Stock investors likely to sustain accumulation of blue chips

http://www.mb.com.ph/BSNS2006010253010.html#

Manila Bulletin
Mon Jan 02,2006

Investors are likely to continue accumulating on select blue chips following a correction in the last week of the trading days in 2005.

The improvement in turnover indicated investors would be pouring in more investments in the equities market.

BPI Securities noted that the market opened last week lower due to profit taking after the strong gains it made earlier.

However, the market partially recovered some of the losses last week as investors took advantage of the lower prices to accumulate and build positions for this week.

One positive development that market watchers have been looking out for was the PSE’ approval of First Gen Corp’s initial public offering (IPO) early this year, says AB Capital Securities.

Public listing of First Gen Corp. was set tentatively on February 8, 2006.

Proceeds from the offering, amounting to around P11.2 billion, will be used for improvements in existing facilities and investments in capacity expansion, which may include both potential acquisitions of power generation facilities and the development of greenfield projects, as well as for general corporate purposes, including working capital and investments.

The shares to be offered in both local and international markets represent 25.5 percent to 33.7 percent ownership in First Gen, which is 88.44 percent owned by First Philippine Holdings Corp. (FPHC).

AB Capital noted that local stocks have been slipping, in line with the downbeat market sentiment.

The political uncertainties have brought fear to the bulls and shake some traders out of the market.

"We feel that the situation has provided a golden opportunity for investors to take long positions. This buying opportunity may well be a gift from Santa Claus. The market is currently at its key support level of around 2,050," says AB Capital Securities.

Despite the downward pressures, the composite remains firmly in a long-term up trend. "It would be a good trading strategy to buy stocks if the market is in an up trend and if prices bounce back up after they touch or lightly penetrate their 50-day moving averages," says AB Capital.

"It is a technical rule of thumb that a stock will find support at its 50-day moving average. If the 2,050 support level is broken, this could eventually lead to a more substantial drop back to its longer term support level near 1,980 in the weeks ahead.

AB Capital noted that the long-term positive view will be in force as long as the index holds above its one year moving average support line.

"With the market currently blinded by the fog of uncertainties, investors are advised to buy the major blue chip issues. We favor strong domestic players and companies that have a strong overseas reach," AB Capital added.