June 27, 2001

THE ARRAIGNMENT

In seven of the last eight trading sessions, the index trended lower. In that span, the index has lost a cumulative 63.57 points. With today's 7.71-point decline, the index level settled at 1415.73. The mood wasn't half as festive today, with no wild market swings and the index trading in a narrow 11-point range.

The sluggishness was partly attributable to the wait and see stance of most investors with ex-President Estrada's arraignment just a day awayu. President Arroyo has made repeated pronouncements of unnamed groups allegedly organizing destabilization acts, reminiscent of the May 1 attack on Malacanang. True enough, we believe that adds uncertainty to the investment atmosphere even as the PNP and the military massed their forces in Metro Manila.

Based on the main counter's chart, we find it more beneficial for the market to continue its decline, perhaps for the last two days of the week. After that, the index may just hit its support level at around 1390 and at the same time be technically oversold. That would thus provide investors a good buying window.

Meanwhile, from under our noses, MBT has been sliding past its comfort zone. Following today's P4 slip, MBT at P205 is now at its lowest point since President Arroyo assumed the presidency. The issue seems to be at support level already. Being technically oversold at the same time, we could see a bounce for MBT. On the other hand, it also looks primed to cover a gap at the P192 level. A look at the issue's weekly chart however, shows that it may have an even long drop ahead of it, with P167 as the next major support level.

Earlier, BPC clarified an earlier news report stating that The Supreme Court had denied the company's petition for review of the CA's ruling revoking the company's permit to operate its cellular business. The company said that the petition in fact is still pending in the court. BPC as of late has been mimicking the index' fluctuations, and has lost 20% in the past eight sessions. Today it closed at P1.56.

In a belated move to ride the IT bandwagon, mining stock ISM announced that it added information technology or telecom and other similar businesses under its articles of incorporation. ISM today was steady at P0.05 with over P10mn in turnover.

AEV confirmed that it may opt to delay the sale of WG&A, wherein the company has an indirect interest through Aboitiz Transport System. WG&A announced a return to profitability for the first quarter. AEV gained 1.43% to P1.42, while WGA was untraded.

June 26, 2001

FICKLE

The market went through another mild dip of just over a point as a lack of technical and fundamental incentives brought about mixed results in the trading of publicly listed stocks today. Trending downward for the seventh consecutive session, the index still has to hit an oversold position. With more investors now at the sidelines awaiting clearer signals, turnover has dipped a bit in recent sessions. In fact, right now the market seems to be running on rumors again, as we have seen many times in the past during periods of downturn.

AJO, which caught punters' imaginations yesterday with a near-ceiling performance, became the latest victim of a fickle market. We learned that the company's pet subsidiary, QNET which is now involved in the deployment of video conferencing terminals is expecting a strategic investor to sign up within a week for about a 25% stake. In the floor, there was much initial excitement as the issue rose by as much as 13% to P1.56, coming off its P1.38 close yesterday. It didn't last long however, as a lot of traders dumped the issue, resulting in the issue's 5.8% drop to P1.3. Volume however continued to swell with 14.9mn shares trading hands.

Construction firm DMCI Holdings earlier reported an P85mn profit for the first quarter, recovering from a P65.6mn loss in the same quarter last year. The company's revenues improved by 69.2% to P1.5bn. Despite the news, the DMC shares slipped by 3.33% to P0.29.

Meralco disclosed that its board of directors approved the appointment of Meralco President Manuel M. Lopez as Chairman and CEO, Chairman Felipe B. Alfonso as Vice Chairman, and EVP Jesus P. Fransisco as President and Chief Operating Officer. MERB closed up by P5 to P56 while MER closed unchanged at P39.

RFM denied that it was actively looking for buyers of its softdrink unit Cosmos. The company instead claimed that it was only looking at prospective buyers as a duty to its shareholders. Furthermore, the company added that talks regarding the sale of CBC are still exploratory. RFM gained 4.17% to P1.5, while CBC lost 6.67% to P4.2.

Mondragon in a breakthrough announcement said that it had agreed with PAGCOR to re-open Mimosa, which used to generate around P100mn/month. Under the deal, the casino will be re-opened on July 6, with 75% of the gross casino revenues to be kept by PAGCOR. The rest will be split between MON and the Clark Development Corp. MON owes Pagcor P82mn and CDC P325mn. MON shares remained suspended.

June 22, 2001

HEDGING ACTION

The market continued to slip today, it's fourth in the last five days, resulting in a 39.53-point decline for the week. Today's drop however, was a mild 4.4 points, although there were considerably more losers than gainers, with a 49:30 ratio.

At the helm of today's correction was PLDT again, with a P5 decline to P710, although it traded as low as P705. As of late, PLDT has not been buoyed by the weakness of the peso which has been trading above the 52 level to the greenback. By contrast, the two multi-national insurance firms, SLC and MFC both chalked up gains today, of P40 and P60, respectively. SLC closed at P1175 while MFC peaked at P1410 - the issue's highest close since the first week of January.

Meanwhile, at the heart of the market's interest were RFM and CBC. With a potential bidding war between SMC-Coke and PepsiCo for RFM's softdrink unit CBC, the latter two climbed steeply in the past weeks. Today, with confirmations from both SMC and PepsiCo officials regarding the negotiations with RFM, investors sold heavily with the news. Whereas, CBC plummeted by 12.25% to P4.65 (its intraday low), RFM plunged by 14.46% to P1.42 (also its intraday low). Based on the latest news release, CBC was almost fully valued compared to RFM's asking price of almost P6/share. We believe the arrangement with PepsiCo seems more workable. However, with no finality in the talks, expect more volatility from the two issues.

ISM which has been running on rumors again outperformed today, with a 12.5% rise to P0.0675 - the issue's highest level since Feb. 2000. In the past two weeks, the issue has risen over 419%.

Meanwhile, it looks like ICT has fallen out of the market's grace. Since the company reported the finality of its sale of its overseas unit to Hutchinson, the issue thoroughly weakened. For the day, it lost 12.45% and settled back to P2.32 after peaking at P3.1 a week ago. That spells a 25% drop for the issue.

June 21, 2001

PLAYTIME

It seems the fund rotation cycle becomes more exciting as the money flows into the second and third-liners. Despite the relatively flat index movement (a 5.28-point drop), individual issues provided some worthwhile volatility. Softdrink maker Cosmos Bottling Corp (CBC) really shook up the market, following up its 15% gain yesterday with another 14%. The result is a three-year high for the issue at P5.3. The issue is now just a couple of fluctuations bellow its all-time high of P5.8. If we are to believe the news however that SMC, with the great monopolizer at the helm, will gobble up CBC to a tune of P8/share or even higher, then the rally may be far from over. Then again, the news hasn't really come up in recent days, but with RFM's 22.06% rise today to P1.66, we would keep rethinking the old news.

Despite the double action of the Concepcion stocks, the speculative awardee for the day is undoubtedly ISM, which took a 33.33% flight to P0.06. While still a far cry from its over 230% trek in the 1996-1997 period, the issue is for all intents and purposes back in vogue. Still with no profit to speak of, the company is rumored to be the backdoor vehicle of Shell Petroleum. To recall, both Shell and Caltex are mandated by law to list this year. The two, however have deferred their respective IPOs, citing poor market conditions.

The Ayala companies merited some buying interest today, with ALI registering a 3.7% gain to P5.6 and BPI gaining a peso to P75.50. Notable too were the net buying positions of foreign funds on the two issues, aggregating about P40mn.

EBC, which has been jinxed after being linked to ex-President Estrada's illegal operations, reported an NPL ratio of around 18%-19%, a bit above the industry average of 16%. The bank expects that further provisions will drag down the bank's income for the year. The bank stated that the priority is to have a clean balance sheet (not a cleaned out deposit base) by next year. EBC today dropped 5.13% and closed at P37. It also 'dropped' as director, GSIS head Winston Garcia who has been having policy differences with other directors. The issue is down 37.3% for the year.

In other stock developments, bellwether PLDT slid back by P10 to P715, ICT continued its descent to P2.65, oil refiner PCOR took a breather to P2.2, while beverage company LTDI stood still at P27.

The index seems to have lost momentum either way. And with the way funds have been flowing into smaller cap issues, we may not expect much movement from the main index tomorrow. This is not to say the market will be devoid of excitement. Playtime continues.

June 20, 2001

MARGINALLY

Yesterday, we commented how the market may salvage the remnants of its past rally by either staying flat, or by gaining a bit. True enough, it stayed flat, registering a 0.72-point gain, but more importantly maintaining its upward momentum based on its charts. We had feared the index would test the 1430 support level should there have been continued selling pressure. Today's performance showed a balance in terms of market breadth, with gainers slightly outpacing losers.

But the headline figure doesn't really reflect the excitement in the market right now. True to the classic fund rotation theory, there is now renewed speculation in third liners, with talks of backdoor listings once again circulating. Mining issues that tickled punters' fancy today were LC, which rose by as much as 21% but ending just 5.41% higher than yesterday's close. The company's "B" shares fared much better, as it closed 15.79% higher to P0.22. A number of betters likewise trained their eyes on Philex Mining, as the issue rose by 11.11% to P0.4.

The distinction of being the best performer among the more fundamentally sound stocks however, belongs to CBC which raced to a 14.81% to close at P4.65. Since the issue's volatile breakout in early May when it was rumored that SMC may purchase CBC from RFM, the issue has gained an aggregate of 69%. The news has thus powered the issue to a three-year high and makes it among the best performers in the bourse.

We cannot fail to mention PLDT however with its heavy weighting in the index. After all, in the recent weeks, the issue's performance has been mirrored by the index. In the past days, the issue has been rather steady, trading in range, like today when it gained P10 to P725. TEL was also the most actively traded issue for the day.

Meanwhile, the company denied that it was open to selling a stake in Smart Communications, after a news item reported that it has been discussing such with Nippon Telegraph and Telephone Corp.

ICT, a victim of a classic sell on news syndrome, continued to show signs of weakness today, even as it gained 1.82% to P2.8. However, before closing up, it tested a P2.6 intra-day low, perhaps giving a hint of the issue's direction in the days to come.

In a similar boat is BPC, which managed to gain 3.49% to P1.78 today, even as it tested an intra-day low of P1.72.

Meanwhile, Equitable Bank announced that withdrawals reached P35bn at the height of the Estrada impeachment trial. The bank said however, that it had paid back about P15bn of that amount. The rest will be paid within the year. Nonetheless, EBC said that the cost of the loan will weigh down the bank's bottom line for the year. It also said that it plans to sell its bad loans, which amount to about P21.8bn, to generate cash. EBC lost a peso to P39.

June 18, 2001

CORRECT MOVE

There was a notable lack of interest in the market today, as investors expected a technical correction following six straight days of registering gains. Dipping by 8.38 points, the market succumbed to selling pressure even as most investors decided to stay in the sidelines. The result was that more issues showed declines, while value turnover dipped considerably after days of breaking through the P500mn level. As it was during the previous week's rally, PLDT was once again an accurate barometer of the market. Taking the lion's share of the trade for the past week, PLDT's volume for the day was less than half its 30-day average. While the issue briefly flirted with a P5 gain in mid-trade, in the end it closed flat at P725.

Some issues, like BPC weren't so lucky. After peaking at P2.14 three sessions ago, it has grown considerably weaker afterwards. Today it lost another 8.16% and settled at P1.8. While the issue does look ripe for a correction, it's weekly chart still looks hopeful. With a little luck, and perhaps the final approval of the government for its requested water rate hike, BPC may commence recovery with the index after a two to three day consolidation period.

Meanwhile, port operator ICTS said that its selling price for its ICTSI International Holdings Corp and Ensenada Cruiseport to Hutchinson International Holdings would reach $400mn. The sale has been the only relevant news about the company during the issue's run-up in recent weeks. The announcement however came after the wake of a negative reversal signal of the issue's daily chart last Friday. Thus, today's dip would only serve to validate that signal. Despite rumors of ICT peaking past the P4 level, we believe it will be a while before the issue breaks out again. Today however, the issue did give a mighty try, trading as much as 13% up at P3.4, but it lost steam in the end, falling steadily to as low as P3 before closing at P3.1.

In other news, MEG disclosed that it will use FAIR as its mass-housing vehicle, citing the company's relative weakness in that sector. MEG slipped by 1.23% to P0.8 while fair added 1.79%^ to close at P0.57. The news however, seemed to have given ELI an unexpected boost, rising by as much as 11%, but closed with the gain halved to 5.88%. ELI was last traded at P0.36.

We believe the index, now at 1470.92 could dip to about 1450 before staging a recovery. Should the index breach that level, we can expect to be down week on week.

June 15, 2001

SWEEP

And so the index gets to keep its streak. Like a hot playoff basketball team (go sixers!), the market has posted its sixth-consecutive gain, resulting in a 90-point improvement in the period. It hasn't been spectacular. In fact the gains have been modest, but considering the disturbing news that we have been plagued with, from kidnappings to higher utility and fuel prices, the streak is worth glossing over, for a while at least.

Being one of the most influential index issues, PLDT has in fact been largely responsible for the gains during the week. There are theories that PLDT planned dilution in PLTL would be better for its future earnings, which really doesn't say a lot of PLTL. It could also be a technical resurgence, with the issue coming off its six-year low last week. The company's acquisition of its final major convergence piece, GMA-7 may also have played a part. A combination of those factors and perhaps a tinge of speculation from market players, drove PLDT to an 18% rise during the market's streak. As such, PLDT now stands at P725. On a daily perspective, the issue looks due for a minor correction. On a weekly one, it looks like the rally has just begun. Thus, express your disappointment that you did not catch the issue at P615, but look forward to lower-priced entry points.

BPI, which is generally not very actively traded, today shot up to prominence with a one peso gain, apart from being the most active issue in the market today. In review, the issue has performed consistently strong, and is in fact bordering on overbought in its daily, weekly and monthly charts. Based on the issue's past performance, we really don't expect any surges anytime soon.

An issue where we would expect surges however is BPC. Influenced by conflicting news such as the passage of the power bill, the approval and subsequent recall of water rates, not to mention the conglomerate's debt problems, the issue and all its listed subsidiaries have been subject to much investor speculation. For the day, BPC gained 1.03% and was once again one of the heavier traded issues. Also stealing some light is FPH, which rose 5.77% today, and by almost 15% within the past three sessions. MERB has been quite steady during the market's current run, gaining just a peso in the period, while ABS has gained a respectable 5.2% during the same.

A closely watched issue these days, ICT slightly corrected with a P0.05 dip. Although floor talk dictates that the issue will continue its remarkable ascent, its daily chart clearly shows a correction in the offing. The weekly chart however, seems to support the rumors. ICT now stands at P3.2.

June 8, 2001

PROFITEERING

Today's market had investors looking to ride the rallies of some outperforming stocks, at least at the start. Coming off a 17.13 gain yesterday, index stocks zoomed ahead after the opening bell, going up by almost 18 points. You have ICT jumping ahead by 10%, CBC by 7%, BPC by 6%, MEG by 5% and even ALI by 4%. Not a lot of those closed at their respective highs. By the end of trading, the market just held on to a 3.85 point gain.

But the market never looked bleak. With PLDT gaining another P20 in a show of resurgence this week, 43 other issues managed to shore up their values, while only 29 succumbed to weakness. Apart from PLDT, a host of other major blue chips attracted much public interest. The likes of MBT, BPI, ALI, ICT, SLC, PCOR and BPC were among the heaviest traded gainers. MERB however, remained weak and lost P0.5 to P55. It was joined in the red by erstwhile highflier FLI which fell victim to profit taking. Coming off a P2.36 close yesterday, FLI quickly raced to P2.42, until profit takers drove it down to its day low of P2.34, where it settled.

Over the past week, the market has been favoring a number of selected stocks which perhaps would explain the greater than average volume today (+P600mn). Without much action in the past months, it would be reasonable to expect the average investor to milk this series for its worth. The prospects for power companies based on the passage of the power bill at this point is speculative of course. Bidders for NPC, foreign investors seeking tie-ups with Meralco and AEV, and improved operating efficiencies are all still well in the horizon. Passage of a law and actual implementation are two different animals. Still, expect investors to continue this flurry of trading in the name of the power bill.

As for the collective market though, the picture can't be that exciting. The present index level is as good as spot as any for inertia to seep in. On a technical standpoint, the index seems to be in-between extremes. So at this point, if you're looking for some action, be the average investor and ride this current wave.

June 7, 2001

AN ACCOUNTANT'S TOUCH

The market recouped yesterday's losses and more, inspired by PLDT's P35 gain for the day. TEL, which the other day skidded to its 6-year low of P610, experienced a fresh wave of bargain hunting today, following up yesterday's budding rally of P5. News reports earlier said that PLDT will change its accounting treatment for Piltel that would cause a dilution in its ownership, such that it will only become a minority shareholder. If PLDT owns less than 50% of Piltel, then it would no longer consolidate Piltel's F/S with its own. But with PLDT not citing any financial savings from the move, it would seem to be a pure window dressing act on the phone company's part.

Anyway, as TEL closed clawed back to P650 at the end of today's session, so were 40 other issues inspired. The result was a 17.13 gain by the index. Albeit almost purely technical, the gain is welcome as the index once again closed above the psychological 1,400 barrier. Still, this could easily be a one-time thing as no factors in the political and economic climate have really changed overnight. Yesterday, the index lost 3.19 points, weighed down by four recently exciting issues. Today, three of those are back on the winning track. AEV gained back 2.63% to close at P1.56. PCOR came back more convincingly with a 5.56% gain to P2.28. Lastly, CBC earns the distinction of being the top gainer for the day with a 13.33% rise to P4.25 despite SMC's denial that it was mulling the purchase of the former. The fourth in the group, ICT continued its slide, slipping 1.96% to P2.5.

Meanwhile, the BSP announced that it left its overnight rates unchanged, and will instead wait for further economic data to be released before acting. Then again, it shouldn't come as a surprise because most of the BSP's moves as of late only mirror that of the US Fed's.

Despite the government's media blackout, the Abu Sayyaf bandits were able to announce that it will execute its American hostages if negotiations are not conducted. Surprisingly, the armed forces are now trying to negotiate as well despite President Arroyo's well-applauded policy of bandit extermination.

Depending on which way the Mindanao battles go, we believe the issue still has some shock value left for the market which could cause an outflow in hot money. However, the more important point seems to be the war's cost to the economy. To recall, it was ex-President Estrada's war against the MILF last year that drove the budget deficit to double its original planned amount. Should Arroyo's own campaign drag for months, it could result in a similar pressure to the budget - a pressure we could ill-afford.

June 5, 2001

CONVERGENCE CRASH

Today's trading was marked by another extraordinary performance by PLDT, on the downward side that is. Shedding another P30 following its ADR's $0.48 decline to $12.74 last night, PLDT closed at P610, a six-year low for the issue. The issue may have been dragged down by its loss-making subsidiary Piltel. The latter announced that it has satisfied all the conditions necessary for its debt restructuring. To recall, PLDT has pledged to cover half of Piltel's debts via issuance of convertible bonds to Piltel's creditors. The anticipation of additional financial burden for PLDT may have partly caused the issue's decline.

Another notable decliner for the day was MERB which shed 5.13% to close down at P55.5. The company, which is an expected beneficiary of the newly passed power reform bill, was sold at the news. It's "A" shares were likewise dragged down by a smaller 2.44% to close at P40. Another company that would be directly affected by the power bill is AEV. The issue in contrast gained subtly by P0.04 to P1.66. The issue's collective gain however since April has not all been subtle. It soared by over 50% during the period, compared to the index which just managed over a 1% rise for the same period.

However, AEV is not by far the best-performing issue of recent weeks. That distinction would belong to ICT, which again for the same period has gained over 145%, rising from P1.12 to P2.8. The buzz on ICT apparently was its sale of its 25% stake in ICTSI International Holdings Corporation (IIHC) and its Mexican passenger cruise terminal to Hutchinson International Port Holdings Ltd. (HPH). ICT's founder shares are granted 10 votes per share. The sale thus transfers controlling interest to Hutchinson. ICT will likewise grant HPH an option to acquire the preference B shares that its wholly-owned subsidiary International Container Terminal Holdings, Inc. (ICTHI) owns. Lastly ICTHI will also sell interest in Ensenada Cruiseport Village S.A. de C.V. which operates a cruiseport in Ensenada, Mexico. We thus attribute the renewed interest in the stock to its potential gains in the sale, not to mention the improved liquidity picture of the company.

And so it seems that liquidating assets is the order of the day. We've also heard the same story from BPC, which is saddled with foreign currency debts, as well as RFM which has sold its profitable and sexy subsidiary PSi Technologies. BPC was unchanged at P1.48, while RFM continued its fortunate streak with a 3.51% gain to P1.18.

Not all issues however can resort to selling assets in the name of focusing on core businesses. Music.com, once Music Corporation's most exciting angle has failed to secure another round of funding from its majority shareholders. In effect, Music Corporation just infused new equity to the portal just for the latter to be able to wind down its operations. Surprisingly though, MUSX even gained 4.5% to P2.32, retracing its recent steep losses. Perhaps what helped MUSX dispel concerns was that it disclosed that it had written off Music.com already, and commenting that it will not significantly affect its financial position.

ABS, which we had suspected of planning a share buyback in order to lessen the BPC's dilution upon the conglomerate's sale of 8% of its stake in ABS, announced that it will not buy back the whole 8% after all. The company clarified that its board of directors only approved the repurchase of 10mn common shares or its equivalent in Philippine Depositary Receipts for the employee stock option plan. An earlier claim by the company however is that the repurchase is precisely to prevent BPC's dilution as well as the support of the company's shares, which ABS believes is undervalued. ABS closed unchanged at P38.

June 4, 2001

WAR AND POWER

The market's concerns for the day, much like the previous days were the passage of the power bill and the on-going military operations against the Abu Sayyaf bandits in Mindanao. So far, the mood has been cautious. The index slipped 3.64 points to 1412.45, breaking the market's three-day gaining streak. Over the past 10 sessions however, the index had lost almost 40 points.

As of today, the power bill has already been passed in Congress and is now poised to be approved in the Senate. President Arroyo has personally pushed for the bill which has languished in the legislature for years already. The supposed beneficiaries of the pending bill, Meralco and First Philippine Holdings, closed mixed for the day. FPH and MER were both unchanged at P41 and P24, respectively, while MERB slipped 4.1% to P58.50.

The war against the kidnap-for-ransom gang Abu Sayyaf has taken its toll on Mindanao, and has tarnished the image of the country again. With scores injured and even more kidnapped, the government and the military is hard-pressed to end the conflicts swiftly and decisively. Nonetheless, government officials and the public seem to be in approval of the president's hard-line stance against the bandits.

Come to think of it, the new wave of kidnappings came at a really bad time. The country is already smarting from a drop in trade levels, partly attributable to the political crisis of the 4q2000 which resulted in wild fluctuations in interest and exchange rates. Newly released reports note that merchandise exports from January to April 2001 are down by 4.1% from last year. For April alone, exports are down by 15.8% from last year.

There remains continued speculation in Cosmos, as the issue rose by another 3.85% to P4.05. Now at its highest level for the year, CBC has gained almost 40% in two weeks of action. As for the cause of the surge, talks have it that SMC has offered to buy Cosmos at about P8-P12 / share, which implies over a 100% premium. RFM however, has been quick to deny an impending sale, saying that CBC is at the core of its strategy and is therefore not for sale. Some analysts however, are skeptical of RFM's statement, since RFM is hard pressed for funds to redeem its convertible bonds which were due since May 30. RFM in fact has already sold its stake in Nasdaq listed PSi Technologies. Despite RFM's cash problems, it too had some spillover speculation, gaining 11.76% for the day.