Tuesday, August 24, 2004

August 24 The Philippine Stock Market Review: A Reign of Fear?

August 24 The Philippine Stock Market Review: A Reign of Fear?

Well with the dirty little word out as officially promulgated by no less than the highest authority of the land…what do you expect? Massacre, Bloodbath carnage…yes, the PHISIX was clobbered by 34.17 points or 2.17% as foreign and local investors stampeded out of the Philippine equity assets to register its biggest loss since the post election May 11 and is the largest decliner among the Asian bourses, as of this writing.

It was a sea of blood out there today as declining issues routed advancing issues by 8 to 1, ALL major subindices hemorrhaged led again by the mining index which fell by 2.82% and foreign money saw an outflow of P 21.847 million. Aside, foreign investors sold slightly more issues than they bought.

Of the nine heavy cap mainstays of the Phisix, 6 issues contributed to the steep decline of the Phisix mostly due to foreign led sell-offs, namely Ayala Corp (-5.46%) Globe Telecoms (-3.46%), Bank of the Philippine Islands (-2.44%), Metrobank (-1.96%), PLDT (-1.56%) and San Miguel B (-1.43%) while the remaining three, Ayala Land, SM Primeholdings and San Miguel A were unchanged.

Aside from the tormented heavyweights foreign money also saw heavy liquidations in Pilipino Telephone (-8.46%) and Union Cement (unchanged), while unassumingly providing support to First Philippine Holdings (-3.0%), ABS-CBN Preferred Shares (-2.43%) and DM Consunji Inc (-7.69%).

Today’s market action calls for us to raise our alert levels to orange, meaning that the Phisix based on its chart has manifested a strong warning reversal signal after having successfully breached its major trendline. Put differently, we have yet to confirm the negative signals emitted today, if it is simply a knee jerk reaction or the onset of the market’s reversal to a declining phase in the immediate term. The sustainability of the critical 1,518-support level should give us a clearer picture where the market is headed for.

Will investors flee the market on thoughts of an Argentina-like upheaval or will they construe that such official acknowledgement of the existing problem, instead of a denial, as government’s resolve to confront the dilemma and stave off a full blown crisis? Today’s market action points toward the former however it remains to be seen how investors would react in the coming days. Will the market's psychology now be enveloped by a reign of fear?



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