity for trading.  I would not fall in love with the stock, however, because profits will always be crimped by political issues.  Just listen to the radio to all this belly-aching on how oil companies are making too much profits.  Filipinos are so ignorant of market forces that they think they can dictate the laws of supply and demand.  the result is that guys like PCOR suffer.

Anyway, I feel very encouraged by the market.  I hope everyone is doing well also.

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