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8:30 am  Wednesday  7 March 2012

While waiting for my flight to Cebu today, I will pass the time sharing a few thoughts.  Yesterday, Tuesday, the PSE officials thought that since the PSEi had clearly broken through the 5,000 barrier, it would be a good gesture to have the president of the republic to ring the opening bell.  Good idea, bad result.  The index tanked close to 90 points in the next 2 hours.  It doesn’t reflect well about what stock market players thinks about the president’s market outlook. In all fairness to the president, I do not think it was his fault.

The market had been relentless not just from the start of the year, but if you look back, it started it strong climb in mid-December and has barely looked back since.  I welcome such a major correction, even if it lasts for a couple of weeks.  To my mind, a 200 to 300 point pull-back of the index will be very healthy.  It will take stock prices to more reasonably priced levels particularly the index stocks.

A catalyst to yesterday’s precipitous drop was the sharp sell down in TEL.  It was quite curious because the company was having a briefing in early afternoon which woulld disclose 2011 results.  Most investors were anticipating a dividend declaration and TEL usually gives a dividend yield which was  superior to other comparable assets.  It was unusual that heavy selling would come when people were expecting to do a dividend play on the stock.  The skeptic in me thinks that there may have been selling by insiders or parties who had early information about the disclosure.  Perhaps, someone ought to look into it just to assuage skeptics like me.

PLDT reported that 2011 core net income was down 7% to P39 B in line with company guidance but 2012 guidance was revised to P37 B which is way below analyst estimates.  What really hit the market in the chin was the 87% decline in 4Q-2011 earnings.  It is something that you hardly expect with a huge and stable company.  Nevertheless, I do not think one bad quarterly results would make me lose faith in the stock; after all, the dividend yield to be given shortly is around 4%.  Furthermore, TEL also pays another dividend in September which could round off the dividend yield to a total of 7% for the year.  Yield like that would be hard to find nowadays.

Anyway, I think the next few days would be a good time for cherry picking.  In the meantime, I have to run and board a plane.

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