The Phisix closed up by a marginal +.12% to lift year to date gains to 5.77%.
The week’s activities appear fixated mainly to buoy the index. Within the basket, advancers trampled decliners by a ratio of 3 to 1 even as the broader markets went in favor of the decliners by a modest margin of 46.
Only one sector suffered a decline, the largest, the holding sector, which accounted for 39% of the PSEi. That’s mainly because the 4 majors suffered deficits for the week, namely, SM (-3.03%), AC (-.25%), JGS (-3.36%) and AEV (-1.42%).
Nevertheless, gains by the rest neutralized losses by the holding sector.
Despite the broad based advance within the PSEi 30, gains had apparently been dispersed.
This continues to exhibit of the ongoing intense volatility or price instability underneath the seemingly calm surface.
And these sharp price gyrations are related to operations to pump or bolster the index.
The facelifting operations via price fixing process on the PSEi operate virtually untrammeled.
For the week, a remarkable 70.21 points came about just to push the headline index higher. Such accounted for .97% of last week’s close! Remember, the PSEi was up by only .12%. Thus, 70.21 divided by 8.51 (.12%) equates to 8.25 or 8.25x the gains represented by the topline. Such also means without these 3 day price fixing at the close the Phisix would have been a lot lower.
Friday’s .24% mitigated decline should be an example. At pre-market intervention phase, the PSEi was down by a hefty .59%. However, a massive pump on ALI (+2.25%) and TEL (+1.5%) would have turned the headline index into positive had SM not suffered a dump (-.74%). Nevertheless, the pump reduced the pre-runoff losses by more than half!
The numbers involved in manipulations have been breathtaking!
ALI closed the week up 3.27%. This means that the interval between the pre-market intervention and the closing bell which pushed ALI by +2.25% last Friday delivered 68.81% of the week’s gains!
TEL closed up 2.7% for the week. This means Friday’s price fixing translated to 55.5% share of the gains for the week!
This shows that 5 hrs of trading in 5 days are really a waste of time. That’s because the gist of the gains or losses has been derived from last minute pump (and dumps)! Worst, a TGIF pump!
Yet, unknown to most, the massive volatility being exhibited by prices of PSEi issues are manifestations of the mountain of distortions generated by the continued manipulation in support of the index. It’s a concrete sign of pricing disorder. The market is being systematically deformed.
And these direct manipulations piggyback on the indirect manipulations by the BSP channeled through negative interest rates.
If the Philippine stock markets stand on solid grounds as alleged by the mainstream then all these would not be necessary. Res ipsa loquitur
Aside from these, I have been pointing out of the emergence of multiple accounts of BW-SSO price actions at the PSE.
Arthaland Corporation (ALCO) should be a prime candidate (lower window). ALCO had delivered a stunning 34.78% gain for the week, a shocking 387.5% from the start of the year and staggering 738.1% over the past 52 weeks. ALCO’s price looks like an ICBM that has just been launched from the missile base.
These growing incidences of vertical price movements have not been isolated from the progressing entropic developments at the PSEi as a result of massive manipulations.
Most will be rationalized from a demand shock—new information that alludes to G-R-O-W-T-H regardless of the validity of its premises.
In reality, both market manipulation and vertical prices are symptoms of the mortal sins of unabated credit expansion or currency debasement.
To quote again John Maynard Keynes: As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.
And also the great Henry Hazlitt: Like every other tax, inflation acts to determine the individual and business policies we are all forced to follow. It discourages all prudence and thrift. It encourages squandering, gambling, reckless waste of all kinds. It often makes it more profitable to speculate than to produce
Understand first that vertical price spirals were conspicuous in several PSEi issues during the 33% 6 month January to July 2016 meltup. These price spikes led to numerous record highs. Unfortunately, such gains failed to hold, hence most came crumbling down. Some were even afflicted by Newton’s Law.
However, the plunge protection team came into action. They saved the Phisix from another the bear market test through a low volume 2 week meltup, viz from end of the week December through New Year week.
So while these pumps helped buoy most PSEi issues, it wasn’t enough to lift the index past 7,400.
What it did instead was to spawn spillovers to select second and third tier issues which pushed some issues like ALCO to the stratosphere.
Prices don’t operate from a vacuum
The PSEi’s % yoy and monthly nominal performance has largely tracked or undulated along with the rate of credit growth of the financial intermediation sector, with a little time lag, since 2014.
That’s with the exception of the last quarter of 2016 when the PSEi plunged even as financial sector credit growth expanded at an accelerating pace: 11.63% October, 13.34% November and 15.63% December
The huge amount of credit being generated by the financial intermediation (finance and insurance) sector had to find an outlet.
And such could be the most likely reason for the 9 day buying splurge at the PSEi. And such could also account for the price spikes that have occurred in many speculative issues.
So the “mark the close” could likely fall under the domain of these participants.
Given the furious clip of general credit growth that continues to put pressure on the peso and the two measures of inflation (CPI climbed again to 2.7% in January while GRPI soared to 4.3% last December the gap continues to widen), the scale of such credit growth will likely hit a wall very soon.
And it would be interesting to see how these numerous varieties of modern day BW-SSO bubble strains would perform under such circumstances.
Here is a guess: Newton’s Law will prevail.
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