WORRIED ABOUT HUNGARY? by Gus Cosio

6:15 pm  Monday  7 June 2010  Philippine Stock Exchange Index  3266.11 (-2.71%) The 323 point drop in Wall Street sent the markets all over the globe reeling once more.  Again another case of New York sneezing and the whole world catching a flu.  The initial impetus on stock prices was Hungary, but how can this country, whose GDP is smaller than that of the Philippines and whose population is only 10 million and declining, really affect the global economy.  At best, the default is a grim reminder that serious problems continue to exist in Europe and that the austerity program adopted by some countries may extend to others.  the global effect is less contribution to world growth by Europe. Of course, that would cause some concern for the U.S. based investor because most DJIA companies are global in scope.  These companies could be facing greater challenges beyond the difficulties in the U.S. consumer market.  The employment numbers provided no comfort either since much of the improvement in employment figures apparently had come from temporary government programs which will be expiring as soon as the federal government start reducing stimulus expenditures. While we cannot ignore global predicaments, we should not forget the things that are going for us.  For one, our GDP had grown by 7.3% in the first quarter of 2010 and GNP by 9.5%.  These are numbers that imply some momentum in economic activity.  I was on the phone with a noted economist last week, and he was of the opinion that GDP growth momentum could provide stimulus well into the second quarter giving rise to a similar growth in GDP.  There is sufficient economic activity in the country to allow much of the PSE listed companies to turn in good earnings figures. While the index dropped by 91 points or 2.7%, there appeared to be  a lot of  accumulation buying of stocks like MBT, EDC, TEL, AP, FGEN, and ICT .  The drop looks more like a buying opportunity rather than a cause to panic.  My view is that for this week and next, we should remain in a tight range in the main PSE index probably between 3200 and 3300.  There are stocks that may nevertheless trade profitably for the next few days.   On my list are: MPI (2.75 -2.95); EDC (4.65-4.85);  MBT (55-57.50); TEL (2400 – 2450); and BPC(3.60-3.80).  I believe AP, DMC, RLC, URC and JGS will either continue to trend or correct slightly. I am not really worried about the market in spite of the weakness of the world equities market.  I am sticking to the view that liquidity and money is coming our way.  Fund managers will always be attracted to strong fundamentals, and I continue to sense strength in the Philippine economy, for the time being.