Keeping our fingers crossed

It is Christmas in November for most traders in the stock market after they were able to reap some profit from the market’s rise to a nine-year high. Things seem to be looking well, especially since the recent bull-run has been unbroken for several weeks now.

Boosted by expectations of sustained robust earnings, telecom stocks led the list of gainers in the bourse. Despite earlier warnings that the country’s mobile communication industry seemed to have reached its peak, recent promises of increased dividend payouts and reports of robust cash flows are buoying price levels.

Banking and property stocks are also on the rise. The Bangko Sentral ng Pilipinas, while keeping its benchmark interest rates steady, just recently brought back the tiering scheme for overnight borrowing rates, effectively reducing the interest cost for money that banks park with the central bank.

The move effectively discouraged banks from lending their money to the central bank, and instead is pushing them to open more corporate and consumer lending by offering more attractive rates.

A low interest rate scenario has lifted optimism that bank lending would soon grow, in the process benefiting not only the banks but also the property firms as well as consumers who would likely be encouraged to buy homes by making mortgage more affordable.

More property development companies are being encouraged to build homes that would be affordable not only to overseas Filipino workers, but also to middle- and low-income families who still rely on domestic employment.

Waiting for a correction

All this optimism, however, is not without its potential downside. As they say, nothing lasts forever, especially with the stock market. Bouts of technical corrections are expected along the way, and the question in everybody’s mind is whether the market will still gain further ground.

The views are mixed, but one sentiment prevails. While bullishness is a craft in equities trading, cautiousness and right timing should always be part of one’s guiding principles. When you feel and think that stocks are already extremely overbought, they probably are.

The Philippine stock market has been Asia’s best performer in the past three months, largely attributed to foreign portfolio inflows that many believe have been plowed locally only after equities in other parts of the region had become pricey.

It is important to note though that while the gains were robust in the past several months, the Philippines is only the third best-performer in the region if we start the date of reckoning to the beginning of the year.

Perhaps, the best description of the Philippine stock market at this time could be that of a late bloomer. After all, any positive developments that investors had wanted to hear for so long came only after the first half of the year.

Improving economic fundamentals

For instance, it is only now that investors are starting to realize and appreciate that the country’s budget deficit will really come in below the programmed ceiling. Brisk revenue collections as a result of the new value-added tax law that came in full effect last February, it seems, is doing more good than harm at this point.

Spending too was restrained in the first half, supposedly to give way for the funding of much-needed infrastructure within the next months. This is also boosting investor confidence. Theoretically, this anticipated government spending on major projects should help spur economic growth. Let’s hope the money will not be diverted to other purposes come election time.

With oil prices easing, inflation too is slowing down to a two-year low from a high of 8.5 percent in 2005. This is giving the central bank leeway to keep benchmark interest rates unchanged even as the US continuously increases its own.

Now, everybody is talking about a possible rate cut as early as December, but that we’ve yet to see. It could come in the first quarter of 2007, but the point here is that easing monetary policy — which should boost businesses and the economy — is underway.

Some traders believe the best for the banking sector is yet to come, and banking stocks are now among their favorites. Lower interest rates should theoretically expand private lending, while more stringent capital rules that are up and coming should force banks to merge to gain strength.

As good as it gets

Traders are counting on further gains in the stock market towards the end of the year, and they have their own reasons for saying so. But let us not forget that these guys are on the "sell side," and as such are usually more optimistic than the rest of the crowd.

The Philippines is a small market — an easy prey to sharp swings. Given its sheer size, an influx of foreign fund managers buying today could push up the market to new heights overnight, and just as easily, send the market falling tumbling straightaway.

Caution and prudence is always the key to wise investing. Remember the basic principles in stock trading. Buy on low, sell on highs; take advantage of rallies the same way you take advantage of retreats. Remember, even the best of markets correct itself.

More satellite sites for Poker Tour

Good news for poker players eager to join the biggest non-wager poker tournament in the country, the Philippine Poker Tour Hold’em Philippine Championship scheduled on 16th & 17th December 2006 at Casino Filipino Pavilion, Manila, Additional sites have been accredited to conduct satellite tournaments where winners are awarded seats to the Grand Finals.

Regular satellite tournaments are now being conducted at: Elbow Room at Metro-Walk, Pasig City every Tuesday and Thursday and San Mig at Alabang Town Center every Friday.

This coming Saturday, 18th November 2006, Casino Filipino Pavilion, Manila is hosting the qualifying/satellite tournament to give Metro-Manila players the opportunity to win seats to the Grand Finals. This will be followed by Casino Filipino Davao and Casino Filipino Tagaytay on 25th November 2006.

Details about the venues and schedules of other qualifying/satellite tournaments are posted in the Philippine Poker Tour (PPT) official web site at www.PhilippinePokerTour.com. Those interested to join these satellite/qualifying tournaments may also call the PPT secretariat (c/o Cindy) at 817-9092 or 812-0153.

Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected] or at [email protected]. If you wish to view the previous columns, you may visit my website at http://bizlinks.linkedge.biz.