IGNORING SENTIMENT by Gus Cosio

6:45pm  Wednesday 23 June 2010   Philippine Stock Exchange Index  3342.97 (-0.26%) The index came down again today with TEL and ICT moving down further.  Heavyweights AC and ALI contributed some points to the decline.  Even some of my favorites such as AP and EDC are down.  Why then am I not worried?  I guess with DMC and SCC being strong as they are, I cannot generalize that the market is broadly weak.  Other stocks that are high on my buy list such as URC and MER were also firmly bought today. The market has become rather selective which is a good sign because selective buyers usually are firm hand buyers.  They are selective because they intend to hold the stock until it realizes its full value.  Of course, if the major markets will always bring ripples and even waves to local stocks, but we must not lose perspective of domestic conditions.    In a statement to Bloomberg News today, Economic Planning Secretary Augusto Santos that there are solid indications of underlying strength in the local economy.  Philippine economic growth may exceed the target the government set with manufacturing and service businesses being boosted by global recovery.  Second quarter growth may match or exceed the first quarter’s 7.3 percent pace.  The fiscal crisis in Europe has little effect on the Philippine exports to the region or on remittances from overseas Filipinos.  The government last week raised this year’s gross domestic product growth target to as much as 6 percent, from a previously forecast 3.6 percent after reporting the first quarter expansion, which is the fastest since the second quarter of 2007. Another factor not to ignore is the fact that sentiment of businessmen and investors are usually upbeat after an election.  That sentiment is being widely felt today.  If that translates to some concrete foreign direct investments into the country in the next six months, GDP growth may really exceed expectations.  Should all of these materialize then saying that the market could be bullish would in fact be an understatement. What it would boil down to is money management on the part of investors and portfolio managers.  The game will be won by those who can wisely allocate to the market within the ebbs and flows of extreme sentiments.  What I am trying to say is that one should not be overly bullish when everybody else is nor should be overly bearish when people are running scared.  Based on today’s price action, I think players are being quite deliberate and very cerebral in their buying and selling activities.  To my mind, we are seeing market conditions that is mature and may not be subject to panic even when adverse news come out from the developed market.  We have been outperforming Wall Street and Europe so far this year.  We may just follow it through for the rest of the year.