indicia of market undervalue

When companies are buying back their own shares of stock on the exchange, it is, in general, a clear sign of stocks being undervalued by the market. That is now the case for us. It very well speaks for itself.

Company buybacks on the PSE
Companies have been buying back their shares on our bourse. To name a few, we have Filinvest Land Inc., Roxas Holdings, CADP group, PLDT, Chemrez Technologies, Vista Land and Lifescapes, Aboitiz disclosing buybacks and the list goes on.

Disclosures published at pse.com.ph
By simply perusing the website of the Philippine Stock Exchange, one will see many company disclosures of share buybacks.

A look at FLI
FLI had an IPO last year and the price of the shares was around PHP1.92ish on the day they were offered. In their disclosures they were buying the same shares back at around 1.08. That would mean they would net almost half of their IPO price and be left with the shares in their names. How brilliant.

A Devil's Advocate perspective
It is possible that behavior like this is calculated to keep stock prices from falling further and is no more than a strategy to boost the image of the shares. However, I'm more inclined to think that that's not the case this time around because of the scale of the buybacks in terms of the number of companies doing it and the number of shares they are buying back. Assuming for sake of argument that it is no more than a mere strategy to encourage higher market valuation, companies will not risk buying back large amounts at overvalued levels. So at the very least, we'll know that the prices are at a reasonable level. That is, at the very least, even with an devil's advocate perspective.

Something to watch out for
I think behavior like this is, in this case, a good indicator that the stocks value is higher than where the market is pricing it at. Over the next few days, I want to watch for more similar activity.

hollywoodish headlines eclipse trading; foreign interest in RP stocks wanes -businessworld

Hollywood-ish news
News of what happened to the Senate's witness on the NBN deal is dominating the clicks on inquirer.net. The Inquirer's front page told of a story that I think belongs in fiction. Lozada was intercepted at the airport even before he made it through the tube, taken by men and made to sign documents saying it wasn't an abduction. His hearing started around 10am today, and I've been following along through inquirer.net's running account.

Another sluggish trading day
The total trade value today was slightly less than yesterday, being just below the Php1.2 billion mark. Modest gains left the market at around 3241, up by about 17 points from yesterday.

Waning interestin RP stocks
Business world's headline for today says that: "Interest in RP stocks wanes" . The article highlighted some important statistics.
"THE STOCK MARKET got off to a shaky start this year, with net foreign selling hitting a record P11.59 billion as foreign investors exited emerging markets.
January’s net foreign selling eclipsed the previous high for a single month of P9.4 billion set in October 2003, the Philippine Stock Exchange (PSE) said in a statement. "

Where does that leave us
I remember a broker telling me sometime last year that foreign buying accounts for about half of the buying that happens in our exchange. If foreign buying is on the way out, that leaves a large gap to be filled by local investors. I'm not too worried about it though. Here's why:

1) I don't think foreign interest will be on the wane for the entire year.
2) For the time foreign buying is low, there remains a good opportunity for us local investors to build a better portfolio by adding into our positions and taking advantage of potentially great bargains.
3) Philippine fundamentals for both the private and public sector remain good.
4) The worries of the foreign investors have more to do with the Americans credit problems and weakening consumer spending rather than problems within the Philippines.