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12 noon  Saturday  16 July 2011

On Friday, July 15,  MSCI Asia Pacific Index added less than 0.1 percent, but the PSEi went up by 0.8% or 35.19 points.  What is significant is that the index close of  4,458.74 is the highest close in history.  Certainly, the bull market looks to be intact, and what gives us encouragement is that this present price movement looks to be fundamentally led.  With above average value turnover at Php 6.1 billion, this to me signals a renewed wave of enthusiasm.  I hope investors and traders will remain involved in this market with eyes wide open so that we can fully this bull cycle which had its beginnings in March 2009.  A New York research firm likens the current global market to the 1982 to 1987 rally.  If those guys are correct, the global equities market is still below the halfway mark of a 500% increase from the base.  Maybe I am too much of an optimist, but our economy’s momentum and uninvested wealth stock is too strong to ignore.

MBT closed at 79.55, its highest in eight months on expectations of sharp earnings growth. MBT has the lowest loans to deposits ratio among major banks which enables it to more aggressive in lending.  Recent statistics from the BSP puts latest loan growth figures at 20%.  It is a classic price and volume spike for MBT supported by very strong buying by foreign funds.  Among the big three – BDO, BPI and MBT – MBT has the lowest price to book ratio at around 1.63 compared to BDO’s 1.69 and BPI’s 2.55.   Actually, the financial sector is really looking very positive.  BDO which was having a tough time touching 57 over the past few weeks eventually closed at 57, also with very credible volume.  I think most market participants are expecting good economic figures for the second quarter seeing that OFW remittances grew at a record 6.9% year on year for the month of May.

Port operator ICT and holdings DMC were similar cause for enthusiasm as we had been seeing sustained price gains for both stocks over the past couple of days.  ICT looks to have broken out while DMC is in the initial stages of a break out, I think.  Consumer stock URC has also broken into new highs as investors unleashed pent up demand for a company that benefits greatly from firm food commodity prices and strong consumer spending.  My instinct tells me that TEL should not be far behind in this price run up.  I believe that TEL is opening up a new era with its merger with DGTL becoming more clear.  While many thought that the merger was a mere market share play, most technical experts in the telecom industry saw this as a engineering upgrade in the way the combined company would be delivering wireless and land line services.  Everybody knows that DGTL has a communications backbone that covers the entire Luzon while PLDT’s land lines are situated only in their franchise areas and that of the defunct Piltel.

As for the power sector, while I like AP, I’d rather put my money on EDC and FGEN.  I think AP and its parent AEV may have come to maturity, and both stocks will trade in a range until new exciting developments unfold for the company.  Meanwhile, EDC is facing accelerated growth next year and because FGEN owns a big chunk of EDC, both stocks will surely break through higher ground.

Of course, the darling for sometime to come will be mining.  I will have updates on LC/B, MA/B, AT, BC, NIKL and the durable ORE soon,  In the meantime, I do not think I would turn blue if I held my breath for these stocks over the coming weeks.

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