In the furious race to attain a new record, apparently, the USD-Peso beat the Phisix for the leadership.
Here’s a short note on the activities of the Philippine Stock Exchange last week.
The Phisix or the headline index racked up a .37% gain this week. Since last Friday signified the end of the month session, the results of that day produced a nearly unchanged (or specifically +.08%) performance month on month. For the first semester, the Phisix registered gains of 14.66%, the fourth the largest since 2009.
Yet the real story behind the positive weekly and monthly changes has been due to the fabulous buzzer-beating shot made by the stock market magicians last Friday.
Like typical afternoon delight operations, post lunch, the Phisix had synchronically and mechanically been bid up from moderately negative (at mid-day) to an unchanged day-on-day status (by the end of the regular session)
However, when the runoff period opened, the Phisix zoomed and closed up by a staggering .71%!!!
Yes, a shocking NINETY PERCENT (99.3%) of the day’s output was due to marking the close (mark on close orders)!!!
The massive pumping also meant that Friday’s final 16 minutes essentially determined the outcome for the week and for the month!!!
Heck, why the pretense of extending trading activities when the last SIX minutes or the interval between the close of the regular sessions ends up shaping the critical outcomes???!!!
Since the Phisix represents a composite of listed securities which are subdivided into sectors, the collaborative-coordinated pumps can be seen affecting all mainstream sectors (upper right)!
And issues above mainly from the top 15 biggest market caps were concertedly pushed by strikingly huge margins to bring about the day’s performance.
Here are examples of the awesome turnaround on the June 30 session brought about by the magic of mark-on-close orders!
56% of BDO’s 2.48% gains!
100% of SMPH’s .76% gains!
91.95% of SM’s 1.65%!
79.82% of ALI’s 1.92%!
78.26% of AEV’s .56%!
MBT was down .93% then suddenly was up .81%!
TEL was down .95% then suddenly was down by a mere .11%!
All for the seeming purpose of “levitating” the index to a new record.
Stunning, but this supposedly is called a stock market!
The general belief is that such activities come without costs or adverse consequences. Yet since the markets fundamentally function as a balancing mechanism for demand and for supply, I’m sorry to say that there will be a nasty price to pay for such rampant and unfettered perversions or abuses of the marketplace.
The struggle to keep the Phisix 7,800 alive has once again focused mainly on the top 5 to the top 10 biggest market caps which sport a combined weighting of (top 5) 40.57% to (top 10) 66.29% (as of June 30)! And it is on these issues where the concentration of the remarkable pumps based on “mark on close orders” has occurred!
The distribution of PERs (based on 2016 eps) should be telling enough to reveal the scope of skewed pumping through the years. As of Friday, the average PER was at 20.07 while the market cap weighted PER is at 24.82!
Yet, an expensive stock market hardly signifies signs of G-R-O-W-T-H! Or stocks won’t be expensive if earnings performance has kept pace with the returns. The above numbers show why this has not been the case. Instead, such are signs of the persistence of reckless pumping and (leverage financed) excessive speculations (and manipulations).
Also, there have been many issues experiencing vertical BW-SSO price actions. Such are manifestations of the prevalence of inordinate volatility that have consumed price activities of listed firms which affect PSEi issues too. And the Phisix can hardly seem to get by a day without big intraday swings.
These are signs of mounting instability and not of a bull market.
For all measures taken to desperately reach a new record, a new record was, in fact, attained last week!
The average daily traded issues matched or even surpassed by a margin the highs reached last July 22, 2016 (PSEi 8,025) [see upper pane].
A paradox seems in place: new highs had been attained even when the broad market was largely sold (461 decliners versus 349 advancers for a spread of 112) and the Phisix remained below 8,000.
Either a divergence has been occurring, or that rotation has been taking place. It could be both.
By divergence, I refer to selling on broader market vis-à-vis selective bidding on the PSEi
By rotation, I mean selling the broader market to finance bid positions at core PSEi issues.
In either case, it’s a sign of a narrowing dispersion of advancing issues relative to declining issues.
The advance-decline spread appears to have already been signaling such internal decay. The Phisix has risen to 8,000 on the backdrop of a materially weakening broad market performance.
The same pattern emerged last year. The race to 8,100 from January to July 2016 likewise emerged as advance-decline differentials moved against the push to 8,100. Eventually, sellers prevailed. And it took another massive set of coordinated pumping to spring the Phisix out of the clutches of the bears at the year’s end.
Moreover, given that the PSE has already begun to revere the current upside, the PSE jinx comes into motion.
As I have previously explained, since 2013, every time the PSE vociferously worshiped or glorified bubble highs, serial meltdowns were the ramifications. At least in 2013 and in 2015 fresh highs were attained. In the 2016 and the present episodes, the Phisix has yet to set a new milestone, but the PSE has already uncorked the champagnes for (premature) celebrations. (See Phisix 7,900: Overvalued, Overbought, Euphoric and the “Mark on Chaos” June 18, 2017)
Such adorations have not only signified signs of euphoria but likewise symptoms of one-way trades backed by heavy convictions of industry participants. These entrenched beliefs have been expressed in the numerous accounts of vertical prices.
Finally, I am NOT here to say that a new record will not be reached. Instead, for whatever heights achieved from the current cycle, like its 2013, 2015 and 2016, the foundations behind these are simply UNSUSTAINABLE. Having said so, these mini-booms are bound to REVERSE.
And at the end of the SECULAR cycle, like its two forebears (70s and the 90s), instead of fresh highs the PSEi will hit multi-year lows.
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