ACCORD CAPITAL EQUITIES CORPORATION

GF EC-058B East Tower, PSE Center, Exchange Road, Ortigas Center, Pasig City, PHILIPPINES 1605 (632)687-5071 (trunk)

WEEKLY OUTLOOK_ XXX_July 25-29_TD 143-147

1 of 2 OVERVIEW & REVIEW: BUOYED up by the positive turn in the European debt crisis, local investors found renewed optimism pushing the index to successively set, then reset, record highs through Wednesday before the bears took control of the last two sessions. The PSEI accumulated gains of as much as 48.3 points (1.28%) thru midweek to an all-time intra-day high of 4,515.77, before giving up nearly 60% or 28.68 points of such gains to close out the week at 4,478.36, just 0.44% over the prior five-day advance. This stretches the measure's run to five (5) weeks following the 4,153.11 close in the week-ending June 17. The year-to-date stands at a comfortable +6.6%. As shown in the accompanying chart, the bullish heading actually began a month ago when the index fell to an intra-day low of 4,123.70 before a mild rally ensued to close the June 14 session at 4,140.27. Since then, it had been uphill, eventually pushing the index past the upper end of a 2.5 month trading band, en route to the earlier mentioned consecutive re-writing of index level history. The bullish trend is highlighted by the rising bottoms and peaks with the latter drawing a steeper slope of +13 versus the former's +10. At this pace, we may expect an index range of between 4,380 and 4,580 this week. A possible break of the 4,600-line in the next 10-15 days (2 to 3 weeks) is likely. A quick glance at four (4) commonly tracked technical indicators posits the possibility of a sustained drop in the early part of the week, as the market eases of overbought territories. Nevertheless, we note that since the surge in the last two weeks were principally driven by aggressive trading in third-line, speculative counters on the back of rumored acquisitions, projects, backdoor listings and/or capital infusion by foreign entities, we may see a discernible shift towards second-line and top-line issues, preparatory to the earnings reporting season. In fact, in the two days that closed the week, this was a bit evident. We expect this trend to become more dominant in the weeks ahead. RSI(14) top chart -- has consistently topped at just below the overbought 70-line since the first week of May. Over the recent weeks, the pick up point has, alternatively, been defined at the 55-58 range. RSI(14) stood at 64 after Friday's trades leaving some room for a further slide, which in turn opens up the ideal buying window. STO(14,3,3)-- 2nd from top -- drew a negative crossover of the trigger line, an early indication of a slide. This happened after Thursday's slide to 4,480 and extended to Friday's drop. The measure is still in overbought region with a 92.15 reading. Again, this supports the earlier proposition of an early weakness in the market as excesses of the previous run is shed. MACD(12,29,6) -- 2nd from bottom -- adds another hint of such weakness, at least at the beginning of the week. The line is almost flat with a slight negative bias. Nevertheless, the signal line remains healthy, sustaining an uptrend that started during the final week of last month, four (4) days before the index broke above the 2.5 month consolidation band. That day also marked a positive cross-over of the signal line, with the indicator emerging into positive territory. The bottom chart shows the Accumulation-Distribution Line which obviously suggests the bull are winning out. Value flow has been consistently greater on the upside for this lines to drawn as it is. The slight drop at the tail-end, coinciding with the last two sessions of last week, has not been sufficient to suggest a potential break of the present trend which indicates an accumulative bias. Over-all, these indicators tell us that the market remains a good buy over the medium and long-term. The negatives are kept at the short-term, given that the market had made significant advances without a major correction. In the same breath, such anticipated weakness should not be a cause of worry for investors, but rather be an opportunity to selectively pick up stocks and redefine their portfolio from the recent speculative binge to more fundamentally sound counters.
DISCLAIMER: THE MATERIAL CONTAINED IN THIS PUBLICATION IS FOR INFORMATION PURPOSES ONLY. IT IS NOT TO BE REPRODUCED OR COPIED OR MADE AVAILABLE TO OTHERS. UNDER NO CIRCUMSTANCES IS IT TO BE CONSIDERED AS AN OFFER TO SELL OR A SOLICITATION TO BUY ANY SECURITY. WHILE THE INFORMATION HEREIN IS FROM SOURCES WE BELIEVE RELIABLE, WE DO NOT REPRESENT THAT IT IS ACCURATE OR COMPLETE AND IT SHOULD NOT BE RELIED UPON AS SUCH. IN ADDITION, WE SHALL NOT BE RESPONSIBLE FOR AMENDING, CORRECTING OR UPDATING ANY INFORMATION OR OPINIONS CONTAINED HEREIN. SOME OF THE VIEWS EXPRESSED IN THIS REPORT ARE NOT NECESSARILY OPINIONS OF ACCORD CAPITAL EQUITIES CORPORATION ON THE CREDITWORTHINESS OR INVESTMENT PROFILE OF THE COMPANY OR THE INDUSTRIES MENTIONED.

ACCORD CAPITAL EQUITIES CORPORATION

GF EC-058B East Tower, PSE Center, Exchange Road, Ortigas Center, Pasig City, PHILIPPINES 1605 (632)687-5071 (trunk)

WEEKLY OUTLOOK_ XXX_July 25-29_TD 143-147

2 of 2 The less obvious measures of the market are also supportive of a bullish outlook. The market's breadth, a measure of the dynamics between advancing and declining issues accumulated over the year-to-date, continues to narrow. Thus, even if the year-to-date number is still negative (-0.0218), an in fact shows a slight drop from last week's narrowest point (-0.0198), it is a marked improvement from the prior week's -0.0224 level. The bullish anticipation is legitimized and the strongest confirmation comes at the cross-over into positive spread territory whence advancing counters will have outpaced declining ones on the aggregate. This much is shown and suggested by the ADL chart (bottom) which similarly shows a rising trend, improving on last week's endlevel of -578 to -536. This resulted as advancers beat decliners by 42, 409-367 in the entire week. Unchanged issues numbered 196. An alternative measure, the AD Ratio, stands unchanged from last week's 0.94 reading, just a point off the year's highest reading of 0.95 posted just Wednesday.
400,000,000.00 300,000,000.00 200,000,000.00 100,000,000.00 (0.0150) (0.0200) (0.0250) (0.0300) (0.0350) (0.0400) (0.0450) (0.0500) 1-Jun 8-Jun 15-Jun 22-Jun 29-Jun 6-Jul 13-Jul 20-Jul

0 -100 -200 -300 -400 -500 -600 -700 -800 -900 -1000 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39

The chart to the left draws the general direction of foreign funds. It is noticeable that foreign trades had aggressively turned positive since mid- to end-February, as the index wallowed near its year low. It eventually crossed over into positive territory on an aggregate basis at the beginning of the second quarter and has sustained it throughout. In fact, it picked up significantly this month, with the rising trend becoming more observed.
3-Feb 3-Mar 3-Apr 3-May 3-Jun 3-Jul

The flow of funds into local equities, in particular, and into emerging markets in general, resulted from two factors. First, the debt and fiscal crisis facing both Europe and the US have (200,000,000.00) increased risks while pushing yields higher. This has forced out fixed income placements at lower yields (alternatively, purchased (300,000,000.00) at higher prices) to seek better returns. Second, monetary authorities in emerging economies have tended towards a (400,000,000.00) tightening stance, pushing interest rates higher, giving these funds new options. A third factor in play is the perception that, despite advances to historic highs, local equities remains, at the very least fairly priced and in most, still undervalued relative to their prospects moving forward. Of course, this trend could easily be reversed if and when a resolution to their problems are reached as it appears to have been in Europe. The knee-jerk reaction would be a shortterm flight as they reposition and reconfigure portfolio to take advantage of such turn of events. However, the domestic and individual firm fundamentals will keep them invested, at least a good part, to keep the market robust. Besides, positive developments abroad will be digested by and discounted into the prospects for local stocks, and the broad economy, just as well. At the end of the day, there are no significant worries from this end.
3-Jan (100,000,000.00)

On the matter of valuations, it is notable that, despite the recent run up, with the PSEI PE (ttm) rising to 15.72x, nearly half of the 30 component issues trades below the market's PE. (refer to trading guide for PE values). Thus, on this basis alone, a good number of issues, fundamentally sound enough and with sufficient market liquidity to make it to the index, are prime candidates to aid the next northern push. On the other hand, there are about 10 issues in the same group of 30 that are currently trading at elevated STO(14,3,3) levels, indicating a near-term sell. Finally, there are 13 stocks, again in the same group, that, relative to their current support and resistance points, offer a return-risk ratio greater than 2.0. Combining all these parameters and applying it to all, we find at least two (2) index issues that may be considered for inclusion in the portfolio Universal Robina Corporation [pse: URC, php48.20, +1.0% w-o-w] which meets both PE and return-risk parameters, although trading at overbought levels; and Philippine Long Distance Telephone Company [pse: TEL, php2,390, +0.8% w-o-w] which shows similar characteristics. Generally, both presents medium- and long-term prospects with entry-levels defined at support lines indicated in our trading guides. (jc)

DISCLAIMER: THE MATERIAL CONTAINED IN THIS PUBLICATION IS FOR INFORMATION PURPOSES ONLY. IT IS NOT TO BE REPRODUCED OR COPIED OR MADE AVAILABLE TO OTHERS. UNDER NO CIRCUMSTANCES IS IT TO BE CONSIDERED AS AN OFFER TO SELL OR A SOLICITATION TO BUY ANY SECURITY. WHILE THE INFORMATION HEREIN IS FROM SOURCES WE BELIEVE RELIABLE, WE DO NOT REPRESENT THAT IT IS ACCURATE OR COMPLETE AND IT SHOULD NOT BE RELIED UPON AS SUCH. IN ADDITION, WE SHALL NOT BE RESPONSIBLE FOR AMENDING, CORRECTING OR UPDATING ANY INFORMATION OR OPINIONS CONTAINED HEREIN. SOME OF THE VIEWS EXPRESSED IN THIS REPORT ARE NOT NECESSARILY OPINIONS OF ACCORD CAPITAL EQUITIES CORPORATION ON THE CREDITWORTHINESS OR INVESTMENT PROFILE OF THE COMPANY OR THE INDUSTRIES MENTIONED.