Postscripts of 2011

It was hardly a good year to many; nevertheless, the market in 2011 still proved to be rewarding to a good number of investors.

Favored by the market then were investors who relied more on price trends and patterns rather than on the fundamental or intrinsic values of stocks.

Looking at the charts, the market went through several situations in which this style of trading worked well.

Market’s pattern

The market was already on the downtrend as early as January last year.  This went on until the third week of February when the market lost some 500 points in the process. The market sprung back and was up about 600 points by the end of April.

By the middle of June, however, it was again down some 200 points. It climbed back in early August, going up by about 400 points to establish a new high for the year.

The market fell quickly after rising to its new high, posting a decline of about 800 points in less than 30 days or in late September.

The market struggled to recover right after. Yet, by the close of trading in December, the market remained down by some 650 points from the established high in 2011.

This pattern of the market’s movement during the year provided short-term investment opportunities to those who apply methods that made use of price patterns as basis in managing stock plays from entry to exit.

New trading hours

The bourse’s leadership in 2011 also decided to implement a two-step strategy to lengthen the trading period in an apparent attempt to boost business.

It extended the decades-old closing time of 12:10 to 1 o’clock until December and to 3:30 in the afternoon effective Jan. 1, 2012.

In the new trading program, the National Anthem will be played by 8:45 in the morning. This will be followed by the pre-opening period at 9 a.m. Actual trading will begin at 9:30 a.m. By 12 noon, trading stops. But unlike before, trading is only suspended for a recess and will resume by 1:30 in the afternoon.

The market will enter into a pre-close period at 3:17 p.m. All price postings at this time will be frozen and consequently sorted out, at which closing prices are settled.

Trading will resume at 3:20 p.m. for the run-off or trading-at-last period. It will go on up to 3:30 p.m. when trading formally closes for the day.

End-of-day (EOD) reports of trading participants (TP) such as the Daily Transaction Report (DTR), ABC Report and Consolidated Trade File (CTF) for the morning session covering 9:30 a.m. to 12 noon should be available by 12:45 p.m. However, the EOD reports of TPs on their DTR, ABC, and CTF for the day—that is, from 9:30 a.m. to 3:30 p.m.—must be available by 4:15 p.m.

The new trading hours will now place and include the bourse in the ranks of stock exchanges in the region to operate the whole day.

Some stock plays

The initial public offering (IPO) and listing of some companies at the small board somehow produced added activity in the market. But what stirred the market to greater activity are the several stock plays of some select companies on the main board.

One sensation is Lepanto consolidated Mining Co. (LC). To recall, the market’s attention was caught by the news that LC “possibly has the biggest undeveloped gold-copper deposits on the globe today” through its Far Southeast Project, located at the municipality of Mankayan, Benguet Province.

In the last 30 days, LC-A traded between the low of P1.28 and the high of P1.77 per share. By the close of trading last December, LC-A ended at P1.55 per share.

With a 52-week high of P1.80 and 52-week low of P0.40 per share record, its latest price performance is seen as a sign that its market price is losing steam.

With actual mining operation to commence only at some distant time, investors were said to be particularly disappointed with the latest news release from the project. It did not contain new information that should sustain higher price plays just yet.

The price play of Leisure & Resorts World Corp. (LR) shares was another sensation. Its stock play towards the end of last year, however, started to fade. Investors were disappointed with the news that its casino project depended on the full completion of the 800-room hotel component.

In this connection, LR renegotiated with Belle Corp. (BEL) to extend its contract to 25 years from the original 10 years-renewable agreement.

Investors particularly interpreted this to mean that LR’s profits in the project were no longer as attractive as originally estimated.

As a result, this will drive LR to another re-pricing exercise.  According to some market insiders, this may lead to a price collapse as a group of big stockholders in the company are suspected of preempting this eventuality by selling down the issue now.

A hazy study that claims that supply will overtake demand for power within three years has also discouraged further interest in power and power-related stocks. This has now crept into the property sector. A glut is suspected to exist. Market insiders cite the ongoing price markdowns on offered projects as clear evidence.

And because of the numerous listing of employee stock option plans as in the case of Philex Mining Corp. (PX), the market play of its stock has hardly prospered. Worse, its share price may just be falling lower soon as the price of gold continues to go through consolidation.

Bottom-line spin

An across-the-board stock play in the near term may still continue to appear unclear; there are, nevertheless, indications that some commodities like coal, precious metals and the like will further outperform in the coming days. This will be attended by some oil stock plays as local companies will explore and exploit their oil assets soon.

Also, as the government pumps money into development projects this year and onward, particularly in infrastructure, the stocks of companies whose products are directly affected by the progress of the local economy are expected to outperform.

Lastly, stock plays this time around may now be more on the basis of fundamental and intrinsic values.

Happy New Year to all!

(The writer is a licensed stockbroker of Eagle Equities, Inc. You may reach the Market Rider at [email protected] or directly at www.kapitaltek.com.)