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9:15 pm Sunday 26 June 2011

Our market has been buffeted by the U.S. markets lately, and it does not seem to me that the DJIA nor the S&P 500 are going anywhere. Infact, udging from the economic news coming out, we may see that market even moving lower. Goldman Sachs just cut it’s 2Q-2011 growth forecast from 4% to 2% while the Federal reserve downgraded its full year growth forecast from 3.4% to 3%. A few other research and advisory firms in the U.S. have similarly adjusted their forecasts lower on account of factors that no longer come as a surprise to us. The unexpected Japanese Tsunami significantlyslowed U.S. growth due to supply chain disrutptions which similarly affected countries like the Philippines. The Middle East/Norh African crisis which pushed up gasoline prices similarly slowed U.S. consumer spending. The slowing of the economies of China and India as monetary authorities acted to stem inflation also had ripple effects in the U.S. while the European sovereign debt crisis seriously dampened financial and commodity markets.

If we are thinking that economic activity may be more robust in the second half of the year, it will not be on account of the growth of the global economy. Much of our growth has to bee domestically driven. It is important that government gets its investment act together. One good sign is that they managed to start an airport project in Caticlan to raise air transportation service to Boracay. Hopefully, they start doing something in Clark’s Diosdado Macapagal International Airport. I believe Clark airport authorities already have a plan in place and all they need is the funding. Anyway, keeping our fingers crossed for these infrastructure investments to happen will not hack it. The government needs to move decisively.

Fortunately, our market has been seeing an active mining sector which to my mind gives our market a strong fighting chance. I believe that even if there is a respite on commodity prices as the developed economies slow down, the threat of inflation arising from the excessive liquidity being pumped out by the U.S. will keep the commodity trend intact. That will be good for those who export hard commodiies, our country included.

In the short run, I expect our market to be swayed by the U.S., and the 3 straight days of net foreign selling into a rising market is not a very encouraging sign. With the U.S. down again sharply on Friday, we should expect some selling at the open on Monday. I would, however, try to look for signs of decoupling from the U.S. There have been times when periodic correlation was very low. I am hoping for that to happen. I am looking at China – Shanghai composite – to start doing better in the coming days. My hope hope is that foreign funds will start taking their cue from China rather than the U.S. After all, we are in a sustained growth path that is just looing for ways to get stronger.

Anyway, I think some profit taking is not bad for anyone playing the market. I suggest cashing in on some positions until the picture gets clearer as to which indicators investors are putting much weight on. Remember, we just got a credit update from Fitch’s and that is a plus sign for us. We just have to stack up more of those plusses so that our market can get going.

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