Most of the novel ideas for regulating the market come from politicians playing the good fairy, or from intellectuals trying to perfect society, or from bureaucrats thinking they can solve every problem given sufficient power—Donald Devine
In this issue
Worshipping Asset Bubbles: PSE Officials Mulls Stability Fund for IPOs, Flexing SM’s PSEi 30 Muscles, The Continuing Telco Mania
I. The Establishment’s Worship of Asset Bubbles: PSE Officials Mulling Stability Funds for IPO Share Price Support
II. Nurturing the Asset Bubbles: Massive Pumps in Share Prices of SM Delivers Most of the Weekly Returns of the PSEi 30
III. TELCO Share of the PSEi 30 Gains Most, The Full Liberalization as Pretext for the Frenzied Pumps
IV. Charts Versus Organized Pumps; The Damocles Sword of Head and Shoulders
Worshipping Asset Bubbles: PSE Officials Mulls Stability Fund for IPOs, Flexing SM’s PSEi 30 Muscles, The Continuing Telco Mania
I. The Establishment’s Worship of Asset Bubbles: PSE Officials Mulling Stability Funds for IPO Share Price Support
PSE officials propose that firms undergoing IPO must support their share prices with a stability fund.
From the Businessworld, December 17: He is scheduled to meet with the Capital Market Development Committee on Tuesday to propose a rule that would require a stability fund, which is deployed by issuers to support their stock price in the market for a period of time after listing. “I will be proposing a rule change where we will require all companies that are doing an IPO, if there is a secondary component, meaning [if] shareholders [are] selling part of their shares, we will require them to have a stabilization fund,” Mr. Monzon said
This outlook represents the zeitgeist of the establishment: social entitlements brought about by asset bubbles!
Incredible.
As noted last week,
Thus, the BSP's policies have spurred unwarranted fixation for short-term gratification from asset bubbles, which mirrors the populist political 'free money' drift towards neo-socialism.
Lower November CPI to Justify the BSP’s Record Low Rates Regime: Paraphrasing J. Carville, It is the Elections, Stupid! December 12, 2021
Why should stock prices be artificially supported?
Isn’t the fundamental role of the market to balance demand and supply? And to expand this precept, to discover economic opportunities in the face of uncertainties, allocate resources to the productive entrepreneurial undertakings, and reward firms for their efficiency?
Are firms not required to disclose all forms of risks when undergoing the IPO process?
And are investors not aware of such risks when participating in the subscription of shares of an IPO?
What happened then?
The Sage of Omaha Warren Buffett once wrote, "In the short run, the market is a voting machine, but in the long run, it is a weighing machine."
Would it not be better for firms to decide on what to do with their capital?
What if a company opts to allocate money to expand business operations in the hope of generating better returns for shareholders over time?
Why should the preference of long-term strategies be inferior to short-term fixes?
Who is in the position to know better, the shareholders and management or authorities of the monopolistic stock exchange?
So are share prices now entitled towards a single direction?
Does the end justify the means?
Why should more firms list on the PSE when share price stability issues might substantially increase the cost of going public?
As a side note, the PSE is a monopoly. The SEC even averred on its 2016 briefing on the proposal by the PSE to acquire the PDS: "PSE’s Share Purchase Agreement precludes the significant market players from establishing rival exchanges and constitutes PSE as a de facto monopoly. PSE did not demonstrate in its submissions that the dangers of having a monopoly will be well mitigated. "
And "whatever it takes" to support share prices seems to be the guiding principle of the overlords of the domestic capital markets.
With the mounting penchant for interventions, both capital and markets may become extinct.
II. Nurturing the Asset Bubbles: Massive Pumps in Share Prices of SM Delivers Most of the Weekly Returns of the PSEi 30
This dogma of one-way share price direction is already being manifested almost regularly through the tolerance of marking-the-close pumps.
Figure 1
The PSEi 30 gained 105.49 points or 1.47% this week.
However, pre-closing pumps accounted for a cumulative 143.1 points, which means that over 100% of this week’s gains came from pre-closing pumps!
Yes, PLDT, GLOBE, SM, and Aboitiz Powers led the winners. But the PSEi 30 breadth was deadlocked.
But in the context of changes in the free-float market cap weighting, it was an SM show, hands down!
Among the 30 elite members, SM posted the largest increase in the share of the free-float market cap this week.
How did this happen?
Well, the activities of Friday demonstrate the power of the SM share price pump.
During the pre-closing transition to the run-off period, SM share prices magically transformed its -1.64% deficit to close substantially up by +2.04%. That was a stunning 3.68% pump with a flip of the finger!
The gains of SM contributed most in bolstering the PSEi 30 to close up by .89% from -.15% at the pre-close. SM wasn’t alone, though. Share prices of SMPH, BPI, AC, JGS, and GTCAP were also beneficiaries of the seeming institutionalized mark-the-close activities.
On December 15th, an enormous 4.4% pre-closing pump lifted AEV! Just awesome.
Figure 2
When all others are failing to deliver the required boost to the index, SM has always been the go-to guy. But interestingly, the chart of SM remains in consolidation.
Learning from the past, index managers appear to have resorted to different tactics this time around.
They seem to have mobilized other sectors to cover up the lack of participation from the previous leaders.
And since moving the index requires a tremendous amount of effort, it requires the steep upward price thrusts (vertical or parabolic climb) of share prices of some PSEi components (ex-Big 6).
The best way to observe this is not through price changes but in the changes of the free float cap weightings.
III. TELCO Share of the PSEi 30 Gains Most, The Full Liberalization as Pretext for the Frenzied Pumps
How did the sectors perform according to such measures?
The weekly free-float market cap gains of TEL, GLO, and BPI supported SM, which means that in the framework of sectors, TELCOs and Financials took the leadership.
And because of SM, the free-float market share of the holding sector also bounced from its downtrend.
Nevertheless, the rationalizations behind the frenzied TELCO pumps have been shifting.
The vital contribution of this industry to the seismic transition to the digital economy functioned as the first pretext.
At present, the narrative segued to the expected full liberalization in the ownership of the public services.
The colossal paradox is that the share prices of the non-PSEi 30 TELCOs (DITO, TBGI, and NOW) have lingered in the opposite direction.
This development suggests two things.
One. Only telcos of the PSEi 30 will benefit from the liberalization, even when the smaller players will likely attract investments too.
Two. The digital economy and full liberalization served as a convenient alibi for the massive pumps EXCLUSIVELY on telco issues of the PSEi.
In theory, I should be a fan of this full liberalization policy, but allowing full ownership of telco company/ies by foreign state/s have aroused my suspicions. Instead of promoting competition, the possibility of full foreign state ownership of domestic public service institutions may be about the export of political control and ideology.
IV. Charts Versus Organized Pumps; The Damocles Sword of Head and Shoulders
Circling back to the PSEi.
Figure 3
The PSEi 30 has risen against a backdrop of weak market internals. Most of the listed (non-PSEi 30) issues have either been sold or have drifted in limbo.
Yet, from a chart perspective, the head and shoulders pattern remains the Damocles Sword of the PSEi 30 despite its forced ascent.
Be that as it may, the week’s rally has only filled the gap from the recent selloff.
For momentum to continue, an increase in upside volatility is required to maintain and improve the current levels. It also needs the participation of some of the Big 6 members.
But we have learned a lesson: chart technicals are no match for organized and orchestrated pumps.
Perhaps the financials are being groomed for the next series of aggressive bids to push the PSEi 30 back to 7,400.
But the mounting volatilities or sharp price actions signify an exposition of the escalating imbalances resulting from the distortions of orchestrated/organized pumping of prices.
If the economy and earnings recovery are on a healthy path, why the need for interventions through artificial price support from the invisible cabal of financial institutions?
Yours in liberty,
The Prudent Investor Newsletters
No comments:
Post a Comment