PSEi 30’s Illusion of Stability: Benchmarkism Meets the Whac-a-Mole Markets

 

When a game is rigged, it’s usually the game’s organizer, the house, that does the rigging. In today’s world, the rigging is done by Deep State types, who are close to power, close to people who can change the rules when it suits—Doug Casey 

In this issue:

PSEi 30’s Illusion of Stability: Benchmarkism Meets the Whac-a-Mole Markets

I. The PSEi’s 30s Weekly Print: A Recoil, Not a Recovery

II. Breadth Doesn't Lie: Four Weeks of Deterioration

III. Where the Volume Went (and Didn't)

IV. Concentration by the Numbers, Foreign Money Keeps Walking

V. The Real Story Was in Bonds and CDS: Whac-a-Mole

VI. Conclusion: Prices Distortion Compounds Risk of Crash 

PSEi 30’s Illusion of Stability: Benchmarkism Meets the Whac-a-Mole Markets 

When concentration, weak breadth, thin liquidity and policy support make a falling market look more stable than it really is 

Nota Bene:

• I was supposed to be on a break. Instead, I have become increasingly active on Substack Notes—a somewhat longer version of X.
• This was supposed to be a Note. It became too long, so here we are.
• Here is the link to my Substack Note 

I. The PSEi’s 30s Weekly Print: A Recoil, Not a Recovery 

The PSEi 30 closed the week down only 0.51%. That headline, however, conceals considerably more than it reveals.

Figure 1

Friday's 1.67% pump — driven by low-volume buying concentrated in the top four issues — primarily by ICTSI— was a recoil off Thursday's low of 5,730, not a change in trend. (Figure 1) 

Strip out that single session and the week reads as a continuation of the selloff — a third week of decline — not an interruption of it. 

II. Breadth Doesn't Lie: Four Weeks of Deterioration 

The index's net decline of 29.94 points understates the damage because it nets out an unusually lopsided internal split. 

ICTSI alone contributed 25.82 gross points (+1.66%), with SM adding another 6.68 points (+1.39%). Those two names absorbed losses of 17.54 points from Meralco (-7.46%), 11.5 from BPI (-2.95%), 8.81 from SMPH (-3.03%), and 7.94 from AC (-2.96%). The index-level number is the residue of two offsetting forces, not a description of how the market actually traded 

PSEi breadth was negative at an aggregate 66-72—where marginal contribution in the net points from decliners eclipsed advancers.  

Figure 2

The broader breadth figures make the underlying weakness explicit: a 420-520 losers-to-gainers split across the week, four down days out of five sessions, and — critically — the fourth consecutive week of breadth deterioration. (Figure 2, topmost visual) 

Average constituent performance came in at -1.64% (19 decliners, 11 gainers), nearly three times worse than the headline index move.  (Figure 2, middle image) 

The gap between that average and the index's -0.51% print is a function of market-cap weighting doing its job — plus a 14.92% single-week crash in SCC that the index barely registered because SCC isn't a big enough weight to matter. 

This is the mechanism worth naming plainly: when an index is dominated by a handful of names, the index number stops describing "the market" and starts describing whatever those names are doing. 

The PSEi’s other twenty-five stocks have been hemorrhaging, yet the headline has remained calm—which has been the benchmark’s legerdemain for the past few years.

III. Where the Volume Went (and Didn't) 

Average daily main board volume collapsed 46.4% week-on-week, from Php 10.722B to Php 5.75B — driven mainly by a pullback in cross trades. (Figure 2, lowest graph) 

The listing of PNB Holdings on Friday didn’t stoke much of the market’s risk appetite. 

Even so, cross trades still made up 29.45% of main board volume and 23.32% of gross turnover. 

Read that pairing correctly: it's not that cross-trading disappeared, it's that everything else diminished faster, leaving the residual volume even more dominated by whatever mechanism cross trades represent — deliberate accumulation/distribution rather than organic price discovery. Cross trades are negotiated transactions. 

Still, ICTSI alone accounted for 15.16% of main board volume. The top 10 and top 20 most-traded issues made up 69% and 82% of volume respectively, and the top 10 brokers handled 63.63% of it. 

Three separate concentration metrics — by stock, by issue count, and by broker — all point the same direction in the same week. That's not noise. 

IV. Concentration by the Numbers, Foreign Money Keeps Walking 

 

Figure 3

ICTSI's index weight sat at 26.6% as of September 24, with the top five market cap issues at 54.72% of the free-float index — both near record levels. (Figure 3, upper window) 

A market where one company is more than a quarter of the benchmark, and five companies are more than half of it, is not measuring "the Philippine economy." 

Pragmatically, it's measuring the balance sheets of a handful of conglomerates whose collateral value depends on the index staying elevated. 

Foreign investors registered Php 816.3 million in net outflows — the sixth consecutive week — with foreign trades comprising 46.1% of gross turnover. (Figure 3, lower chart) 

Foreign capital left in a week when the broader market got no support from the broader PSEi constitutents; the negative breadth and the foreign exodus are the same story told from two different vantage points. 

V. The Real Story Was in Bonds and CDS: Whac-a-Mole 

Here's where the week's real signal sits, and it didn't happen on the PSE.  

Figure 4

YIELDs of US Treasury and advanced-economy surged to multi-year highs, while ASEAN 10-year yields responded with a softer, divergent move — either delayed transmission, or most likely active policy suppression of bond-vigilante pressure. (Figure 4, upper pane) 

Either explanation implies the same thing: the adjustment is being deferred, not avoided. 

The CDS market is less forgiving of deferral. Most Asian sovereign spreads widened as global yields rose, with Vietnam, Indonesia, and the Philippines among the most affected. (Figure 4, lower diagram) 

Credit Bubble Bulletin’s Doug Noland flagged the same pattern in dollar-denominated paper:

EM dollar-denominated bonds (in particular) were taken out to the woodshed… In Asia, dollar-denominated Philippine yields jumped 23 bps to 6.04% - the high back to 2008. Indonesia ($) yields rose 18 bps to a three-year high of 6.04%. (bold added)

 

Figure 5

That’s right. The sequencing matters more than any single number. This was a selloff that started in USDPHP and the bond market, then spilled into equities. (Figure 5, upper graph) 

Paradoxically, this runs counter to the mainstream’s expectation that ICTSI’s share melt-up would lead the broader PSEi higher. 

Instead, if local-currency yields are being held down by policy while dollar credit and CDS repricing move regardless, the pressure hasn't been eliminated — it's been redirected. 

Yes, this reinforces what I call the Whac-a-Mole dynamic: suppress the signal in one market, and it resurfaces in another, usually the one that’s harder to manage administratively. 

Bond vigilantes showing up first in CDS, dollar credit and in foreign portfolio outflows, ahead of the equity market, is the tell that the PSEi and local bond market's calm is manufactured rather than earned. 

Of course, the crux here is what determines the sustained run-up in global yields, and how that pressure transmits not only to the peso, but through global and domestic liquidity, the Philippine banking system, domestic bond prices, and eventually the PSE. 

VI. Conclusion: Prices Distortion Compounds Risk of Crash 

Friday's bounce may simply be an oversold recoil, or it may get written up as a "false breakdown" — a framing that conveniently supports the financial architecture’s broader project of keeping asset prices elevated so balance sheet collateral values hold up and the credit cycle keeps financing the savings-investment gap. 

But the degree of trade and price concentration documented above tells a different story than the headline index number does. 

Prices convey information. When policy—through index mechanics, cross-trading patterns, or bond-yield suppression—prevents that information from being priced in cleanly or prevents markets from clearing, the resulting distortions do NOT disappear. 

They compound on existing imbalances until something forces a repricing anyway, usually somewhere less convenient than where the distortions started. 

Bluntly, the bigger the distortions, the greater the eventual disorder—amplifying the risk of a market crash. 

Concentration is a symptom. Policy is the disease.