DECEMBER 19, 1999

Merry Christmas everyone!!!! I think starting tomorrow (Monday), investors will be on a holiday mood already. Volumes will probably thin. If we believe that there will be window dressing for the market, then propping up blue chip prices encounter that much resistance. So maybe we should look out for TEL, SMC, AC, MERB. Then again, these blue chips have risen already. Let's see...last Friday I was looking out for ICT at P2.9, MUSX at P5, and ION at P13.50. PNB is very attractive on a daily chart as it is terribly oversold, but on a weekly, it seems to have a long way to go. Besides, PNB only trekked up because Lucio Tan bought it up to acquire control. And that's another point. It's a Lucio Tan stock now. If MERB or SMC went down like that, it's a clear buy.

Well that's it for now. Happy Birthday to my friend Jing. She celebrated her birthday last week, and silly me I forgot to greet her. Silly me.

DECEMBER 16

Gaps galore!

When was the last time you saw the composite index gap up and down like it did this week? Well if it happened quite recently, then I musn't have been paying attention. The two day run-up was fun while it lasted. No one really expected much from it given very thin volumes to support the run-up. But at least we're receiving more active foreign participation now. Optimistically, we can believe that they're starting to accumulate for next year's rally. Me, I'm still resigned to a listless year-end market. Now I'm as myopic as ever, probing the index and a few second-liners for that great bargain. And there's one typically everyday. The other day it was Ionics as I had hoped. I sold it after a day with a peso profit. That gave me enough gas money to brave greenhills traffic for a day. ha! Yesterday, I believe it was MUSX although I wasn't armed with my charts being absent from work (and boy that feels great!) True enough it was one of the more generous gainers today. Today I didn't really find any. I was gearing up for MBT at P260 but a momentary sell-off by Merril and Barrings scared me enough to instead repost at P255. Come to think of it, the issue's not quite oversold at P260 although I believe our technical analyst pegged it as the support. Investors are selling it reportedly because its stock right issuance will dilute its earnings, and because Asian Bank is not such a great buy. Note that during the time Anscor was auctioning it, neither RCBC, nor MBT, nor Banco de Oro made a bid for it. What does that tell you, specially at a time when every bank's in a rush to merge or acquire? But what do I know? I'm merely a speculator in all of this (this is a subtle disclaimer in case someone decides to sue me for maligning...)

DGTL peaked at about P1.32 yesterday. Sayang! Well, another opportunity might just be around the corner since it started dropping again this morning. I'd better post at P1.16 tomorrow...just in case.

DECEMBER 14

Fall from grace

We should have expected that PLDT will correct. Perhaps a lot of people did, and in so anticipating drove down the stock price. It's really peculiar in our market I suppose. Investors seem to have so little confidence in the companies that they sell on news, which is saying sell when you hear the good news. If you're in a race for profit taking, that basically means you don't believe that rallies can be sustained. This is what happened to MBT, BPI and FEB after the merger announcements were made. Speculation fuels the stock, and confirmation shoots it down.

So what stocks did you buy today? My pick yesterday, DGTL did go down to P1.16 but it recovered to P1.2. Instead, I went for another stock. I bought ION at P12.75. I didn't get the bottom price again at P12.50, but I figured it was enough since the price dropped about 8% from yesterday's close. And mind you, it wasn't due to a wave of foreign selling either. I think what happened was that there was a big discrepancy between buyer and seller price, at P12.75 and P13.50, respectively. At P13.50, that would be a P0.50 drop from yesterday already. Some guy then decides to panic and sells about 500 shares at the buyer's price. Then I figure that some other investors just saw the price, and not the volume and figures that it's a sell-off and promptly follows suit. What am I saying? I think other investors will catch on quite quickly, and I expect it to recover soon. Then again I've been wrong before. 10 website design revisions later and I'm still holding on to my RFM. Sigh...you can't win them all.

My stock market Christmas wish is for the index to consolidate at this level. Perhaps a month-long consolidation would be good, just to strengthen the support level. I think if it breeches 2000, investors will lose confidence again and there's no saying where we'll settle next. Furthermore, I seem to be making most of my trades during sideways periods. I have other unrealistic wishes of course: CEI to reach P2, and RFM to peak at P4.

Anyway, if you read my Dec 13 piece, I discovered quite a number of errors. I've corrected them now. Na-dyahe naman ako.

DECEMBER 13

Liquid once more

Oh what a time to miss my updates huh? Thursday's drop in the market was a beautiful time to bargain hunt. I simply couldn't work that morning, as I was hard pressed to decide which issue to buy. A lot of them hit oversold levels. I ended up buying MERB at P97.50 and DGTL at P1.18. Those weren't bottom prices, but being greedy is not my game anyway. In retrospect of course, PLDT would have been the best buy given the way it soared like a BW earlier today. But needless to say, I disposed of the issues as soon as I could. I sold MERB at the opening ring and DGTL before 10:30 AM. It felt really good too since I think both closed below my selling price. RFM remains a problem though. It's still about 25% below my purchase price and even the technicals don't look optimistic. Anyway, a few colleagues told me that RFM is actually a bad stock, and that they would recommend shareholders to dispose of it when possible. They told me that Mr. Concepcion doesn't give a hoot about RFM's shareholders and that he actually bought a yacht after RFM's IPO. What a bummer to learn about that just now huh? Furthermore, they said Concepcion makes no attempt to support share prices, unlike JFC or MBT. Well I'm still hoping that the issue rides on with the blue chip surge expected before the year ends, in line with the window dressing attempts of the government. Nonetheless, with coup rumours still at the tip of people's tongues, I'd still suggest an in-and-out strategy (bastos ba?) until politcal confidence is somehow restored. Anyway, if you're looking for a pick, DGTL seems to be the only index stock in an oversold level, closing at P1.16. I was thinking of buying actually, but technically it can still go down. Our technical analyst echoed my sentiment, but he was just looking at P1.14 with that being the 12-month low (I think). It seemed strong at close, but I'm more keen to pick it up at P1.12. I'm not in a rush to buy right? Of course I'll probably feel bad if it soars to P1.30 tomorrow, but we all make wrong calls right. Good night!

Dec 8 Market Review

The market continued with its decline an hit a low of 1880.76 breaching the 1890 support level.Investors sold down on a number of first line issues on worries about the Y2K and the ballooning budget deficit. The deficit has hit P103bn as of end-Nov. 99. This sent fears from investors that the short-fall in the budget may take its toll on the domestic interest rates. Secondary market for 6-month T-bills rates were quoted at 10.15% to 10.2% in the secondary market as against the auction rate of 10.299% last Monday even as the 91-day bill rates remained flat in the last 3 weeks at 8.894%. News that SMC will be earning a net income estimated at P6bn from the 1998 3.2bn was ignored by the market as it registered a 1.8% decline. The sell-off was triggered by the announcement that its 21% owned subsidiary Coca- Cola Amatil will be realizing some loss of A$70m in its Philippine operations due to the dismal economic environment and a restructuring in its overall operations. This has brought prices for CC Amatil down by A$0.43 to A$4.6 in the Australian stock exchange. SMC planned to sell its investment in CC Amatil but postponed this for next year in anticipation of better prices. Other blue-chip issues which registered price declines were MBT which hit a low of P267.50 and closed P17.50 lower to P270. MERB which lost P2/share closing at P6.90 after hitting a low of P95. ALI which declined by P0.30/share to close at P8.90. The issue which lent support for the market was TEL which gained by P15/share to close at P835 as investors anticipate the approval by shareholders of its acquisition of Smart Telecommunications Company in a special stockholders' meeting tomorrow. Speculative BW Resources took up 15% of total value turnover for the day as investors position on the prospects of BW taking up the bingo operations of Best World Entertainment and Gaming Corp.

Market Outlook

The market is expected to go on a technical rebound after 2 days of decline by 50 points. The blue chip issues hit slightly lower their support levels which makes these attractive entry levels for trading stances.

Daily Phisix Chart

BIRTHDAY

This time, I would like to greet my ex-officemate Shirley Cabral a happy birthday. I think she's 22 now and still doesn't have a boyfriend. Greet her at Shirley.Cabral@Phl.CCAmatil.com

INFLATION

November inflation was reported at 3.9% (as I remember it). It was below the consensus forecast, but was still mainly lower because of an extra-ordinarily high base last year. Unfortunately I haven't done my homework on this. Maybe I'll comment some more tomorrow.

PICKS

Note my December 4 issues. JFC has recovered to P13.25. DGTL looks attractive at P1.22, although my own posting is at P1.2. PLTL continued to drop and is nearing the RSI it reached when it first dropped to P1.18. My RFM was among the day's top gainers to close at P3. SMCB I think dropped a bit more.

DECEMBER 5

BIRTHDAY

I'd like to greet my household mate Robert Blasco a happy birthday. You can contact him at RobKyle@Mailcity.com if you want to greet him.

BAD MARKET

We have the worst performing stock market in Asia for the year. This was a direct consequence of about $400mn in foreign funds being pulled out of the country since June. Some would argue that dismal corporate results disappointed investors. The argument has merit. While analysts have been revising up their corporate forecasts in other countries, only a handful of companies have outperformed in ours. One of the basic theories is that while we're experiencing mild growth in our GNP and GDP, it hasn't really translated into higher spending incomes. The lower than expected inflation for August, September and October did not excite the market in any way. We are of the belief that the basket of goods do not represent the consumption pattern of your average Filipino. The seven-time hike of oil prices for the year - which aggregated to about a 40% spike - hardly made a dent in the inflation figures. If I remember correctly, fuel and transportation have a weight of about 8%. Food takes up more than 50%, with a bulk of that being rice. Needless to say, you cut rice prices and you have yourself a nice inflation rate. A couple of months ago, you saw President Erap order the NFC to cute rice prices by P2. I made a quick look at the NSO site.

THE ERAP FACTOR

But what's really keeping foreign direct and portfolio investments out of the country? Interestingly enough, fund managers do not worry as much about the economic picture as they do about the political climate. An article came out recently on how broad-based the attacks against Erap have been. Currently, you have a cabinet shake-up which came after a wave of resignations of the president's men. You have a new PNP chief that has a questionable human rights record. At the heart of the stock market, you would see the president's boys lording it over. Danding Conjuangco took the reins of SMC. Dante Tan's BW Resources became a byword following its meteoric rise from just over P1 at the start of the year, to a peak of P107 last October 11. Lucio Tan is said to have taken over PNB and perhaps the National Steel Corporation via a potential debt-to-equity swap with PNB. But more than these ones, everyday you would hear fresh stories about how some Erap boy is bent on taking over some publicly listed company to engage in more often than not, gaming operations. Funny but even before these companies become profitable, some people have already enriched themselves because they were issued shares before the issue price spikes.

DECEMBER 4

GOING AGAINST FEARS

A Lot of analysts are saying that the bombing of the Shell building last week triggered an investors' sell-off. I tend to think it’s a self-fulfilling analysis which prompted more investors to sell last Friday. I am of the view that it's an isolated case, and that the market will rebound shortly after. A rule of thumb I've often heard is that you know the market's about to recover when the majority becomes pessimistic. Following this, I suggest you wade through the emotions and look at the valuation of the issues. Take a look at the following stocks I've listed down, followed by their corresponding closing prices last Friday and their RSI for the same date:

ISSUE PRICE RSI MER P88.50 22.028 JFC P13.00 21.0007 DGTL P1.26 16.661 PLTL P1.080 10.598 RFM P2.70 2.774 SMCB P54 22.984

Note that JFC, PLTL and RFM are all down to their year lows. JFC is being sold down only because brokers are buying the JFC warrants and converting them to common shares at effectively lower prices. Actually if you're planning to buy now, JFCW would be more compelling as there isn't any selling pressure. PLTL is understandably an investor's nightmare, but it's still a PLDT company. While I would mildly suggest this because it is technically cheap, it comes with a warning that you should be prepared to hold on to this or to cut your losses should the rebound not materialize. It had a slightly lower RSI when it fell to P1.18 early last week. Although I wasn't able to buy, I observed that it recovered within two days to a high of P1.28 before falling again. I would conclude that PLTL is tradable, but the window of profit is very short term. RFM has been dropping terribly for the past three sessions for reasons I have not discovered. If it's a technical drop, then I would certainly buy more to average down my price. It's intriguing for me though because it dropped like MON or UW at the times when reports came out that creditor banks were starting foreclose on their properties. I have not heard any such thing. The latest about RFM is its plan to sell Swift to Purefoods of Ayala. While that would rob RFM of a profitable subsidiary, it's cash position will certainly improve. JGS appreciated when it sold PCI. I guess I will have to find that out in the coming days. I will continue to hope that it was just an unwarranted technical drop.

DECEMBER 2

HUMBLING

Well now. Look what happened to RFM? It skidded all the way down to P3.20 due to a wave of foreign selling. Silly other investors must have panicked. My comment is, if yesterday I got the stock cheap, today it's a steal. I actually tried to buy a few more but I don't think it went down to my price. Well, this highlights the importance of fundamentals. Whereas my steak of one-week holds will probably be over soon, I can be assured that the price will recover at some point. I believe that RFM is a healthy company and will benefit once consumer demand bounces back next year. Contrast this to the Uniwide that I bought a couple of months ago on a whim. Admittedly, that was a stupid purchase. But as they say, that's called the "tuition fee" of stock market investing. By gosh, I think I'm almost finished with my degree. By next year, I would have completed my 5 years in the stock market. I wonder what my diploma will say...

DECEMBER 1

VINDICATION

Happily I would like to report that I've sold my ICT at P3.4, or at the intra-day high, mainly because I was posted ahead of everyone else. So much for that. Meanwhile, I've also bought RFM at its intra-day low at P3.75. Gosh I think the daily RSI was down to 12! The weekly RSI was likewise below 20! Well I just hope it recovers as fast as my other recent purchases. It's possible because it went down more than 6% today. I think investors tend to notice large fluctuations in stocks. So there. I guess I just wrote this to prove that I follow my own advice.

CHISMIS

I heard that EBC is planning to have a secondary offering next March at P113 or at its original IPO price. I'm not sure but I believe EBC closed at P85 earlier. That can spell about a 33% upside. Why? For that offering to be attractive at that price, I would think it should be at a discount to the prevailing market price. And since pure fundamentals do not merit such an increase in so short a time, they might be planning to drive it up. But that's unvalidated, so if you have any news on that, kindly mail me about it.

THEORY

By now you would have heard of JFC's acquisition of Chowking. The purchase price was pegged at P600mn. But apart from the price, a lot of other things remain under discussion. Now, JFC plans to finalize the terms by January 2000. As you may know, the purchase will be via a share swap between the two parties, based on the prevailing market price of JFC. If that were so, would it be so farfetched to suggest that JFC might prop up its share prices so that it wouldn't have to issue as many shares as it would given a benchmark price of P13.50 (today's close I think)? Then again it might not be necessary since the potential dilution is rather small.

NOVEMBER 30

NO CLASSES!!!

There's no work today and so I am blissfully at home. I figured I should go update my website. The problem is, I don't really have my work files here, nor my charting tools. Thus for the meanwhile I will transform my site into a pure text site. I did my market review yesterday but since I interviewed some JFC company representatives (yes I specialize in the food and beverage / consumer sector) I wasn't able to finalize it. I'll release it tomorrow morning. In the meantime, here are my current investment views.

SUMMARY

Yesterday's trading saw a 19.87 jump in the index. That's already a jump since trading has been listless the past months. Nonetheless, I don't believe it's because of fundamental changes in the economy. The general view is that it was merely bargain hunting. Foreign investors themselves have not been positioning although I believe there was a greater degree of net foreign buying yesterday as against foreign transactions as of late. To a great extent, it was a senseless market with speculative issues taking over again. Issues like BW, OM, AGI, and MAR aroused much public interest, accounting for over P1bn in value turnover. Index issues accounted for just over P700mn. Need I say more about the kind of market we have?

INVESTMENT STRATEGY

I have recently adopted an investment strategy that I am still testing, although I am confident that it will work. Generally, what I do is to look for a company with earnings growth for the year. That limits me to quite a few companies I know, but I do make exceptions for obviously fundamentally sound companies. As far as I remember, these companies registered positive growth for 9mo99: SMPH (+10%), MEG (+16%), SMDC, PF, ICT, ATI and LTDI (+170%). My most recent transactions involved SMDC, ICT and ION. I try to make sure that the company does not have a debt problem. For this alone, I would never suggest MPC. I like FLI but it had negative cashflows. That's a big no-no in this period of insolvency and restructuring. Despite disappointing earnings, I would still make exceptions for big-cap issues like MERB, MBT, BPC and BPI.

After limiting my world of stocks to about 15 issues or so, I trade them on a purely technical basis. My technical indicator (just one) of choice is RSI. Apart from that I just look at the price history. If an issue's daily RSI falls below 20, I consider it. If the weekly RSI is likewise below 20, there's a large chance that I will start calling my broker for a buy order. (This is on the assumption that the fall is not fundamentally warranted of course.) I look at the price chart. If indeed it is oversold, is it a relatively low price. If an issue price has risen over 200% for the year and it falls to an oversold level (having an RSI of less than 20), there's a chance that the issue can still fall. There's more downside risk than when the stock is at a 12 month low already. If its close to its 12-month low, and is oversold, there's an 85% chance that I'll buy it at once as I would be expecting a quick technical recovery. (about a week or so). I bought ICT at P3.1. It's not the bottom price lately since it traded at P3 as recently as yesterday. Nonetheless I believe that it will recover within the week (I hope!).

Buying the issue is the first step. For me, selling comes at once. Once my buy order is "done", I automatically post a selling order at about 7% above that price. For retail investors, the breakeven is about 5.5% above your buying price. Why post at once? Well my general belief is that the market is not about to turn bullish and run-up for weeks. I believe that it will remain sideways, and any run-up is only good for a couple of sessions. Therefore, I'd like to be at the start of the list of sellers. When I bought my ICT, I automatically ordered a GTC sell at P3.4. While I haven't sold it yet, I'm first on the list so in the case of a freak posting, I'll benefit from it. ICT actually closed at P3.4 yesterday, but the transactions were crosses so my posting remained. Nonetheless I consider it a good sign since there were investors already willing to trade at my selling price.

RISK CONTROL

Make no doubt about it, it's a risky market we have with all the speculators and price fixers around. Add to this the volatility of foreign funds and you have a truly unpredictable market. To insulate myself from this, I try to look at those issues that are hardly traded. With no foreign funds to be siphoned out, that's less risk for you. With less volume, there's hardly a chance that there will be short-sellers and day-traders in general involved with that stock. With this in mind, I am looking at SMDC, RFM, CBC and ATI for samples. Looking at their charts, these issues have workable trading ranges. Compare this to MON, WPI or even BEL and you'll note that the incidence of heart ailments is more frequent for investors in these issues. Nonetheless, my "non- liquid" issues I feel are traded enough to be taken advantage of given an investment horizon of 1 week to a month.

CONCLUSION

So there, I hope I was able to share a few helpful insights for you guys. Post a message on my board if you have comments, suggestions or even investment tips of your own. Have a nice day.