July 16 Friday Philippine Stock Market Review

July 16 Friday Philippine Stock Market Review
 
After drifting lower for most of the day the Philippine benchmark, the Phisix eked out a paltry 1.25 points or .08% gain to break its 6th consecutive sessions of decline on very light volume.  Peso Volume turnover amounted to a puny P 305.889 million (US $ 5.42 million).  Local investors dominated trading activities for the third straight session, and accounted for 53.64% share of the aggregate output.
 
Among the index heavyweights, Globe Telecoms inched higher by .62% together with Bank of the Philippine Islands up by 1.2% against a sole decliner, SM Prime down 1.66%, which led to the miniscule rise of the key index.  Ayala Land, San Miguel local and foreign shares, Metrobank, Ayala Corp and PLDT were unchanged.
 
Because local investors dominated trading activities while foreign investors either sold out (net outflow totaled P 8.395 million) or stayed on sidelines, four of the 9 heavyweights were off the list of the 20 most traded issues, a rare circumstance.  And in lieu of them were companies from the mining sector and other second tier issues.  
 
The Mining Index, after 4 straight sessions of decline, soared by 9.89% to command the day’s biggest advance on frenetic buying on index lightweights such as Manila Mining local (skyrocketed by 44.4%) and foreign shares (flew by 36.84%), Atlas Mining (surged 20%) and Abra Mining (rose 12.5%).  Index heavyweights Philex Mining climbed a modest 6.25% for its local shares while its foreign shares accounted for a moderate growth of 5.71% while the largest market cap Lepanto shares plodded along up 2.6% for the local shares and 2.04% for the B or foreign shares.  Apex Mining was also today’s top winner with a frothy 50% advance for its ‘A’ shares while its foreign shares was likewise higher by a bubbly 31.81%.
 
The Prudent Investor is unaware of the reason that prompted the buying frenzy although one can expect ‘stories’ on the press most likely about ‘deals’ to rehabilitate the mining operations, or foreign financing/buyouts or reactivation or reopening of its mining pits for commercial operations.  Cash generating mining issues were largely discarded in place of ‘deal-based speculations’, these highly reflect on the quality of the mindset of the typical local investor.
 
The Oil index, another extractive industry, posted a hefty advance of 8.27%, the second best growth among the industry indices, mostly from the rebound of the index heavyweight Oriental Petroleum whose local and foreign shares were both up 13.33%.  After five sessions of sharp declines today’s uptick could mostly likely be construed as a technical rebound.
 
As we previously have noted, the number of issues traded exceeding the 100 threshold represents bullishness from local investors.  Market sentiment despite the slight increase of the Phisix, showed dominant optimistic local punters, as advancers thrashed decliners 50 to 27.  Industry indices were mostly up except for the Phi-All index, weighed down by the decline of Manulife the index’s largest component, and the Property Index. 
 
The light volume, the broadening breadth, the declining foreign activities, and the stonewalling of the index heavyweights, as well as its diminishing trade activities manifest that local investors, whose underlying psychological framework is bullish, have been rotating the buying binge across the board while eluding the heavyweights, which would require substantial volume to boost up.  In other words, the fundamentals behind today’s market activities vastly differ from the trading environment of last year.  Foreign investors were the growth locomotive responsible for the substantial climb of the Phisix in 2003, this was largely brought about by the accommodative global monetary policies adopted by the world’s central banks.  In today’s tightening climate, foreign investors have scaled down on their activities prompting the locals to pursue with its newfound optimism arising from the recently concluded elections.  But unfortunately, due to the shallow breadth of local investors one can expect trading activities to be limited to the second and third tier issues.  Hence, a different strategy or approach is required.  More on this in our weekly newsletter.