week 45_daily for november 11, 2010

8/8/2019 WEEK 45_DAILY for November 11, 2010

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ACCORD CAPITAL EQUITIES CORPORATIONGF EC-058B East Tower, PSE Center, Exchange Road, Ortigas Center, Pasig City, PHILIPPINES 1605 (632)687-5071 (trunk)

DAILY REPORT & OUTLOOK_November 11, 2010PSE Index Pts Change % Change Total Volume Total Value Advancers Decliners Unchanged

4,197.57 -62.78 -2.28% 2.088B Php6.732B 24 116 36

REVIEW & OUTLOOK:

THE MAIN INDEX fell by its biggest percentage margin in nearly 10 weeks aslocal investors were spooked by heavy foreign selling right off the bat. ThePSEI dropped to as much as -94 points before buying activity near the closeerased a significant part of the losses, yet still 63 points short of the theprevious day's level at 4,197.57.

The Index breezed through a number of support levels without, as the clichgoes, breaking a sweat. Sustaining its close under 4,270, the composite of 30-companies ignored catch-levels at 4,250, 4,230 and the 4,200-psychological line, raising questions of a possible terminal move for thebarely-two year old bull.

Magnifying the results in the local market were mixed closes by its AsiaPacific peers. Major markets Hang Seng, Shanghai, and Bombay were all inthe red. Save for Bangkok, which joined Manila with a half-percentage pointslump, t he rest of the ASEAN 6 gained. Earlier, the OECD was PhilippineGDP trailing the group for this year and the next.

The night prior, US stocks fell as the dollar strengthened and metalprices fell. The Dow Industrials traded in positive territory briefly inmorning trades before drawing a generally downward path the restof the way. The two-day slide however fails to substantially alter a 2-and-a-half month uptrend. Sentiments remain mixed on the paceof the broad economy's recovery. The Dow settled at 11,346.75 atthe bell, -0.53% below Monday's close. The broader S&P500 gave up-0.781% while the Nasdaq values were squeezed -0.66 percent.

European markets, on the other hand, gained Tuesday, behindstrong corporate earnings. The Paris bourse led the majorspercentage-wise, climbing 0.82% to 3,945.71. London's FTSE 100and Frankfurt's DAX 50 both rose by 0.43% and 0.55%, respectively.The continent was at the forefront of the prior day's decline in worldmarkets, particularly in Asia, as concerns on its members' sovereigndebt situations resurfaced.

As this is being written however, both Europe and US markets aredeep in negative territory. This despite positive figures from the USlabor front showing initial jobless claims fell to the lowest level infour months.

There was much attention to foreign funds activity yesterday.

Nevertheless, the over-all picture remains almost unchanged.Although the last four sessions have aggregated net foreign salesworth php1.18B, the year-to-date position still stands at php56.327B.Furthermore, while this segment of the market aggressively sold theHolding Firms, Service and Mining & Oil sectors, they have, on-

DISCLAIMER: THE MATERIAL CONTAINED IN THIS PUBLICATION IS FOR INFORMATION PURPOSES ONLY. IT IS NOT TO BE REPRODUCED OR COPIED OR MADE AVAILAOTHERS. UNDER NO CIRCUMSTANCES IS IT TO BE CONSIDERED AS AN OFFER TO SELL OR A SOLICITATION TO BUY ANY SECURITY. WHILE THE INFORMATION HEFROM SOURCES WE BELIEVE RELIABLE, WE DO NOT REPRESENT THAT IT IS ACCURATE OR COMPLETE AND IT SHOULD NOT BE RELIED UPON AS SUCH. IN ADDITSHALL NOT BE RESPONSIBLE FOR AMENDING, CORRECTING OR UPDATING ANY INFORMATION OR OPINIONS CONTAINED HEREIN. SOME OF THE VIEWS EXPRESSEDREPORT ARE NOT NECESSARILY OPINIONS OF ACCORD CAPITAL EQUITIES CORPORATION ON THE CREDIT-WORTHINESS OR INVESTMENT PROFILE OF THE COMPANY OINDUSTRIES MENTIONED.

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4,197.57 -62.78 -2.28% 2.088B Php6.732B 24 116 36

balance over the same four days, increased positions in Financial and Property counters at least this is what the numbers tell us. Theywere on the sell side in all four days with respect to Holding Firms and three days in Mining & Oil. Note however, that isolating theirnear-panic inducing trades, positive positions were actually taken in Financial, Property, Service and Mining & Oil issues. The tablebelow shows their net activities over the last four sessions, based on figures culled from the daily quotation reports: (in million php)

DATE FINANCIAL INDUSTRIAL HOLDING FIRMS PROPERTY SERVICE MINING & OIL

11/05/10 133.30 24.34 -68.19 118.91 -218.52 -61.97

11/08/10 -57.64 56.81 -29.52 -6.79 -326.87 -54.62

11/09/10 109.07 1.33 -589.24 -60.77 45.40 -3.71

11/10/10 88.61 -140.81 -315.74 36.05 192.99 5.64

TOTAL (4 days) 273.35 -58.34 -1,002.69 87.40 -307.00 -114.66

Noticeably, the sectors that showed net foreign buying or the leastforeign selling over the last four sessions, registered the leastpercentage losses. Furthermore, a good number of stocks actuallyposted gains, defying their respective sectoral trends. Amongthese are: FINANCIALS: SECB, CHIB and PNB; INDUSTRIALS :SMC, MUSX, HLCM, JFC, AP, PNX SMB and PIP;HOLDING FIRMS :ABA, AEV; PROPERTY : BEL, RLC; SERVICE: LIB, ABS; andMINING & OIL: APX/B, MA/B, LC and PX.

The bar chart shows the daily net foreign trade totals for theNovember-to-date. Note that yesterday's total showed a possibledissipation of the pressure, despite the perceived massive sell-off

as the day was progressing. In fact, as even the table above willshow, the drag posed by Holding Firms eased up, replaced,however by a turn-around in the net positive position in Industrials.

The ADL was pulled to the -340 level, matching a prior low pointcoinciding with the PSEI trading between 4,150-4,200 andbreaking under the most recent trough (-295) with the Index at the4,100-4,120 range. In previous reports, we had raised the flag of caution of an impending correction solely on the basis of thisindicator which then showed a lower peak as the index brokethrough an registered its latest new all-time high close at 4,397.30.In terms of the ADL, the true market top at 4,130, suggestingthat the weakness had began to develop from that pointonwards. This same suggestion is supplanted by the recent shift todistributive pressure in the Accumulation-Distribution Line.

The PSEI has thus erased practically all gains of the last two weeksas the market rallied from 4,190 to almost 4,400. Measured overthe full swing of the 2009-originated uptrend, however, the recent



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4,197.57 -62.78 -2.28% 2.088B Php6.732B 24 116 36

decline wiped off just 7.6% of the total advance. This remains far from the 20% level chartists are concerned with as a prospectivereversal point to mark the end of the present bull. Given present index levels, this key reversal point, a break suggesting a terminalmove, lies at the 3,870-line. (see chart below)

OUTLOOK

ALL things considered, the market may have acted irrationally during yesterday's session.

THE country's macroeconomic indicators remain positive.Inflation is contained at 4%, well within the government's targets.Remittances are at record-levels, lending stability to the local currency, albeit raising some worries from the export sector and OFW families, the principal beneficiaries of these inward flow of dollars. Gross international reserves are likewise at never-before-reached levels. And despite the OECD's outlook placing thecountry's GDP growth at the tailend of the ASEAN Six,a 6% paceis nothing to sneeze at. In a certain respect, this is a deja vu of the post Asian Financial Crisis of 1997-98 when the country held upagainst the contagion but registered slower growth pace amongits peers during the recovery period. Real interest rates rangebetween marginal negative to a low positive, which make equitiesan attractive wealth creation vehicle. On the other hand, the low interest rate regime is a boon to business expansions and capital investments as well as to a certain degree, for firms seeking to ease their debt burdens. The peso continues to gain strength versus thedollar.

The socio-political front is stable. Aside from the recent travel advisories on account of a supposed terror threat, there have been noimmediate threats of upheavals that may create uncertainties in the business and investment environs.

On a micro-level, earnings have been generally impressive. In the least sense, reported results have met expectations, save for a couplethat provided some disappointment. Four major companies that reported earnings in recent briefings all showed double-digt growths intheir bottomlines and further expressed optimism over their full-year profits. MWC and ALI both reported 30% increases in net profitsTuesday. Yesterday, MPI and VLL showed positive numbers.

From a technical standpoint, the four-day slide which squeezed 4.5% off equity values, may be ripe for a technical rebound. Addingconfidence to this outlook was yesterday's late surge towards the close. That may be evidence enough that buyers have begun to step in asthe index fell under 4,200. We may expect a technical rebound with the index returning above the 4,200-line, possibly testing the 4,230-initial upper limit. Immediate support is at 4,130-4,150 range. Residual negative sentiment, carried over from the four-day slide, may temper any surge past the 1.0% mark with profit-taking. Hunting for long-term bargains will provide the counter-balance.



week 45_daily for november 11, 2010

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