In this issue
More Signs of the Year of the PIG: The Incredible PHA! PhiSYx: BLOOM in, PCOR out, US Primary Dealers Panic Hoarding of UST Continues
-More Signs of the Year of the Pig? Second-Third Tier Stocks Signal Late-Stage Rally, The Incredible PHA
-PhiSYex: Bubble Stock BLOOM Returns to the Index, PCOR out!
-4Q GDP and 2018 GDP Inflated: December Industrial Production Crashed, Consumers Went Slow on Spending
-Primary Dealers Still Panic Hoarding US Treasuries! 3M LIBOR Rates Crashed!
More Signs of the Year of the PIG: The Incredible PHA! PhiSYx: BLOOM in, PCOR out, US Primary Dealers Panic Hoarding of UST Continues
More Signs of the Year of the Pig? Second-Third Tier Stocks Signal Late-Stage Rally, The Incredible PHA
Figure 1
The PSE opened trading on the Chinese New Year of the Earth Pig with a fantastic surge! Panic buying prompted intraday gains to reach a high of 1.8% just before lunch break. When trading resumed, gains were sustained until the last hour when the PSYei 30 began to crumble. By the last 15 minutes before the market intervention phase, panic selling rule. The day ended with marking the close dump which forced the index lower.
The Phisix roundtripped by a stunning 3.74% on the post-New Year’s Day trade!
Has this been signs of the things to come in the Year of the Pig?
The manic performance of second-and-third tier issues has been amazing.
Figure 2
Particularly fascinating is how the market has been riveted by a Php 2-3 billion market cap issue, the Premiere Horizon Alliance (PHA). Though PHA plummeted by 22% this week, it remains in the top 15 in terms of peso traded volume. A Php 2-3 billion company in the league of the market cap heavyweights for 13 straight sessions! What a feat!
At its recent peak on January 28 and 29, PHA corralled 10.6% and 12.22% of the total board volume. As PHA plunged last week, its share of daily board volume dwindled to 7.85%, 3.15%, 3.23% and 1.98% on February 4, 6, 7 and 8 – yet still ranked within the top 15 most traded issues. (see figure 2)
That the market’s attention shifts to the second-third tier issues as the PhiSYex enters its late-stage rally is hardly appreciated. After the Phisix culminated at 9,058 in January 2018; the previous darlings, TBGI and MRC, climaxed. Both issues fumbled along with the PSEi and rallied alongside it.
PHA appears to be the cynosure de rigueur.
And for good measure, the furious rallies in select second-third tier issues have prompted the average daily traded issues to hit its third highest level.
The average number of issues traded daily raced to the third highest level this week to 255.25, only marginally different from the July 21, 2017 peak at 256.8. The milestone high was at 269.6 set on January 19, 2018.
Though last week’s numbers haven’t reached the crest of January 2018, the common denominator appears to be the ardent belief that there is no way to go but up as highlighted by the excessive speculations!
PhiSYex: Bubble Stock BLOOM Returns to the Index, PCOR out!
And even more. The Philippine Stock Exchange announced changes on the major indices effective February 18.
Figure 3
The Phisix would bring about changes in its composite members. Enrique Razon owned casino firm Bloomberry Resorts (BLOOM) will replace oil refiner Petron (PCOR) in the index.
Curiously, it would be the second return of gaming behemoth Bloomberry Resorts (BLOOM) to the Phisix. Its inaugural was onMarch 11, 2013. Three years later, or on September 12, 2016, it was substituted by Security Bank [PSE: SECB].
BLOOM's entry into the elite benchmark in 2013 must have been an outcome of its strong share price performance. Its 2016 exit also reflected on its share price decline. With BLOOM up 8.65%, this week for a 2019 return of 28.16%, the same pattern in the PSE’s selection process seems to be unfolding.
In an attempt to boost the index, the PSE selects big ticket winners and weeds out the underperformers. So these can be aligned with the blatant mark-the-close pumps.
With BLOOM’s entry, the service sector would have the second biggest representation (6) after holding firms (10) in the composite index.
The headline index becomes an abode for winning issues only. Forget the representation of industries which should reflect the economy.
The PSE also introduced a new index, last week, which would incorporate dividends, reinvested dividends aside from capital gains through its Total Return Index (TRI)
4Q GDP and 2018 GDP Inflated: December Industrial Production Crashed, Consumers Went Slow on Spending
I argued that the 4Q and 2018 GDP had been padded.
The Zeitgeist of 2018 GDP: The Record Deficit Spending, Was the Export Data Been Inflated?, History has Rhymed January 27, 2019
Figure 4
From the Inquirer: The Philippine Statistics Authority’s (PSA) Monthly Integrated Survey of Selected Industries for December 2018 showed that the Volume of Production Index (VoPI) declined 10.1 percent that month. The drop in the December 2018 VoPI, a proxy for manufacturing output, was steeper than the 6.1-percent decline in December 2017. “Ten out of the 20 industry groups registered annual declines [in VoPI], with two-digit decreases noted in the following: printing (-79.4 percent), chemical products (-28.9 percent), tobacco products (-22.1 percent), food manufacturing (-17.8 percent), basic metals (-16.7 percent) and machinery except electrical (-12.6 percent),” the PSA said. In the meantime, the Value of Production Index (VaPI) slid 9.3 percent, also faster than December 2017’s 7.1-percent drop. The PSA said the following sectors led the decline of the VaPI in December last year: printing (-78.5 percent), chemical products (-28.2 percent), basic metals (-16.5 percent), food manufacturing (-15.8 percent) and tobacco products (-11.1 percent). (bold added)
Consumer credit and cash (M1) also stagnated in December. Credit card growth was marginally up 20.93% in December from 20.2% a month ago. Auto loans growth plunged to 11.96% from 13.13%. Salary loans contracted -2.66% against -1.71%. M1 was little changed to 9.48% from 9.47% over the same period.
Consumers didn’t go wild last Christmas. 4Q GDP and 2018 GDP had been inflated.
Primary Dealers Still Panic Hoarding US Treasuries! 3M LIBOR Rates Crashed!
As global stocks went into bidding orgy, I wrote about the panic bidding of USTs by Primary Dealers in the US.
Mania at Phisix 8,050! Beware of the January Effect, Will 4Q GDP Be Lower Than the 3Q? January 20, 2019
Instead of going away, the hoarding only accelerated.
Figure 5
Panic hoarding by primary dealers are increasingly signs of collateral-liquidity hedging-issues by third parties served by the primary dealers. They maybe central banks (PBOC?) or European banks.
From Marketwatch: Three-month Libor sees biggest drop since 2009 (February 7): “The three-month rate at which banks on average charge each other to borrow funds fell around 4.1 basis points to 2.697% on Thursday, its biggest one-day drop since May 2009, according to ICE Benchmark Administration. Trillions of debt and loans are benchmarked to Libor , or the London Interbank Offered rate. Some analysts speculated that the Federal Reserve's hints that it would keep rates on hold for the foreseeable future at its January meeting contributed to the fall in money market rates”
Based on the inversion of the Eurodollar futures curve, this could be a sign that the US Federal Reserve will be cutting rates soon.
Beware the Year of the PIG!
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