Sunday, March 12, 2017

Pumps and Dumps Intensify, SM’s Friday Dump: A Gambit To Stir Bulls Into Action? Or Signs of Backfiring of the Price Fixing Mechanism?

Pumps and Dumps Intensify, SM’s Friday Dump: A Gambit To Stir Bulls Into Action? Or Signs of Backfiring of the Price Fixing Mechanism?

Market Manipulations Run Amuck!

Manipulations in the Philippine Stock Exchange have now gone way beyond control!

 
The pricing system, or the economic function of the domestic exchange, is systematically being impaired by the fantastic egregious practice of serial pumps and dumps!

This week’s activities put into the spotlight the intensifying entropy of the PSE’s market functions.

Monday’s .92% gains was a product of synchronized pumps in ALL major sectors that went into operation immediately after lunch (upper leftmost). The PSEi was down by about .42% at lunch break and when the PM session opened, many heavy caps which belonged to all mainstream sectors simultaneously charged up to push the index to 7,300 (or up by about .7%)!  That was a vertical 1.12% pump in less than half an hour (more like 20 minutes)! Incredible!

And in the next three days the same pattern occurred: The PSEi had strong openings. Early gains fade.  And all three sessions ended in a splendid end session “mark the close” dumps!

Friday (March 10) was the most spectacular (lower middle pane). It was a day that moved beyond the daily template. The Phisix was weak throughout. The afternoon delight was curiously absent. Going to the close, the Phisix emaciated further. At the climax, down by the .95% at closing phase of the regular session, the Phisix suddenly crumbled to -2.04% when the runoff period opened. Such mark-the-close dump (80.2 points) accounted for 53.76% of the day’s deficit of 149.18 points (-2.04%)! Or the loss from market intervention-runoff phase was even more than or has exceeded the pre-market intervention losses of 68.98!

For the week, the PSEi was down 100.85 points or 1.39%. The week’s combined end-session dump at 123.75 points was even MORE than the noted cumulative weekly difference. This means end-session activities constituted the ENITRE trading outcome this week!

This isn’t a stock market anymore.

Dissecting SM’s Friday 9.24% Plunge; Pumps and Dumps Beyond SM  

SM’s stunning 9.24% crash contributed significantly to the Friday’s 2.04% retreat. Yet, astonishingly, 87.12% of the day’s loss emanated from mark-the-close!

Because SM represents the largest market cap issue, media and establishment experts immediately went on air to exorcise Friday’s action

From the Rappler:

“In less than an hour, SM Investments Corporation lost P73.479 billion worth of stock value, ahead of the main index rebalancing next week. 

Facts of the SM’s 9.24% plunge. 

As noted above, 87.12% of Friday’s 9.24% deficit happened during the 6 minute (floating) transition period or the market intervention phase to the runoff and to the close.

90.08% of SM’s peso total volume (Php 846,315,815) for the day was derived from this period.

33.07% (458) of SM’s total transactions (1,385) also occurred during that window. 

So media attempted to frame such event as an outcome of the market’s action. It was hardly about the market.

"We saw a market-on-close order from CLSA Limited [a Hongkong-based brokerage and investment firm], selling close to 500 million worth of SM. Given the size and nature of order, it looks like a foreign fund exiting," Luis Limlingan, managing director of Regina Capital Development Corporation, said in a mobile phone reply. 

CLSA was the most evident seller because it was the biggest (852,080 shares) among the end of the session, as well as, of the overall seller on Friday.

Broker selling came in the following order during the runoff phase: Col Financial, Philippine Equity Partners, Macquarie, Deutsche, Credit Suisse, CLSA, ATR, Deutsche (again), Philippine Equity Partners (again), UBS, Deutsche (again) and Astra. Broker sales came in different peso and share volumes.

There had been others ahead of CLSA. But given the volume, CLSA could have functioned as the key price setter.

Ironically, SM posted a Php 102,002,995 of net foreign buying.

Has the CLSA selling order emanated from a local account/s or from a local seller/s??? Could this have signified sales from an insider or related to insiders??? From an elite, perhaps? If so why???

The sharp drop caused SM Prime Holdings Incorporated to overtake SM Investments as the country's most valuable listed company in terms of market capitalization. 

The market cap share weightings, according to the PSE, as of March 10: SM 9.82%, ALI 8.03% and SMPH 7.93%. So unless the world has turned upside down where 7.83 is GREATER than 9.82, then the statement is utterly false. But no problem, fake news is the fad, anyway.

According to Corazon Guidote, senior vice-president for SM Investments' Investor Relations, there is no fundamental reason for the 9% drop in SM share price. 

Of course, investor relations officers are spokespeople for the firm. Their work is to promote the firm’s image through public relations. They are the last persons to admit to anything wrong.

Even worst, SM’s dive has been attributed to “rebalancing” based on the consensus expert opinions covered by three different newspapers including the above, plus Inquirer and Businessworld

This should be an example of reasoning from price changes.

There will indeed be a re-composition of the PSE members next week where EMP will be replaced by PGOLD. However, because X (PSEi re-composition), thus Y (price change because of rebalancing). The PSE reportshere and here doesn’t show that SM will be included in next week’s alteration. But it’s a convenient way to get one’s name published in the media for status signaling—just say something popular regardless of its relevance!

And again, this has hardly been about a normally functioning market.

If someone wanted out of SM, why not sell at Php 650s (or higher) from the start to the close of the regular session? The seller/s could have saved a lot of money. Think Php 50 per share. At 1,272,670 million shares transacted at Php 599/share, that translates to Php 63.63 million lost!  Yet the dump, why??? To provoke the bulls into an emotive denial reaction through panic buying sprees that could push the index up in the coming sessions?

As one would note, such “mark on close orders” has transformed into a tool for price fixing. Instead of attempting to attain optimum outcomes from transactions, the expressed desire to set prices at the close has not only led to amplified pricing inefficiencies and increased volatility but notably to higher transaction costs.

Yet for what purpose/s?

And because of end-session pumps and dumps, such time window has morphed into THE focal point of trading activities.

Yet for the mainstream, upside and downside spikes operate like a black hole—either they don’t exists or have been seen as having insignificant bearings on the markets

As proof, media’s focus on SM ignores ALL other PUMPS and DUMPS of Friday.

Yes, it wasn’t just SM.

JGS Summit was DUMPED 1.53%, MBT 1.5% and URC 1.12%! (lower rightmost pane)

To put into perspective, JGS closed -2.44% Friday. This means 62.7% of losses were due to Friday’s closing dump. And because JGS closed the week down 4.15%, Friday’s dump accounted for 36.87% of the week’s loss!

Yet how about the opposite: GTCAP was PUMPED by a shocking 3.96% and AEV 1.16%!

Here’s another frame: since GTCAP closed Friday up by 1.82%, this shows that such majestic 3.96% pump magically transformed the entire day’s 2.14% losses into 1.82% of glory!! How wonderful!

The alchemy of turning lead into gold happening here only in the Philippines!

The same phenomenon applies to GTCAP’s weekly outcome of 1.65%! ALL it took was 6 splendid transition minutes PLUS the runoff period to change the complexion of GTCAP’s outcome for the WEEK from bloody red into scintillating green!!!

Some normally functioning market eh?

As I have repeatedly been saying here, the PSE should just cut trading activities to one day in a week instead of 5. Additionally, trading time should also be limited to a mere 30 minutes. It seems pointless to exhaust vast manpower and resource logistics for pseudo daily “trading” activities when the pricing system has virtually ceased to exist!

Here are the Friday and the weekly performance for the rest: MBT Friday -3.69%, weekly -5.46%; URC -1.19%,-3.01% and AEV +1.03%, +1.16%. Apply the same logic to them

And yet why the ZERO comments on these (by media backed by the highly paid experts)????!!!  Survivorship bias? Or Selective perception?

Was the Dump a Setup for the Bulls? Or Signs of Backfiring from the Systematic Perversion of the Markets?

As noted above, because the focal point of trading activities has mainly shifted to the closing transitional phase, such has only magnified price volatility. And some players (outside of the circles of price setters) have only adapted to the changes in the current “trading” patterns at the PSE, or have recalibrated their activities to take advantage of such amplified price gyrations.

This suggests that excessive volatile price movements (in either direction) may or may not have relationship/s with what’s popularly attributed as “fundamentals”.

For instance, the big selling order from CLSA on SM may represent a request for an immediate significant withdrawal by a wealthy client (for personal or non-fundamental reasons) that may have prompted the designated fund manager to liquefy its most liquid holding (if the relationship is fiduciary). And to fulfil such request would likely induce a price ‘dump’ on security/ies sold.

Of course, “fundamentals” could also have been a factor. Although present and past performance may provide some hints, the pricing of corporate fundamentals is about the FUTURE. Perhaps new information unavailable yet to the public may have prompted such action. Yet mainstream has rushed to SM’s defense to write this off.

With SM’s subsidiaries BDO hitting a fresh summit and SMPH unchanged this week, it looks likely the former than the latter.

But then again SM has been priced dearly despite this year’s BSP-stimulus eps bump.

And since Friday’s seller appears to be local, such is the question of motive.

Again has the seller been an insider or related to the insider? Yet why the panic dump?

Does such represent a gambit to stir incensed bulls into action? Or has this signified a backfiring of the sustained pumps and dumps?

The coming days should give us an answer

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