June 25 Philippine Stock Market Review; Jollibee and Oil Issues

Three of the blue chips or major index heavyweights buoyed today’s trading activities leading the Philippine benchmark index, the Phisix, to close slightly higher by 5.74 points or .36%. PLDT (+1.33%), SM Primeholdings (+1.69%) and San Miguel B (+.68%) were largely responsible for lifting the index, as Bank of the Philippine Islands being the sole decliner, down by 1.16%, with the rest (Globe, San Miguel A, Ayala Land, Ayala Corp and Metrobank), closing unchanged. Over the week the Phisix is up by a hefty 3.05%.

Overseas investors were net buyers today, accumulating P 47.560 million worth of equity assets. Aside from the key telecom issues, it seems that investors abroad took heavy positions in Jollibee (+2.04%), which for today, posted the largest amount of net capital inflows. Jollibee has been on a winning streak, since coincidentally, Mr. Tony Tancaktiong, Jollibee’s head huncho took home the prized 2004 World Entrepreneur of the year award in May 29, 2004, held at Monte Carlo Monaco. Jollibee share prices are up 21.95% since May 28 and have attracted P 85.362 million of foreign money or 39.92% of the company’s accrued turnover during the said period. So aside from being blessed with a prestigious global award, Mr. Tancaktiong is likewise being rewarded by a vote of confidence from overseas and local investors. A case of hitting two birds with one stone.

Oil issues took a drubbing today on probable ‘profit taking’. After a sizable climb over the past weeks due to oil drilling speculations, the oil index plummeted 11.63% weighed down by index heavyweights Oriental Petroleum, which fell 16.66% for the foreign shares and 12.72% for the domestic shares. Perhaps what the prompted the fall was Basic Consolidated’s disclosure that it had assigned 1.45425% of its 4.155% share in the Zebra-1 and Rhino-1 wells, which means Basic’s share to the project will be reduced to 2.70%. Basic Consolidated was the second largest day loser plunging by 15.21%. Basic opened the day’s trading gap down, eventually dragging along Oriental Petroleum shares.

Today’s action by investors on Basic Consolidated was quite bizarre. It is as if the recent price of Basic presumed cash flows from an EXISTING commercially producing oil well such that a reduction in its share in the drilling project would mean greatly reduced revenues, hence the logical fall in prices. But what seems to be lost among the local investors is that oil HAS YET to be found, hence the prices of Basic Consolidated has not yet factored in cash flows from the oil well simply because these have yet to be ascertained.

The recent spike in these issues means that investors were positioning for a possible oil discovery. If the oil well comes out as a dud then the recent price action is justified, however, since the drilling is still in progress with no defined outcome, my discernment is that the current steep drop in its prices reflected mere ‘profit taking’ or a ‘knee jerk’ fickle reaction to something yet to be determined. Unless, of course, the insiders who are in the know have started unloading due to advance knowledge of the status of the drilling project.