June 8, 2005 The Scourge of Politics

The Phisix slumped by another 49.74 points or 2.48% for the second straight day bringing total losses to an incredulous 4.77%. Wow, seven consecutive sessions of an accrued 10.35% gains and suddenly 4.77% in losses, what volatility!

Today’s decline came on a heavy volume of 1.764 billion, which makes your market observer, question the sustainability of the recent rally.

First, while the critical support level of 1,950 was sustained at the closing, the Phisix traded below the said levels for most of the trading day.

Second, internal indicators recorded substantial deterioration; advance decline differentials swelled lopsidedly in favor of declining issues, while except for the oil sector (particularly on Philippine Overseas gains), all industry subsectors posted notable declines.

Lastly, the breadth of foreign activities was mixed, while the Phisix managed to post a positive net foreign buying of P 131.4 million, over the broader market the buying and selling activities was slightly in favor of the buyers. This is in great contrast to the previous days were buying activities governed. Although most heavyweights, Ayala Land, Globe, PLDT, Bank of the Philippine Islands and SM Prime still posted inflows.

What we are seeing lately is an insulated development, while most of the Asian bourses have been moving forward the Philippine bourse appears to have lagged. It could be noted that the accelerated offloading by the locals seemed to have affected the sentiment of foreign capital movements which apparently manifested reduced buying activities and revved up liquidations resulting to the mixed market breadth. Naturally when the market is driven by the locals then given our inveterate impulsiveness, the concerns over the political stability would be the premier culprit to the latest carnage.

For the moment, the facts have changed in favor of the bears! While a rally could not be ruled out given the sharp (almost 5%) decline in two days, I would rather see a smoothing out of the recent selling pressures before reopening my trading positions. It is better to be safe than sorry.

Over the longer period unless we have a major political upheaval, I remain bullish over the prospects of the Phisix.

That’s the way it looks from here.