Gus Cosio Says So – August 27, 2013

It will be the start of a short trading week in the Philippine stock market. Traders have been bearish so far, and sentiment was exacerbated further by relentless foreign investors selling. Well, this week, particularly on Thursday, 2013Q2 GDP growth rate will be announced. I expect it to be a good number although it will be no guarantee that people will be less bearish. What I find constructive is the amount of buying by local institution when prices drop dramatically. It is certainly not a negative factor when local investors have a more positive view than foreign investors. This also means that local liquidity can carry this market even as it drifts lower. After all, nobody really catches the bottom. However, prudent and conscientious investors can identify value, and surely a lot of the large cap stocks are now presenting reasonable value. Furthermore, if we superimpose the growth potential of the economy moving forward, value even increases. I am not saying that investors should start rushing in at these levels, but I think those with longer holding power can slowly accumulate positions. Our market was drummed down not for domestic reasons but for global investment flows. Our own currency had actually swung way to over-valued levels, and it does not surprise me that currency related moves would trigger outward flows. However, the PHP has weakened by almost 10 percent from the 40 level to the 44 level now. The currency is no longer expensive. In fact, it is approaching its cheap levels already. Foreign funds may not be returning anytime soon, but I do not think it should bother us. If we stick to strong stocks, I think when global investors start to differentiate the various emerging markets, they will recognize the value of these strong stocks. The prudent thing to do, nevertheless, is to manage the cash and make sure that should the market ease further, we will have enough money to deploy. at least that is what i am doing.