Wednesday, May 27, 2015

Phisix: Why the PRE-1Q 2015 GDP Announcement Stock Market Dumps?

It’s supposed to GDP week. In fact, tomorrow is GDP day!
 
By GDP week, I mean the domestic stock market should at least be evincing signs of buoyancy in the expectation of another blowout in statistical G-R-O-W-T-H.

It’s true that I have pointed out that several indicators, namely market breadth, vastly diminishing volume, activities concentrated to a limited issues and chart formation, has conspired to exhibit the material deterioration in the foundations of Philippine stocks. 
 
But this should have been a medium to long term process. I hardly expected a swift deterioration, most especially during GDP week.

 
You see, if the consensus expects a GDP boom, then at least the headline index should echo such expectations even when the general market maybe in doubt (as had been the case in the past).
 
Yet we seem to be witnessing a sharply contrasting development from the behavior of the stock market going to the pre-GDP announcement in January (4Q 2014) vis-à-vis today (1Q 2015). 
 
Four days until the actual GDP 4Q 2014 January 29 announcement—where the statistical GDP showed a 6.9% G-R-O-W-T-H, a number which for me constitutes nothing but a statistical embellishment—the Phisix was pumped by 3.3%.

In sharp contrast, an accumulated a 3.59% DUMP has been the result of four days prior to tomorrow's announcement!

Why???!!!

(as a side note: index managers has failed to stop the fulfillment of head and shoulder’s pattern)

I know the mainstream will rationalize this as being US dollar influenced or reverberations from last night’s US stock market’s 1+% decline.
 
While the US dollar may be factor, it is likely an aggravating factor rather than the main driver. 
In the last four days the USD peso (USDPHP) rose by only a  .44%, specifically from 44.69 to 44.49. During the four days going to the 1Q pre-GDP announcement the USD peso fell by .5%.

Today, the USDPHP even fell by a margin to 44.69 from last night’s 44.705.
 

Also today Asian currencies based on the latest Bloomberg quote has had mixed showing. This should demonstrate of the minor effects from currency influences on domestic stock market performance.
 
Next, “experts” will justify global actions as contributing current events. This is the available bias—to look for an event or events that is/are easily recalled, which gets associated with market actions.
 
Again this likely serves as a superficial factor than the main cause.
 
While it is true that most (ex Japan China) Asian markets endured losses today, as shown in the Bloomberg table, some markets like India (SENSEX), Taiwan and even Thailand’s SET defied the sentiment to post marginal gains. Besides losses were relative: the biggest losers had been the Philippines, Korea and Indonesia.
 
Importantly, in the recent past (from 4Q 2014 until lately) every big selloff at Wall Street had been met by 'panic buying day'. Panic buying days are days where index managers bolster the index by starting their panic buying pumps as early as half an hour or an hour from the opening bell. The objective seem as to create an impression of 'decoupling' or less susceptibility by local stocks on foreign developments. Here are some examples

Curiously today, those early pumps were apparently absent.

The index managers were not totally absent, though


They embarked on their regular tactical post lunch “afternoon delight” pump right on schedule. But ostensibly again, they were repulsed!
 
Today’s selloff came with a relatively big volume of Php 10 billion with Php 1.4 of block sales to tally Php 11.449 billion. Selling had been broadbased: ALL sectoral indices had been down by at least 1% and decliners trounced advancers by 132 to 54 or a ratio of 2.44 to 1!

Foreigners were net sellers to the tune of Php 1.274 billion (PSE Quote)


Index managers were particularly active yesterday.

The major benchmark fell by only .43% but this masks the actions in the general market.
 
The index loss was moderate because of a massive 'marking the close' pump which essentially erased an astounding 51% of yesterday’s losses at the last minute! 


Index managers secured the containment of losses from 4 sectors, mainly from the property sector.
 
Last minute pumps narrowed the PSEi losses from the fantastic interventions on ALI and SM.
 
A stunning 1.7% last minute push on ALI's stock prices expunged losses. The major property firm even managed to close the session significantly up!

Meanwhile SM’s 1% pump also help halved the index losses for the day.

As a side note, given today’s heavy losses in ALI, yesterday’s manipulators must be bleeding.

Even more spectacular, underneath the modest decline in the headline index, market breadth was remarkably bearish! Losers walloped gainers 161 to 31 or by shocking margin of 5.19 losers for every gainer!!! (PSE Quote)
 
In other words, total losses could have been more had it not been for the Phisix pump.
 
If the markets continue to decline, lots and lots of resources by index managers will not only get tied up to stocks at very lofty levels, they will profusely hemorrhage!  

Yet, why all the seeming panic selling on pre-GDP day?  

Has it been because government insiders may have tipped off tomorrow’s numbers to the connected few (since last week)? 
 
Will tomorrow’s numbers be vastly lower than mainstream expectations?
 
(all above chart courtesy of colfinancial)
 
Oh by the way, I have been saying that interventions at the Philippine treasury markets have caused a whack a mole effect—interventions in one maturity have led to yield surges elsewhere.
 
Today should be a great example.


Yesterday, market manipulators pumped 1 month bills in order to contain its yield from running berserk.
 
But, but, but…

…they forgot about the 6 month contemporary!


Well there it is, the yield of 6 month bill at an amazing 3 year highs! (investing.com)

More volatility, more yield curve flattening and more signs of short term funding pressures!

So for the Phisix, will tomorrow be a (post-sell the rumor) buy on news??? 

Should be very interesting.

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