The Third Quarter 2010 Philippine Stock Market Report

PSEi at 4,000

At the end of the third quarter of 2010, the PSEi has successfully breached and settled at the 4,000 level for the first time in its history.  The economic, social and political conditions have stabilized with the new president of the Republic of the Philippines taking on the helm for a term of six years.  Average bond yields have also been decreasing making equities the favored asset class in the quarter.  After an upward trend from the start of the year, the PSEi has rallied in September into new heights.

When the PSEi is Expensive, Be Very Very Selective

There are seven bargain stocks and nine reasonably-priced premium stocks according to our Law of Averages at the end of 9M10.  The bargain stocks in order of discount to market are FPH, ATS, RCB, VLL, UBP, CHIB and FGEN.  The reasonably-priced premium stocks in order of discount to market are FLI, GMA7, SECB, GLO, SMC, RLC, MWC, MEG and GSMI.  There are also 11 out of 40 stocks (28%) that have positive margins of safety based on PER at the same period.  This is a drastic decrease from 16 out of 40 (40%) stocks in September 9, 2010 indicating that the PSEi has gotten very expensive at the end of 9M10.  We continue to recommend our bargain and reasonably-priced premium stocks in a diversified equity investment portfolio for superior returns compared to the PSEi.

Pymwymi Fund Performance

The Pymwymi Fund is a basket of 15 stocks deemed to have the best resiliency to downturns and sustainable growth for best value.  The top five stocks have a 50% share of the total fund.  The Pymwymi Fund is up 55.6% while the PSEi is up 36.4% from the start of the year to September 30, 2010.  The Pymwymi Fund’s performance notably bests two ICAP Stock Funds with the highest year-to-date yields.  They are the First Metro Save and Learn Equity Fund, Inc. (up 48.32% from the start of the year) and the Philequity Fund, Inc. (up 47.11% from the start of the year).

Disclaimer

The Philippine Stock Market Research report is solely for information.  It should not be constituted as an offer for solicitation for the purchase or sale of securities mentioned.  The information herein has been obtained from sources believed to be reliable.  Whilst every effort has been made to ensure accuracy, we do not guarantee the accuracy or completeness of the report.  All opinions and estimates expressed herein constitute our judgment as of this date made on a reasonable basis and are subject to change without notice.  No liability can be expected for any loss arising from the use of this report or its contents.  As this is general information, it does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may obtain this report.