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.