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Amid a market that has peaked at over 7,400 points and currently back at a level where it began this year, allow us to once more share our views and expectations in the months to follow.

As we approach August (ghost month)

In the context of seasonality, the stock market in the months of July and August generally undergo consolidation – market moves sideways.  As we approach this “ghost month,” investors veer away from stocks and there is very little activity here.

We are firm believers that the Philippine fundamentals are very sound.  We believe that these short term losses in the market are very much driven by sentiment and lower future expectations.   Once fear and volatility simmer down, stocks with solid fundamentals will outperform.

There are two catalysts which we are looking forward to in July to reinforce this view.

First, listed companies in the Philippine Stock Exchange had a combined net income growth of 23.3% in the first quarter of 2013 year-on-year.  We expect growth to be the same or better for the second quarter of 2013.  Second, the Philippine GDP was a remarkable 7.8% in the first quarter, and we expect this to be at least 7.8% or even better for the second quarter.

Having figures that will outperform Q1 will hopefully revive positive investor sentiment and bring the focus back to fundamentals.

As fund managers, what are we doing? And what are we going to do?

We believe this is the perfect time to be in a managed equity fund.  It’s difficult to cherry-pick individual stocks that will outperform the market when all you see in front you of you is red.  As a fund manager, we put the interests of the shareholders first and with the best tools on hand, make educated selections on the stocks that have the best chance of outperforming the market in the medium to long-term.

From our last commentary, we used the SALEF as an example given that it’s the fund that is affected the most by any major market movement.  As of recent trades, the SALEF has moved from a cash position of 25% to 15%, having invested its reserve cash into stocks that have gone down in price.

We are also restructuring its portfolio. We are now able to buy fundamentally sound stocks which we did not own at the beginning of the year at bargain prices. We wanted to get into index stocks early on, but were not able to do so because of the accelerated growth of the market in the first quarter of this year. As of now, we are able to take profits on some stocks and replace them with the stocks we’ve always wanted to own: the ones that fundamentally shape the PSE.


As an investor, should I shift my money to SALFIF? Or should I stay with SALEF/SALBF?

Poor market sentiment has affected SALEF’s performance as with the PSEi, both of which are now at equal footing of a little below 1% year-to-date yield (as of June 24, 2013).  As an investor, if you have a short term investment horizon (3 – 6 months), then shifting to our Save and Learn Fixed Income Fund to preserve your gains may be a good option.  However, if your investment horizon is 6 months or greater, we suggest that you leave your investment in SALEF and allow FAMI, your fund manager, to weather through this storm for you.

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