ASEAN Meltdown: Finally a Relief Rally

Finally a breather following a torrent of heavy losses.

The badly mauled ASEAN equity markets pulled up a substantial comeback today.

Indonesia’s JCI jumped 1.92%.

Thailand’s SETI got a lift from the bulls, the SETI was up 1.31%

Malaysia KLCE was higher by 1.04%

Singapore’s STI climbed 1.13%

Meanwhile the biggest gainer today has been the Philippine equity market as the local benchmark, the Phisix, soared by 3.59% (chart from technistock.net)

But the gains of the Phisix has conspicuously fallen short from a similar reactionary oversold bounce (from a crash).

When the first bear market struck late June (see red ellipse), the reactionary bounce saw the Phisix boom by 5.7% as noted here.

Today, there had been an apparent attempt to push the Phisix beyond the 4% threshold gains, but foreign sellers foiled the local bulls during the last minute. Today’s 3.59% advance pales in comparison with June 26th 5.7% oversold bounce.

And also in contrast to last June’s dead cat’s bounce, foreigners bought into the rebound. Today, foreigners sold some Php 1.542 billion (US $34.45 million @ 44.75 today’s PDEX closing).

Also market breadth has been relatively unimpressive, the difference between the advance-decline spread was only 79 today compared to June 26th’s 112.

However trading volume has almost been similar at Php 6.9 billion

In short, all these suggests of a fading conviction from local bulls to pull on the same feat similar to June. Such lack of conviction could mean that the relief rally phase may be shorter and less powerful than the earlier episode.

Nevertheless, today's relief rally also covered ASEAN currencies.

Based on the PDEX the Philippine peso closed at 44.75 today or at the same level as of yesterday.

But based on Bloomberg’s spot market quotes, the Peso trades at 44.65 along with the rebounding Indonesian rupiah, Malaysian ringgit, and the Singapore dollar.

No trend goes in a straight line. And as previously noted:

“Denial” rallies are typical traits of bear market cycles. They have often been fierce but vary in degree. Eventually relief rallies succumb to bear market forces.

Bottom line: the fate of ASEAN markets ultimately depends on comport of the international bond markets, particularly the US 10 year note. Current developments in global bonds barely indicates of reduced volatility.

Use the relief rally to reduce risk position. 

Caveat emptor.