Why The Phisix is the Third Most Expensive Bourse in the World? One Answer: Financial Alchemy
The Philippine Phisix has acquired the distinction of becoming the THIRD most expensive national bourse in the world! Yes, THIRD – after the US and Belgium and trailed by India and Indonesia.
Recently published at an international media, such international “prestige” was derived from tally conducted by a financial institution, predicated on CAPE and PER metrics. [Chart of the Day: The Top 5 Most Expensive Stock Markets in the World July 19, 2017]
Nature abhors a vacuum. The extravagance in valuations didn’t happen overnight but was a manifestation of a process. It signifies a product of long term dynamics covering stock market returns relative to published earnings.
Excessive valuations are emblematic of the imbalances brought about by the asymmetry in performances which has largely favored asset price inflation over earnings. Such even assumes that the declared corporate earnings growth has been accurate.
To highlight on the progression of such imbalances; Friday’s (July 21) activities represent another mind-boggling rendition of the financial alchemy - of magically converting stones into gold – used in the artificial propping up of the headline index!
Down by about .66% post lunch recess, a methodical bidding up of the Phisix (afternoon delight) commenced operations just after 2 pm.
At the close of the regular session, the Phisix was almost unchanged (actually down by 1.32 points). Notice that the Phisix was in the red for about 99% of the day’s session (left window)
However, when the PSE reopened after the market intervention phase – BOOM! – the Phisix rocketed by a staggering 1.08%!!!!
The Phisix was FORCIBLY pushed up by a COLOSSAL 86.71 points or 1.1% to generate the day’s 1.08%!!!
What cannot be achieved in the regular session had to be executed at the close through a concerted, collaborative, and engineered massive PUMP!
With a cumulative market cap of 44.44%; seven issues which had an average gain of 1.8% virtually turned mild losses to an astounding upside!
And this blatant price fixing process is called a market!
The numbers involved for such complicit activities have been staggering. Friday’s mark on close order pumps contributed to the following: (right window)
-79.32% of SM Prime’s 3.73% gains for the day, as well as, 54.24% of its week’s outcome!
-74.23% of Security Bank’s gains for the day, as well as, 62.31% of its weekly output!
-35.57% and 32.77% for Ayala Corp!
-71.86% and 61.59% for the biggest market cap SM!
And even more wondrous hocus-pocus: Red (water) turned into green (wine):
-.59% day’s loss by BDO was suddenly turned to an amazing 1.98% advance via a gigantic 2.57% pump! BDO was up .32% for the week (again mainly from Friday’s pump)!
-55.62% of AEV’s 4.13% day’s gains. On a weekly basis Friday’s majestic pump transformed -1.37% into a .93% advance!
-33.85% of TEL’s 2.1% were from ‘mark-on-close orders’. Such also chopped -1.46% of weekly losses by about half to just .75%!
The orchestrated end-session pump virtually involved ALL mainstream sectors. The price fixers had to ensure that a leak won’t foil their plans. Moreover, the stupefying scale of selective big market cap pumps had been implemented to generate such desired outcome.
As one can see in the lower pane, 7 of the top 10 biggest PSEi 30 issues had been the main focus of the grand scale of end-session price surges.
Desperate for a breakout, insiders have turned to “whatever it takes” to attain such goal.
Perhaps Monday’s SONA or the yesterday’s extension of Martial Law had been rationalized for such actions. Or maybe not.
Since its inception in late 2014, this price fixing phenomenon has only escalated in intensity and frequency.
Present actions have only reinforced the religion of asset bubbles. For them, the laws of economics have been suspended for their convenience: free lunches and an impaired price system are without costs.
Well, good luck to them.
Nevertheless, as I will repeat, actions have consequences.
One of the major effects has been to MAGNIFY price volatility, which are symptoms of developing financial instability.
Aside from outlandish valuations, unsustainable vertical price trends account for as the other impact from the current dynamics. Vertical prices have spread to many other non-PSEi issues.
Raging vertical prices are symptoms of excessive, manic and epic speculations!!! These BW-SSO impulses are mini-bubbles within a larger spectrum of an asset bubble.
Growing divergences in market actions signify as another repercussion
Having surged in four consecutive weeks, the average number of daily issues traded has blasted way past the July 2016 highs! Present numbers indicate that - including the latest IPOs - the proportion of traded issues have reached a record about 95% of listed firms!
Curiously, while more issues have been traded, trade churning has materially diminished.
The reduction of the average daily trade (lower right) and the stunning shrinkage in the peso traded volume reinforces the perspective that there has been a NARROWING of activities to issues that have outperformed.
Moreover, BREADTH has DETERIORATED over the past FIVE of six weeks where decliners continue to build an edge over advancers.
So the record “number-of-issues-traded” means that the diminishing number of issues experiencing sharp upsides has been financed by sales of BROADER market issues.
And because the PSEi commands a majority of the peso volume, rotation from the broad market translates to the funneling of much of these proceeds to big named PSEi 30 issues. Again, issues experiencing BW-SSO impulses have also been the focus for this rotation.
Market forces have shown reluctance to push the Phisix to 8,000 and beyond. Hence, insiders (manipulators) have been impelled to take matters into their hands. The PHISIX will go beyond 8,000 by hook or by crook!
Yet supercilious, reckless and unscrupulous actions have largely ignored the ongoing buildup of CONCENTRATION RISKS in the domestic stock market.
As a reminder, markets exist for a socio-economic purpose. Hence, such unfettered PERVERSIONs of the PRICING system translate to the accumulation of monstrous DISTORTIONs of the marketplace and of the economy.
The latter, again, has been evidenced by such frantic race to build supply on popular sectors, largely financed by credit, which resonates with the current conditions of the stock market.
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