3:00pm   Thursday  2 July 2009   PSEi  –   2438.04 (+0.21)

What can you say when there is nothing going on.  Yes, the Philippine stock index is up 5 points on a very unexciting, uninspiring day.  Stocks traded up at the open simply because Wall Street was up.  After a few minutes,  players sold the market down.  What would have been a 20 point gain was slowly whittled down to 5 and volume was again subdued.  This market is not going anywhere for the time being.

Hong Kong, China and India are all up today on encouraging recovery signs which means other markets are simply feeling the ripples of summer holiday doldrums.  As the days and economic figures go by, I believe that the Asian region will keep moving toward recovery.

Crude oil was down overnight and remains weak in Asian trade.  Generally, I believe that oil will not be declining to levels seen in early 2009  because there is not enough of this commodity anymore.  This implies that anything that has to do with energy will likely become desirable as the months and years wear on.  This is why I like SCC or Semirara Mining whose main product is coal.  Coal is still the cheapest fuel for electric power plants in the Philippines.  I am very much convinced that whatever fuel stocks that are available today, are there in finite quantities.  Both oil and coal may soften from time to time but prices cannot be sustained below these levels for very long periods.  My view, therefore, is to go long energy commodities. In the Philippine stock market, the only energy play worth looking at is SCC.  What makes buying this stock easy is the fact that it paid 6 pesos dividends for last year’s earnings.  It’s regular dividend pay out is 4 pesos.  It closed 33.50 which means that even if I hold this to April 2010, the yield would be almost 12%.  That does not sound bad at all given that Philippine bond yields are below 8% for 10 year maturities.

If the broad market remains as boring as it had been today, it will give us time to look at good buys like SCC.  Anyway, there is bound to be more bargains that will come our way in the coming days or weeks.  This is really the time when the smart money surreptitiously make its move.  One has to think out of the box from time to time, so I’ll use this period of lull to position myself for the bigger move down the road.  After all, the great investment minds did their stock picking when nobody was paying attention.  Warren Buffet had said, you don’t make money in the market by doing what is popular.

Isn’t it a great day? Yeah!

8:00pm   Wednesday     1 July 2009   PSEi  –   2432.89 (-0.21%)    PHP/$  –   48.13

As I look at some of global economic news, I find that signs of recovery are showing up in both Western and Eastern Europe.  Not that we are seeing robust growth showing up, it is just that the decline have consistently moved shallower over the last 3 months.  It seems that the U.S. is no longer alone in coming out of recession among the major economies.

In East Asia, while the business sentiment has not yet become upbeat, the Tankan survey indicates that Japanese businessmen believe that the worst is behind them.  In China, moves to stimulate its economy is being met with favorable response from the domestic manufacturing sector reflected by steady rises in its purchasing managers index.  Indonesia also appears to be in good shape as its strong equity market reveals that investors are looking forward to growth emerging soon.

What all these tell us is that the strength of the region’s equity markets in the past few months had accurately predicted the region’s economic recovery.

In the Philippines, we’ve also had a strong market although confirmation of growth from economic indicators have not yet emerged.  I think this is why we will continue to see Philippine stocks move sideways or even lower in the next few weeks.  I am looking for another 80 to 100 points to be taken off the index, roughly a 4 to5 percent decline.  Some stocks such as BPI, MBT, PNB, FLI, MEG, AC and ALI have either touched or penetrated their 60-day weighted moving average curve.  What it means is that the uptrend of these stocks have been already broken or just about to be broken.  What is encouraging, though, is the resiliency of the top telcos TEL and GLO because of strong support from a new wave of buyers.

The game is definitely shifting because investors are thinking of what to do next.  There are no obvious moves that are being telegraphed by the market in the past 3 days.  I prefer to take my cue from the dismal value turnover today.  This is saying to me that players were not willing to take risks today.  If that is the case, I would not want to be a hero.  I won’t increase my risk position ahead of everybody else.  I will choose a right time to stick my neck and money out.


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