Thursday, August 22, 2013

Phisix: Will Friday’s headlines be another shocker?

The law of one price holds that markets has the tendency of  eliminating arbitrage opportunities through, as per the explanation of, “if the price of a security, commodity or asset is different in two different markets, then an arbitrageur will purchase the asset in the cheaper market and sell it where prices are higher”.


The Phisix proxy traded in New York, the EPHE, fell 2.35% last night. I say ‘proxy’ because price actions seem to resemble the Phisix (PSE) or that the EPHE has a very tight correlation with the Phisix, although the distribution of asset holdings by the iShares MSCI Philippines EPHE and the Phisix are different.

Over the past three days, or when financial markets trading in the Philippines has been suspended due to 2 days of floods and a public holiday, the accrued losses by the EPHE reached 6.6%.

Now if the law of one price holds, then will this be another headline hugging shocking day for the Phisix, déjà vu  June? Will the Phisix do a huge catch up (green ellipse) or gap filling with the EPHE?

Will the the Peso which closed at 43.64 last Friday also fall sharply today? (USD Peso quoted by Bloomberg, as of this writing, is at 43.97!)


Here are updates on our embattled neighbors. The Thai SETI has plunged to June lows and approaches the bear market level.

Indonesia’s IDDOW, which has already entered the bear market, has had an unimpressive relief rally yesterday. I was expecting the bounce somewhere 2-3%.
Malaysia's KLSE has been little changed yesterday.

Caveat emptor

No comments: