July 19, 2001

Fluke

The Peso performed mightily today, prompting us to wonder why the stock market did not take its cue from that. Then again, appreciating by a peso in half a day, we would all suspect this to be the handiwork of the BSP. Rightfully so, the bank exerted a little muscle to make speculators think twice before acting. Then again, exactly because it looks like an intervention, the peso's rally may be fleeting.

But even as the peso peaked at 53.1 to a dollar this morning, the stock market composite Index dropped by as much as 18.77 points, as large investors let go of their blue chips. The index did recoup a bit of its losses and by close only declined by 11.31 points, but clearly the order for the day was to sell.

Should the index decline by a little more than 10 points tomorrow, we believe a number of blue chips may just be perfect for bargain hunting. In fact we'll point out a number of them later.

In the meantime, the saga of SMC, Pepsi, RFM and Cosmos may finally be nearing its conclusion. Albeit both RFM and SMC disclosed that there are still issues being ironed out (such as valuation), it was reported that SMC was the chosen buyer. RFM's 85% stake in CBC will be valued at P14.5bn, inclusive of a P2.5bn goodwill money that will be distributed among RFM shareholders as dividends, and P1bn equivalent to CBC's total debt of the same amount. The same report indicated that at an P11bn net, CBC's shares would be valued at P5.20 or a 9.5% premium to CBC's closing price of P4.75 today.

With that arrangement, we believe there will be a dividend play for RFM. In fact, that seems apparent to investors already, as RFM gained 3.36% today to P2.46. The market likewise reacted favorably to SMC's "A" and "B" shares, which closed higher by P1.5 and P0.5, respectively.

AC today hit an intraday low of P6.4, although it didn't quite cover the gap at P6.3. But recovering from its low, the issue may now be in position for a technical bounce. However, should the issue be weighed down by the market's weakness tomorrow, it will become a more compelling buy.

BPC attempted to continue is impressive performance yesterday, rising 2.1% in midday, but was weighed down by the market's poor performance, and ended up a fluctuation lower at P1.88.

BPI lost a peso in today's session, thus falling to P69. At this point, the issue is in a precarious position and may fall below P68. Should that happen, the gap to be covered is at the P62 level. That spells a 8.9% potential drop in the near future. So it may be advisable to lay off the stock for a while.

PLDT dragged down the rest of the market with its poor performance, losing P30 to close at P660. A potential hazard for the issue would be a retracement all the way to P610. Should that materialize, PLDT will be a real bargain.