PATIENCE FOR LUNCH by Gus Cosio

6:45 pm  Wednesday  9 June 2010   Philippine Stock Exchange  3254.83  (-0.593%) The market came down by 19 points today in spite of an improvement in Wall Street.  The past two days, the local market was up in spite of huge declines in New York.  Are we decoupling from the major markets?  For one thing, our market, while strongly influenced by Wall Street, does not necessarily follow the trend in the DJIA or the S&P 500.  In fact, over the last three months, the correlation coefficient has fallen far below 1.  The PSEi had outperformed the DJIA by 13 % on year to date measure.  In other words, the PSEi has moved up 6 % YTD while the Dow has dropped 7 % YTD. There is even greater impetus for our market to go better in the coming days due to enthusiasm coming from today’s proclamation of Aquino as president-elect.  Political stability and smooth government transition has always been positive for any market, most especially ours. Economic indicators are even being supported by monetary developments with M3 moving up 12.4% in April.  The BSP has not really been pumping money into the system.  As a matter of fact, they have been sucking out money through the special deposit accounts (SDA), yet money supply is growing.  This only means that GDP/GNP growth has been creating money for the economy, and I think that is good for stocks. What is important for investors and traders to do now is to closely observe price actions of each stock.  When the market is ranging as it has over the past 3 months, it is not very difficult to identify buy entries and profit taking levels.  Here are a few observations and ideas. MBT looks to be moving sideways for the next couple of days and strong support is 55.  BPC is showing strong support at 3.60 but sentiment on the stock might take it close to 4.  FGEN doesn’t look like it is going anywhere in the next few days; those who follow this stock should buy it on dips rather than chase prices higher.  Its sister -EDC – is a strong buy at 4.65, to my mind.AP and AEV will likely be stuck in the range just below their recent highs. JGS,RLC, URC and DGTL are stalling at these levels, but because of their underlying strength, I’ll look for good dips for buying opportunity.  AGI will probably skyrocket in a few weeks.  Try to buy this stock on weakness – below 5.50 – because I hear earnings are starting to fly.  SM, SMDC and SMPH should also be bought on dips.  I would be careful, however, on PIP because I think it has limited upside. Having said all that, I think it will still be useful to follow the developed markets.  In my opinion, China’s stock market is starting to stabilize after a full year of decline.  I think that will be good for our market since China and East Asia(ex Japan) now accounts for 42% of total Philippine exports. Things could get boring as price action would require a lot of patience from investors.  Remember that there are no free lunches and often times the price to pay is our own patience.