Thursday, September 23, 2004

September 23 Philippine Stock Market Daily Review: Low Interest Landscape Fuels Foreign Buying

September 23 Philippine Stock Market Daily Review

Low Interest Landscape Fuels Foreign Buying

Oops, while yesterday’s chart formation and market internals emitted negative signals leading this analyst to forecast a possible retracement today, apparently foreign money anteed up on their holdings of local equity assets even as Wall Street succumbed to a sharp decline last night. This underscores the folly of short term forecasting.

In the past newsletters we have noted of two salient factors that may lead foreign money’s attraction to Philippine Equity assets; first the low interest rate environment. Yesterday marked another threshold low for US 10 year note, from Bloomberg “U.S. Treasuries rose, pushing the yield on the 10-year note below 4 percent for the first time since April”. Despite the US Fed’s reserve third rate hike this year, the rally in governments bond prices globally signal the imminent top of the rate increases. Hence the proclivity of international fund managers to eye on markets with high-risk high-yield potentials and with low correlation to the US markets. Second, the disconnect with the US financial markets, today’s fierce rally in spite of Wall’s Street’s morose outlook in its equity markets simply highlights the Philippine Market’s independence from the major global bourses. As of the moment, the Phisix is one of the minority gainers among the Asian bourses, including Pakistan and China’s Shanghai. While one day does not make a trend the recent gamut of divergences has slowly been molding.

Foreign money controlled trading activities that accounted for 56.79% of the today’s aggregate output and soaked up on the local equities assets to the tune of P 132.257 million. Naturally, the concentration of the sprightly accumulations were on the blue chips. Of the 8 major cap issues 6 posted capital fluxes from overseas investors with the meat going to the Property heavyweights, SM Primeholdings (+1.61%), and Ayala Land (+1.56%). PLDT (+3.0%), which had been sold down for the past three sessions by portfolio money, posted a reversal and is the third largest recipient from investors abroad. Only Globe Telecoms (-1.38%) and Ayala Corp (unchanged) registered negligible outflows. Obviously, the correction in Globe Telecoms was more than offset by the gains of PLDT. PLDT together with the key property heavyweights and San Miguel B (+1.43%) also on foreign buying buoyed the Phisix by 14.68 points or .85% for the fourth straight session. The rest of the field except for Globe Telecoms were neutral for the day.

Market breadth showed the bulls ahead of the bears by a slim margin 33 to 30. Moreover, industry indices were tilted towards the bears as declining indices (Banking and Finance, Mining and the ALL index) edged out advancing indices (Commercial Industrial and Property) by 3-2 with the Oil index unchanged. However, foreign money bought more issues than it sold in the broadmarket.

The figures above tells us that:

First foreign portfolio money are manifestly are becoming more bullish.

Second, the locals, whom have evidently slowed on their rotational buying binges in the general market, has limited their actions to a few issues and sold the broadermarket hence the tight advance decline differentials. Today’s darling is Gokongwei’s Digitel (+13.43%) the only major telco player whose share prices have lagged its contemporaries for over a year.

Lastly, in spite of all of the headline ‘fire and brimstone’ outlook on the local economy, the Phisix has managed to outperform major market as the US. Could this be a sign that investors have discounted the Philippine economic conundrum or does it show that the seemingly flagging US economy is in a more critical condition than ours, hence the aggressive inflow?

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