The Philippine PSEi 30’s Push to 7,000: Low Volume Concentrated Pumps, Gaming the Index, and "Blow-Off Tops"

Be careful here – deteriorating internals matter. The condition of market internals is precisely the same hinge that – in market cycles across history – has separated overvalued markets that continued to advance from overvalued markets that collapsed through a trap door. That’s not to say that stocks must collapse immediately; market peaks are a process, not an event. That’s also not to say that market internals could not improve, which wouldn’t relieve extreme valuations, but could very well defer their immediate consequences—Dr. John P Hussman

 

In this issue

The PSEi 30’s Push to 7,000: Low Volume Concentrated Pumps, Gaming the Index, and "Blow-Off Tops"

I. PSEi 30’s Push to 7,000: Desperately Seeking A Bull Market

II. PSEi 30 Almost Reached 7,000 on Lethargic Volume—Despite Foreign Inflows

III. PSEi 30 7,000: Gaming the Index with End-Session Pumps and Dumps

IV. PSE: Concentrated and Organized Pumps on Lack of Retail Participation

V. PSEi 7,000: Price Pumps Concentrated on ICT and Banks

VI. PSEi 30’s Version of "Blow off Tops," the "Rising Wedge," and the US Tech’s "Mother" of All Bubbles!

The Philippine PSEi 30’s Push to 7,000: Low Volume Concentrated Pumps, Gaming the Index, and "Blow-Off Tops"

 

The thrust to PSEi 30 7,000 can be described as a low-volume, concentrated, and organized institutional pumping, with several "blow-off tops" in the making.

I. PSEi 30’s Push to 7,000: Desperately Seeking A Bull Market

 

The establishment has been seeking desperately to inflate a stock market bubble.

 

The thing is, inorganic rallies tend to devitalize market structure. Bear markets slide down the ladder of hope. 

 

Three critical factors depict the underlying health of the alleged renascence of the "bull market."

 

First.  Despite the winning streak in 7 of 8 weeks in 2024, sluggish volume remains the dominant feature of the PSE.  The depressed volume reinforces the long-term underlying trend.   At the same time, lackluster volume manifests unhealthy or divergent breadth or the distribution of gains and deficits.

 

Two.  End-session pumps and dumps continue to shape the PSEi's 30 daily outcomes.

 

Three.  The PSE continues to be plagued by the concentration of trading activities that have led to increasing market pricing contortions or mispricing. 

 

Figure 1

The PSEi 30 closed the week up .58%, extending its winning streak to 7 in the eight weeks of 2024, increasing YTD returns to 7.2%—one of Asia's leading performers. The Philippine bellwether ranked fifth in the region as of February 23rd. (Figure 1, topmost graph)

 

Buoyed by global financial easing, 15 of the region's 19 national indices closed higher in the week YTD, with an average return of 3.2%.

 

This week, the equity benchmarks of Japan (Nikkei 225) and Taiwan (Taiex) joined the group of national equities that has recently carved all-time highs (ATH) like supposedly "unstoppable" Pakistan’s K-100 and India’s Sensex.  Australia's AU200 seems next in line.

 

The once laggard Philippine equity markets now want to "keep up with the Joneses."

 

Let us deal with this in detail.

 

II. PSEi 30 Almost Reached 7,000 on Lethargic Volume—Despite Foreign Inflows

 

Surprisingly, inertia in mainboard volume has accompanied the push towards the PSEi 30 7,000. (Figure 1, middle window)

 

Yet, mainboard volume includes cross (or intra-broker) trades, which account for about 5 to 10+% of the total.

 

Rapidly rising prices should have enticed the public to redirect excess savings to the stock market, but instead, there has barely been growth in the daily (or even weekly) mainboard volume.

Figure 2

It seems no coincidence that lukewarm growth in universal-commercial bank loan growth and M2 savings have coincided with the general trend of the PSEi 30's recent bear market and the long-term slowdown in volume. (Figure 1, lowest chart; Figure 2, topmost graph)

 

Yet, could rising PSE eventually echo with improved bank loan growth and liquidity in the coming months?

 

And it seems odd that the increased foreign fund flows—while boosting the index levels—have barely contributed to the total turnover growth. (Figure 2, middle pane)

 

In 2024, the PSE reported Php 11.09 billion of fund inflows or about 5.3% of gross volume (as of February 23).   These inflows occurred in 7 of the eight weeks.  Foreign trades accounted for 49.23% of the total turnover.

 

Increased foreign trades are likely symptomatic of mounting leveraged carry trades on the backdrop of a weak Japanese yen, Chinese yuan, record low Malaysian ringgit, and others alongside global financial easing.   

 

But the irony is, why the seeming deficiency in the expansion in volume given the streak of foreign inflows?

 

Were these foreign funds—for real?  Or were these part of the international satellites or affiliates of PSE-listed firms owned by the elites?   

 

Why were local institutions selling their "appreciated" holdings of select PSEi 30 firms to these international trend-following institutions? 

 

Aside from volume and price levels, market breadth would have been more potent from these supplementary inflows.

 

III. PSEi 30 7,000: Gaming the Index with End-Session Pumps and Dumps

Two.  Gaming the PSEi 30.

 

As recently explained, if the PSE wanted to improve the efficiency of the capital markets and the economy, it would work to ensure an effective market pricing process.

 

Instead, not only do we get inert volume, but the PSEi 30 levels have been determined by relentless (pre-closing) pumps and dumps via increased volatility of share prices of select market cap heavyweights. 

 

These were the biggest daily (pump and dump) movers during the last two weeks. (Figure 2, lowest diagrams)

Figure 3

 

Although the weekly % share of the top 20 traded issues has risen in 2024, it has slowed recently.   Last week's 81% average (daily) remains significant despite the 2024 average of 83%, meaning some of the volume has spread to the broader market. (Figure 3, topmost pane)

 

IV. PSE: Concentrated and Organized Pumps on Lack of Retail Participation

 

Three.  Concentrated trading activities.

 

The good news is that though some trading activities have spilled over to the broader market, most of the trading actions remain in the hands of the top 20. 

 

Further evidence of this is the bounce in the weekly average of the daily traded issues, which recently hit a one-year high but partly retraced this week. (Figure 3, middle chart)

 

While this may partially signal the perking up of retail activities, the overall turnover and other market internals suggest otherwise. 

 

Instead, the rise in traded issues indicates active trading of institutional accounts spreading to the broader market.

 

Figure 4

 

Aside from the volume slack, the weekly averaged daily trades remain in the doldrums, as the output per trade has bounced in 2024, which suggests increased wholesale transactions (by institutions). (Figure 3, lowest graph: Figure 4, topmost graph)

 

Market breadth remains tilted towards decliners.  Oddly, weekly declining issues were ahead (5/8) in 2024.  The aggregate spread in 2024 was a negative 10 (favoring decliners)—despite the 7.2% increase in the PSEi 30! (Figure 4, middle window)

 

The paradox showcases the participation vacuum from retail activities.

 

Meanwhile, the top 10 (mostly wholesale or institutional) brokers continued to corner a substantial 57.42% of the mainboard volume in the week ending February 23, but slightly lower than the YTD weekly average of 59.32%. (Figure 4, lowest graph)

 

V. PSEi 7,000: Price Pumps Concentrated on ICT and Banks

 

Figure 5

 

The PSEi 30 continues to be driven by the top 5 market heavyweights as their share slipped from a record 48.5% to 48.3%, primarily from the partial pullback of the parabolic ICT.  (Figure 5, topmost chart)

 

Aside from ICT, institutional trades have been rotating towards banks. 

 

The market cap share of the banks—consisting of three PSEi 30 banks—hit an all-time high on February 23, as trades shifted from near-record BDO and BPI to MBT. (Figure 5, middle window)

 

Possibly echoing the Q4 2022, Q1 2023, and Q2 2023, Other Financial Corporations (OFC) were the primary buyers of bank shares.  Could they be today's buyers?

 

Ironically, the rotational manic bid on banks comes amidst slowing profit growth (2023) and a rising liquidity gap, which is unlikely to diminish substantially anytime soon.

 

And the panic bids have barely spilled over to the non-PSEi banks, with former members Security Bank (-.14% YTD) and Union Bank (-10.63% YTD) hardly recovering from their recent lows.

 

Such selective outperformance could mean attempts at bolstering the PSEi 30's facade.

 

By the way, BDO (9.27%) has supplanted SMPH (9.24%) as the second-largest free float market cap share in the PSEi 30 (February 23).

 

Once again, the distribution of the market cap share of the PSEi 30 resembles the power law, with seven of the thirty issues commanding a considerable heft. (Figure 5, lowest chart)

 

The market share of the top 10 issues accounted for 71.23% of the PSEi 30 (as of February 23).

 

Yes, the market cap share of other issues contributed to PSEi 30's recent rise (GTCAP, MONDE, BLOOM, and CNPF), but these played a minor role.

 

VI. PSEi 30’s Version of "Blow off Tops," the "Rising Wedge," and the US Tech’s "Mother" of All Bubbles!

Figure 6

The concentrated pumps have led to "parabolic" or extreme upside price actions.

 

Despite the PSEi 30 below 7,000, three issues broke records in 2024 (ICT, MER, and CNPF), while BDO and BPI are at a hair-breadth distance from all-time highs.  (Figure 6, topmost charts)

 

As a side note, even at extended overbought levels for some issues, there should have been a few entities who would take on "shorts." Ironically, there have been ZERO takers for the PSE's "short sell" program!  (I haven't seen any since the PSE began posting the daily short sale on its website)

 

The latest bidding shift to Metrobank, which spilled over to GTCAP, demonstrates the rotational pumps to buoy the PSEi 30.

 

Please observe that intense daily pumps have been directed at a few market cap heavyweights, accompanied by the complimentary push on the other top 10 issues to "power" the PSEi 30 higher—on low volume.

 

Like the artificial peak of 9,041.2 on January 26, 2018, driven by select elite issues (9 record highs that year with little broad market participation), concentrated and organized pumps eventually wear down. 

 

Though agnostic on chart patterns, the PSEi 30 bears the shape of a "rising wedge," which could mean an eventual reversal unless a new formation takes over.  

 

Aside from fundamentals, the recent developments in the PSE's internal structure hardly support a sustained upside momentum, which seems to support the "rising wedge" pattern.

 

Nonetheless, forcing an upsurge in the "markets for the big boys" hardly constitutes organic and spontaneously rooted market pricing, which worsening distortions translate to the mounting risk of a market bust.

 

After all, Philippine BVAL treasury yields continue to rise and have recently steepened across the curve.  Rising yields translate to losses in fixed-income security holdings.  It could heighten inflation risks and escalate liquidity and credit-related strains on an economy swimming in debt.  It could spur higher HTM holdings for banks. (Figure 6, middle pane)

 

In closing, this incredible US tech chart outperforming global tech, which has not only soared way past its long-term average but likely forged a "tailed-event," depicts the extent of intensifying leveraged hyper-speculative activities. (Figure 6, lowest graph)

 

Some would call this a "blow-off top."   

 

It also looks like the "Mother" of all bubbles.

 

Yet, when the US market sneezes, the world markets catch a cold.

The Philippine PSEi 30 Jumped 3.9% Courtesy of the "National Team," The "Powell Pivot:" A Christmas Gift to the Wall Street of the World?

 

This Power Elite directly employs several millions of the country´s working force in its factories, offices and stores, controls many millions more by lending them the money to buy its products, and, through its ownership of the media of mass communication, influences the thoughts, the feelings and the actions of virtually everybody. To parody the words of W. Churchill, never have so many been manipulated so much by few--Aldous Huxley, Brave New World Revisited 

 

In this short but chart-rich issue: 

The Philippine PSEi 30 Jumped 3.9% Courtesy of the "National Team," The "Powell Pivot:" A Christmas Gift to the Wall Street of the World? 

I. The "Powell Pivot:" A Christmas Gift to the Wall Street of the World?  

II. Market Euphoria Spillovers to Asian Currencies and Bonds 

III. Buoyant Asian Pacific Equities led by the Philippines, Australia, Hong Kong and Record-Breaking India  

IV. Four Days of Pumps (and a Dump); The Fabulous Friday’s Ayala Corp Pump 

V. Pumps Concentrated on Heavyweight Holding Firms 

VI. Retail Sidelined Anew: Lethargic Breadth and Anemic Volume  

VII. Foreign Trades Agnostic to the Pumps 

VIII. Trade Volume Concentration Benefiting Heavy Caps 

IX. Broker Concentration: Symptoms of the "National Team" in Action 

X. PSEi 30’s Weekly 3.9% Return Courtesy of the Philippine "National Team?" 

 

The Philippine PSEi 30 Jumped 3.9% Courtesy of the "National Team,"  The "Powell Pivot:" A Christmas Gift to the Wall Street of the World?

Was the "National Team" the principal force behind the PSEi 30's weekly gain of 3.9%?

 

I. The "Powell Pivot:" A Christmas Gift to the Wall Street of the World? 

 

Figure 1 

 

The ZeroHedge wrote (December 16, 2023): Powell "pivoted" and everything exploded (bonds, stocks, rate-cut expectations, gold, oil, and crypto) as the dollar dumped…And world equity and bond markets added $4 trillion this week alone, and are up over $15 trillion since the November FOMC...(Figure 1, topmost window, bold original) 

 

Global financial conditions have been dramatically easing.  

 

Many Emerging Markets central banks have gone ahead of their developed market peers in slashing rates. Global financial markets have front-run the Fed's change in policy stance over the past weeks. Gold recently set a new price high. 

 

And last week's Powell Pivot or the US Federal Reserve Chair Jerome Powell's drift to a dovish stance also whet their insatiable speculative appetites.  

 

The "Powell Pivot" seemed like a Christmas gift to the world's Wall Street.  

 

II. Market Euphoria Spillovers to Asian Currencies and Bonds 

 

The global euphoria spilled over to Asia.  

 

The US dollar index $DXY fell by 1.34% this week.   

 

Except for the Philippine peso (+.64%) and the Malaysian ringgit (+.11%), most Emerging Asian currencies rose against the USD dollar. (Figure 1, middle graph) 

 

Reversing last week's gains, the USD dropped most against the Thai baht (-1.84%).  

 

Asian bonds rallied feverishly. 10-year Asian yields fell unanimously, or prices rallied. (Figure 1, lowest chart) South Korea, Hong Kong, and Singapore treasuries rallied the most.  

 

III. Buoyant Asian Pacific Equities led by the Philippines, Australia, Hong Kong and Record-Breaking India  

Figure 2 

Asian-Pacific equity benchmarks manifested this intensifying speculative mania. (Figure 2, topmost chart) 

 

Fourteen of 19 national bellwethers closed higher with an average of 1% WoW return.  

 

The Philippines' PSEi 30 bested its regional contemporaries, followed by Australia's All Ordinaries, Hong Kong's Hang Seng, and India's Sensex--which has been on a back-to-back record-breaking streak. 

 

Yet, the PSEi 30's blazing weekly return of 3.91% was the largest since July 14 this year. In the context of the PSEi 30's "full" market capitalization, the "Powell Pivot" granted its member-majority owners an impressive Php 287.4 billion bonus! 

 

But how robust was the rally? Could this mean the return of the bull market, as many in the establishment predict? 

 

IV. Four Days of Pumps (and a Dump); The Fabulous Friday’s Ayala Corp Pump 

 

First. Pumps and Dumps. 35% of the PSEi 30's weekly return came from net- aggregate pumps. (Figure 2, middle charts) 

 

Four days of massive pre-closing pumps and dumps have magnified the end-session volatility of the PSEi 30.  

 

One of the most remarkable events was Friday's (December 15) stunning gargantuan pump on Ayala Corp [PSE: AC]. [Figure 2, lowest pane] 

 

AC was last quoted up by 2.8% at the start of the pre-close floating phase. At the runoff, AC's gain spiraled to 7.93%! So, the index managers used the five-minute float to control and push AC's upside that fed into the index with an additional .4% gain from .68% to 1.06%. 

 

V. Pumps Concentrated on Heavyweight Holding Firms 

 

Second. Pumps on Holding Firms. 

Figure 3 

 

The top 10 issues were the primary beneficiaries of the week's gains. Essentially, the three biggest holdings firms—SM Investments (+9.7%), AC (+14.8%), and JG Summit (+8.5%)—posted the largest advances. (topmost graph) 

 

Although a majority (19/30) of the PSEi breadth leaned positive, the benchwarmers barely participated in this upside.  

 

Three. Pumps boosted the free-float share of the heavy caps.  

 

Pumps centered on these holding firms (SM, AC, and JGS) reflected the spike of their free float share of the PSEi 30.  (Figure 3, middle pane) 

 

In effect, together with the biggest holding firms, the top 10 issues closed the week with a remarkable 70.8% share of the free float market cap.  (Figure 3, lowest diagram) 

 

Again, a few elite issues determined the fate of the PSEi 30! 

 

VI. Retail Sidelined Anew: Lethargic Breadth and Anemic Volume  

 

Four. Breadth and volume reflected the lack of retail participation. 

Figure 4 

The aggregate weekly advancers led decliners by only 11 despite the PSEi 30 sizeable gains. The average daily traded issues barely bounced from the 2014 lows! (Figure 4, topmost graph) 

 

Though mainboard volume improved (up 42.8% WoW), helped by cross-trades, it remained below the week of December 1st level.  Besides, volume remained within its downtrend channel. (Figure 4, middle window) 

 

VII. Foreign Trades Agnostic to the Pumps 

 

Five. Little help from foreign savings.  

 

As stated here, shrinking volume is a symptom of declining savings.  

 

In view of this, savings or credit should improve, or the PSE would have to rely on fickle flows from foreign savings. Net weekly flow posted a negative Php 74 million as Friday's Php 448 million of inflows was short of offsetting the outflows of the three sessions.  

 

Importantly, while the foreign share of mainboard volume continues to rise, this comes amidst the backdrop of declining volume. And since foreign money has been net sellers, they have countered actions of the local version of the "national team." (Figure 4, lowest chart) 

Figure 5 

The BSP's Foreign Portfolio data showed a net outflow of USD 714 million from January to October 2023. (Figure 5, topmost window) 

 

VIII. Trade Volume Concentration Benefiting Heavy Caps 

 

Six. Heavy caps signify the center of the main board volume activities.  

 

The latest gains by the heavyweights resonate with the market liquidity or volume.  

 

For instance, the volume share of the three largest free-float market caps, represented by the Sy group, has been rising in tandem with the PSEi 30. (Figure 5, middle diagram)  

 

The top 20% share of the mainboard volume has also climbed alongside the PSEi 30, which marks an increasing concentration of trading activities towards the heavyweights.   (Figure 5, lowest graph) 

Again, the concentration of trade volume and price actions on the same issues are signs of coordinated activities.

 

IX. Broker Concentration: Symptoms of the "National Team" in Action 

 

Last but not least is the increasing broker concentration.  

 

Figure 6 

 

The top 10 brokers had a 61% average share of the mainboard volume this week. Its share has been on an uptrend as the PSEi 30 tumbled. (Figure 6, upper window)

  

Alternatively, the other (114) brokers have been fighting for the crumbs.   

 

The dominant majority of these elite brokers are institutional (caters to banks, non-bank finances, and other non-financial institutions), which means domestic and foreign institutional (private or public) clients are likely the source of the bulk of transactions.  

 

Bank lending to the financial industry has coincided with the gyrations of the PSEi 30.  Could some of it represent margin trades or trades by the industry—funded with leverage?  Along with the PSEi 30, bank lending growth to the finance industry has declined throughout 2023. (Figure 6, lower graph)  

Has the slowdown in volume also reflected the reduced participation by the financial industry?

As retail participation dissipates, these elite institutions represent the marginal price setters. Some of them could be the likely local version of the "national team." 

 

Could the Maharlika Investment Fund have been part of it?

Unfortunately, mispricing from such artificial "pretend and extend" activities distorts capital valuations, resulting in deeper resource misallocation that leads to more capital consumption. Therefore, aside from eroding savings, small brokers may carry the yoke of the increased activities by the "national team."  

 

In any event, Hong Kong's bear market has caused a wave of (small- and medium-scale) brokerage layoffs and closures.  

 

Sadly, unless volume improves, Hong Kong's predicament represents a likely template for the Philippines. It pains me to say that the bear market could strike hard on the marginal brokers of our industry. 

 

X. PSEi 30’s Weekly 3.9% Return Courtesy of the Philippine "National Team?"

 

In the end, trades, price activities, volume, and broker activities, which the market breadth reflected, showcased a likely methodical and coordinated tactic designed to embellish the PSEi 30 by the "National Team," rationalized and piggybacked on the "Powell Pivot."  

 

Though seasonal factors may help the interim momentum, it remains a bear market rally or a "bull trap" considering the increased fragility of the economic and financial structure. 

The Chinese government has repeatedly attempted to quash their bear market through the "national team" and other measures. Authorities have even warned the financial industry from making bearish calls. Bankers have even been banned from displaying their wealth! 

Still, China's equity benchmarks continue to find a floor.