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|No Nonsense Economic Outlook||
January 2, 1999
Share prices closed stronger on last minute year-end buying in the blue chips led by San Miguel, Meralco and Ayala Corp. Porofolio managers took positions in anticipation of economic and corporate rebound for 1999. The sudden runup was also due to window dressing and was really expected as the market marked the last days of trade for the year 1998. This upturn may also indicate investors positioning ahead of the likely recovery. A general perception of recovery in the region, the Philippines eluding recession and the various economic ills brought about by the onslaught of the economic turmoil has renewed investor optimism.
The composite index closed up at 1,968.78 or 35.8 points higher after being confined to a narrow range. Chart indicators points to a fair chance of a good rally although resistance is very strong at 2,000 level. If it rallies on a stong volume then its 2,500. In the short term, next week will be critical however. A bearish double top formation is at hand if we cannot breach 1,980 and the market closes on declining volume. Watch out for the foriegn brokers once they start going out of the market.
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December 10, 1998
We have good news and we have bad news. First the bad news. The market hasnt done anything exciting in the last trading days, and the rest of December could see little activity beyond what weve seen. The good news is, the Phisix has not broken below our Maginot Line at 1760, which could be telling us that the consolidation taking place may be accumulation driven. Better times are expected for the month of January up until the end of the first quarter if only because of improved macroeconomic fundamentals. Load up on the following stocks.
BANK OF THE PHILIPPINE ISLANDS. Time will vindicate the faith of those who invest in the countrys foremost financial institution. Market inefficiency has kept the stock underperforming other banking issues such as PNB and MBT, but far and away the more sensible investment.
AYALA LAND. Back to 10 pesos. An excellent stock for long term investors and short term punters. Large float is not a problem everytime the stock moves. Short term resistance is at P11.25, medium term resistance at P12.50, thats good enough for a 25% return.
PETRON CORP. Trading at support, if it falls below 4.00, then the next sensible price to come in would be 3.75. Do not be misled be drops in the prices of fuel, the prices of crude in the world markets has drop a lot more ( much more ) than the implemented price roll back, so in effect, profitability has not suffered, and probably even improved.
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December 4, 1998
The Phisixs drop to 1800 was swift and violent, something we had not seen since November 10, when the market went from 1800 to 1637 in three days. The question on everybodys mind is, has the "correction" been enough? Theres reason to believe that we could get a rally today, if only because the area between 1770 and 1800 constitutes strong support. Inflation figures for the month of November is due out today, and we dont expect it to be any worse than the previous months. If the market does the unexpected, which is break below 1770, then we could see it continuing downwards until 1680. Medium to long term scenario remains the same, markets in for better times until Februaru of 1999.
METRO PACIFIC CORP. Has, literally, turned itself into a real, true blue chip stock overnight. Used to be only a pseudo heavyweight. The stock may be burdened by its affiliation with Salim, and a relatively high leverage ratio, but having controlling interests of one of the five biggest capitalized companies in the country, and the one with the highest profit growth of the big five certainly catapulted MPC to the big leagues. Trading at support, a definite buy.
AYALA LAND. A 23% fall form its high back on November 24 has made the stock real attractive from a trading standpoint. The companys income for the first nine months of the year did drop 40% from that of last years, but the stock has never gone out of favor among investors looking for real corporate gems. Has also gone to support, if it does breach 10.00, then it looks like the next pick up price would be 9 pesos.
PETRON CORP. Trading at support, if it falls below 4.00, then the next sensible price to come in would be 3.75. Do not be misled by drops in the prices of fuel, the prices of crude in the world markets has drop a lot more ( much more ) than the implemented price roll back, so in effect, profitability has not suffered, and probably even improved.
MERALCO B. Only a few pesos away from support of 100. A blue chip that trades like a second line, even third line stock. A buy at this point. Well-run utilities such as Meralco are almost assured of regaining lost ground.
FILINVEST LAND. Good strong support at 2.60, which it, for all intents and purposes touched yesterday, also traded 48M shares yesterday, being property related wont help its profit prospects this year, but the stock has performed regardless of reported earnings, should be able to do it again.
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November 25, 1998
Ext resistance for the Phisix is 1970, then 2060, and then 2150. The market still looks extremely strong. Blue chips such as AC, ALI, PCOR, SMC and PNB have appreciated at a steady, if unspectacular, rate, making the rallies easier to sustain. Keep this in mind, if the market is eventually going to hit 2150, then its going to take significant moves from the heavyweights.
METRO PACIFIC CORP. Still a buy, MPCs denial notwithstanding. First Pacific and Metro Pacific is, for all intents and purposes, one entity. The buy-in into PLDT looks more and more a reality with each passing day. Just to give an idea how significant this potential acquisition is going to be, even just a fourth of PLDTs annual net income represents three times the consolidated earnings of MPC based on 1997 figures.
AYALA CORP. Has been consolidating between P10.50 and P11.25 over the last seven days. Looks like its getting ready to test the initial resistance level of P12.25 in the coming days. Has every reason to be priced higher than ALI, based on Book Value and recent financial performance, its not, which in that sense, makes it a good buy.
ASIAN TERMINALS. Traded 6M shares last Friday. Has not had the kind of price movement weve been seeing in virtually every second line stocks in our recent rally, partly because of small float. Could conceivably go up to P1.30.
EEI CORP. Income for the first nine months of the year grew by 51%, an incredible achievement given the kind of earnings contractions weve seen in property related companies in the last two quarters of the year. Looks ready to go up to P1.50.
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November 24, 1998
The Phisix rallied on a good surge of volume yesterday. We are seeing volume rise on the right side of the right shoulder of a reverse head and shoulder. The resistance at 1860 that defines the bear market has been hurdled. Are we in for a long term reversal? Encouraging sign....personally, yesterday looks like a strong confirmation. We are seeing the market will go to 2500 level between now and approximately middle of February.
Take up positions in blue chips like AC, TEL, BPI, PCOR, BPC, SMC, etc...
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November 17, 1998
As with the last five trading days, the market and the majority of stocks will follow where PLDT and MPC goes. A word of caution for those trading MPC, do not buy it because youre expecting them to bag the PLDT deal, buy it and trade it for quick, small profits. There are too many unknowns and it seems nobody has any idea whats going on, not even the major dailies. Our feeling is, nothing will be known until perhaps two weeks from now, because the guys pulling the strings have not made enough money yet. One of our short term resistances used to be 1820, today, because weve made four unsuccessful attempts, another one has been established at 1770. Oh, this just in, PNB reported losses amounting to P500M for the third quarter of 1998, and Metro Pacific said that profits for the first nine months of 1998 was P172M, a drop of 70% from last years P700M.
JG SUMMIT. Good support at 1.46. Traded 7.6M shares yesterday, huge spike. Company stands to earn about P3B this year. Underperforming subsidiary is DGTL, which saw revenues go up almost 100%, but has net income contract by 30%. If the stock falls below P1.46, liquidate the position right away.
ABOITIZ EQUITY VENTURES. One of our favorites. Stock has lagged behind the Phisix, but make no mistake, Cebu-based holding company remains one of the most financially healthy in the PSE. A investment in this stock certainly requires a little more patience than say BEL and MPC, but its worth it.
SAN MIGUEL CORP. Received P24B from its sale of Nestle. Interest income on that amount alone at 10% per annum will be more than double the income Nestle wouldve contributed to SMC bottomline for the whole year of 1998. Companys finally headed somewhere after 12 years of floundering in open water.
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Ayala Corporation is a holding company with interests in real estate development, banking and finance, telecommunications, electronics and information technology, manufacture of food and agricultural products. Ayala Corp., the oldest business house in the Archipelago, which is established in 1834. Some of its well known subsidiaries and affiliates are the Ayala Land Inc., Bank of the Philippine Islands, Globe Telecom, Purefoods Corporation, Ayala Life, Ayala Hotels, Inc., EDINet Philippines Inc and the Ayala Foundation
FAVORABLE ASPECTS OF ITS FUNDAMENTALS:
UNFAVORABLE ASPECTS OF ITS FUNDAMENTALS: