Market seen to trade sideways this week

MANILA, Philippines - The local stock market is expected to trade sideways this week, with a positive bias as investors focus their attention on large-capitalization issues in anticipation of a continued Dow Jones rally.

Prince Anthony Yeung of AB Capital Securities said a prolonged rally in the DOW which is now above 7,000, will help push the local stock market higher.

The PLDT group’s announced Friday it was acquiring an additional 20 percent interest in Meralco to bring its total shareholdings in the utility firm to 30.17 percent is also expected to boost market activity.

“As per the moves of PLDT, investors will await further details but that will not stop them from making moves in anticipation of what may happen,” Yeung said.

Among the stocks that could spark interest among investors are Pilipino Telephone Corp., a mobile unit of PLDT which is acquiring 223 million common shares of Meralco or two-thirds of the total shareholdings of the Lopez family in the power utility giant. The shares will be acquired at P90 each share for a total of around P20 billion.

Part of the plan would entail the transfer by Piltel of all its subscribers and GSM assets to Smart Communications which will hold all the mobile phone businesses of the PLDT Group. In exchange, Piltel will receive royalty fees for the usage of the Talk N Text brand.

In view of this, PLDT will be making a tender offer for shares in Piltel to provide shareholders of the latter the opportunity to get out if they do not agree with the direction the company is taking.

“It would be reasonable to assume that the tender offer price will be at a premium in order to entice shareholders. Although stockholder approval is needed, these moves will definitely push through,” Yeung said.

Another stock that would benefit from the transaction is First Philippine Holdings Corp. as it is expected to receive a significant amount of cash which can be used to settle its debt.

“This is only the beginning of what is sure to be a transaction that would make waves in the market. Other factors such as economic indicators would most probably take a backseat to information on what PLDT, Meralco and San Miguel’s plans are. Activities such as these brings interest into the market and might translate to an increase in market activity next week,” Yeung said over the weekend.

Stock portal 2tradeasia.com, on the other hand, said some portfolio fund managers might lock in gains as they “await other catalysts to warrant sustainability of an ascent.”