A Bullish Financial Sector Equals A Bullish Phisix?

For the Phisix to breakout of the 4,400 level, this requires either leadership by the component heavyweights (of the Phisix basket) or general market buoyancy. Although I believe that both are related or that the causal linkage isn’t clear; in a bullmarket either the general market’s sanguine sentiment lifts component heavyweights or vice versa.

For starters, last week’s action in Financial sector seems to give us a clue:

One would note that major banking issues appear to recoil from their February-March troughs and have mostly been on an uptrend since.

Last week Banco De Oro [BDO-green] and Metrobank [MBT-red] spearheaded the Financial’s dazzling performance up 6.03% and 7.17%, respectively. BDO represents 4.12% of the Phisix weighting while MBT is 4.71% as of Friday’s close.

Also in the chart are Security Bank [SECB-blue], Bank of the Philippine Islands [BPI-black] and last week’s chart feature Philippine National Bank [PNB-orange], all three are also on a seeming uptrend but SECB has outperformed what appears to be a lagging BPI and PNB.

Nonetheless, BPI has the largest weight in the Financial sector index (28.69%), while SECB has 8.52% and PNB 3.98%.

All told, the 5 issues comprise 81% of the Financial sector index. I purposely omitted China Bank [CHIB] because of its lack of liquidity.

Anyway, SECB as of Friday’s close represents 1.88% of the Phisix basket while BPI is 6.33% as of Friday’s close.

The above only shows that 3 (BDO, MBT, SECB) out 5 seems on a steady ascent. The laggards BPI and PNB (while also on an uptrend but has been consolidating) may eventually follow.

Two, the actions of the Phisix (blue line) seems closely or strongly correlated with actions of the Financial sector (green line). The implication is that a continued upswing in the financial sector should translate to an ascendant Phisix.

Three, the financial sector is only marginally higher (.08%) on a year to date basis. The current uptick represents a recovery from an earlier decline rather than from a sustained advance. Only SECB has been considerably up by 9.74% y-t-d.

In short, the prospective actions in the financial sector suggest that the balance of risks seem tilted towards the upside than the downside.

This makes the financial sector a likely good place to position for an eventual Phisix breakout.

[Disclosure: I have no position in any of the abovementioned banks, but I am looking at the possibility to add one]