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12:20pm Monday  19 October 2009  Philippine Stock Exchange Index closed at 2932.20 (+0.32%)

The markets in the U.S and Europe ended the week down last Friday.  The strongest influence in market sentiment was disappointing earnings from GE and B of A which overshadowed better than expected results from the tech sector.  With the major markets trading strongly for most of last week, I suppose it is not surprising that investors would try to preserve their gains.

It is the beginning of a new week and if we’re going to trade it properly, we must have some fresh ideas.  I’ll begin with high liquidity stocks that I feel are close to oversold levels.  Among the stocks that I follow closely, these are AGI, FLI, ALI, TEL & PIP.  Among these, I’ll be comfortable buying any and all except FLI which I would sell on rallies.  FLI is in danger of being down graded because of its properties that we inundated by the typhoons.  My next group liquids due for buying is composed of AC, MBT, BPI, PNB, URC &  RLC.  These stocks are off their highs, have been subject to some selling, but remain high on my fast horse list for the week.

For the small caps, I would suggest taking profits on TUNA while looking to buy SPH or ISM.  My inclination is that small caps may be better performers in the coming week as large fund investors become more defensive on the headline stocks while the smaller punters will continue to follow trading movements in the recently battered small cap shares.

The new issue US$ 1 billion 25 year global bond had become eventually well received notably in Asia.  The scuttlebutt is that New York fund managers thought the bond to be a little rich with the spread over treasuries at 217 over the US treasury yield curve.  Consequently, the bonds traded around 38 cents lower at 99.0 from issue price of 99.382  near New York close.  Not surprisingly, these bonds rebounded when Asia opened and started to trade a shade above par (100.10).  as expected, Philippine sovereign bonds or ROPs have a very strong constituency in this part of the world.

What is significant about the successful sale of bonds by the government is that it adds more cash into the local investment market.  It frees up funds that would have been sucked into the local fixed income market.  As it stands, a lot of investors would have to contend with the relatively low yield being derived from both local and foreign currency Philippine government bonds, a catalyst for seeking returns in other asset classes.

While this market had opened weaker, the momentum being seen in MER is once again influencing the mood of the entire market.  You’re seeing renewed interest in the Lopez stocks FPH, EDC , BPC and FGEN.  It looks like another buy program has kicked in for MER distorting its value a bit.  Nevertheless, I think that the astute trader shouwl really be looking at the front liners like TEL and AC.  In my view, these 2 stocks are a buy withing this price level  I think that in spite of some weakness in the US, investors in this neck of the woods might be looking from a different perspective.  Look at the new ROP bond; it slipped in New York only to come back in a big way in Asia.

Many analysts have been saying that the next few years belong to Asia as the US and Euroland will be dragged by their high unemployment level.  Paul Krugman was even saying that the decline global trade is far worse than in the Great Depression reason being that the US cannot afford to import more from its trading partners.  All of this will trickle down to the Asian region where more interregional trade is going on.  Eventually, the regional dynamics will provide impetus to the Asian capital markets more than the usual western driven investment moves.  My bet is that money will chase more assets in this part of the world simply because it has more room for growth in value.  Philippine stocks may be more valuable than we think.

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