100% of the Week’s 1.27% Returns Came from Pumps (Mostly Sy Group)! The Flattening Treasury Curve is AOK?

100% of the Week’s 1.27% Returns Came from Pumps (Mostly Sy Group)! The Flattening Treasury Curve is AOK?

The Phisix surged 1.27% or by 93.21 points.

How was it accomplished?

In greeting the last month of the year, the headline index sprinted by 4.51% in just two days.

 

Orchestrated mark-the-closing pumps on mostly SY owned firms were responsible for these fantastic gains. A total of 108.55 points were unnaturally added to the 2-day gains

In the next 3 days. the headline index gave back 72% of these gains.

 

The net weekly pump of 95.37 was larger than the weekly gain of 93.21 points. With ends-session pumps greater than headline gain, what kept the PhiSYx afloat had nothing been more than blatant price fixing. Including the top 3 issues of the Ayala Group, market share cap of the PSYei was last at 51.12%!

Six issues determine the fate of the headline index.

These are facts. All one has to do is to go to the PSE website.

These activities reveal that because most composite issues haven’t been participating in the forced upside push, the same 6 issues have been used to keep the headline index at the current levels.

Even as the Phisix raced to 9,058 in January, the broader market sold off.

Deliberate or engineered pumping only exhibits the degree of dysfunction of the domestic stock markets.

And the amassing of market cap shares by the elite 6 wouldn’t have repercussions?

When the PhiSYx raced to 9,000 last January, the befuddled Financial Stability Coordinating Council wrote this:

Stock market price-to-earnings ratios, on the other hand, have been persistently well past their textbook warning thresholds but there seems no evidence that investors believe the stock market to be overvalued. Whether this is a Minsky moment waiting to happen is certainly an important thought but the absence of clear-cut valuation measures for the market as a whole leaves the issue without an empirical resolution

Operating under the rational expectations theory, the authors saw the patent mispricing as a function of the “absence of clear-cut valuation measures”.  It is not.

They didn’t or refuse to see that one of the principal causes of valuations overreach has been the unbridled price fixing. And by distorting prices, not only have overvaluations been attained, such mispricing have spurred massive misallocations of capital.

And the sustained manipulation of the market signals has only exacerbated such imbalances. Even more, the concentration of market cap share to only a few issues makes the headline index vulnerable to any volatility that may arise from these issues.

The PSYei 30 has been borrowing significantly more than the net income it generates. And this understates the point that the aggregate net income growth has been a function of increased gearing. Through the 3Q, non-bank PSEi borrowed Php 515.4 billion to generate 28.32 billion of net income. Php 18.2 borrowed for every net income it generates!

No wonder the engineered upward thrust has been required to support the index. Artificial profits must be supported by price fixing to exhibit everything is A-OK

But has everything been a-Ok? Surely not for the banks.

There would be major inversions on the curve soon should the current flattening dynamic persists! 

This reminds me of the FSCC’s FSR:

While there is no definitive evidence of a looming crisis, it is also clear that shocks that have caused dislocations of crisis proportions have come as a surprise. What is not debatable is that repricing, refinancing and repayment risks (3Rs) are escalated versus last year and this could result in systemic risk if not properly addressed in a timely manner.

The Phisix raced to 9,058 last January even as “dislocations of crisis proportions have come as a surprise”.

Sure anything can happen to the markets. But what is unsustainable will soon stop,