June 9, 2005 Market Carnage Continues as Political Drama Unfolds

June 9, 2005 Market Carnage Continues as Political Drama Unfolds

As the assault on the probity of the incumbent government accelerates, the Philippine Stock Market and the Peso has taken most of the brunt of the prevailing political anxieties besetting the nation.

It is quite obvious to anyone with common sense that the gamut of controversies thrown by the political opposition is part of a destabilization ploy aimed to unseat the present government.

The objective here is to present the incumbent as similarly tainted in terms of corruption relative to the administration it previously deposed and as an apocryphal leadership whose electoral victory was allegedly obtained by fraud.

By virtue of media mileage, these actions are seen by your analyst as flagrant attempts to undermine the confidence of the present leadership so as to gain public support for any intended unconstitutional acts that it may opt undertake to achieve its objectives and also to provoke dissension among the military hierarchy from which a possible junta supportive of their cause may emerge.

Naturally when the foundations of the country’s political structure is put into doubt, investor confidence will be eroded as seen by the abrupt turnaround by the Phisix which is presently down by 7.5% in just three days!! This according to Bloomberg is the biggest drop since October 10, 2001, just right after several earth shaking local and international events as the EDSA II and III and the September 11 tragedy.

Now that the Phisix has broken practically all support levels except for the base from which it took off about 10 days ago, i.e. 1,855 to 1,858, this means that the critical support would be at 1,818 where after any successful encroachment would signify an ‘All hell break loose’ scenario.

Yes, as mentioned yesterday market internals continue to manifest marked deterioration. Today’s net foreign buying P 78.639 million was actually due to the special block sales of PLDT shares, otherwise, it would have recorded a net selling of about P 48 million!! Over the broader market, foreign money was also seen as net sellers. This obviously has been due to the panic stricken mood by local investors which appears to have influenced overseas capital to be similarly hesitant and antsy with the domestic market.

For the moment I would NOT recommend any ‘buying on dips’ as the Phisix has shown substantial volume on declines, which is a very bad signal! As much as the government has been destabilized so has been the Phisix! Again we cannot discount any forthcoming rally considering the sharp fall in the past 3 days, however such rallies maybe used as EXITING INSTEAD OF BUYING opportunities if NOT supported by EQUALLY LARGE volume, as seen during the recent selloffs.

Remember prudence is a better part of valor!