The Philippine PSEi 30’s Push to 7,000: Low Volume Concentrated Pumps, Gaming the Index, and "Blow-Off Tops"

Be careful here – deteriorating internals matter. The condition of market internals is precisely the same hinge that – in market cycles across history – has separated overvalued markets that continued to advance from overvalued markets that collapsed through a trap door. That’s not to say that stocks must collapse immediately; market peaks are a process, not an event. That’s also not to say that market internals could not improve, which wouldn’t relieve extreme valuations, but could very well defer their immediate consequences—Dr. John P Hussman

 

In this issue

The PSEi 30’s Push to 7,000: Low Volume Concentrated Pumps, Gaming the Index, and "Blow-Off Tops"

I. PSEi 30’s Push to 7,000: Desperately Seeking A Bull Market

II. PSEi 30 Almost Reached 7,000 on Lethargic Volume—Despite Foreign Inflows

III. PSEi 30 7,000: Gaming the Index with End-Session Pumps and Dumps

IV. PSE: Concentrated and Organized Pumps on Lack of Retail Participation

V. PSEi 7,000: Price Pumps Concentrated on ICT and Banks

VI. PSEi 30’s Version of "Blow off Tops," the "Rising Wedge," and the US Tech’s "Mother" of All Bubbles!

The Philippine PSEi 30’s Push to 7,000: Low Volume Concentrated Pumps, Gaming the Index, and "Blow-Off Tops"

 

The thrust to PSEi 30 7,000 can be described as a low-volume, concentrated, and organized institutional pumping, with several "blow-off tops" in the making.

I. PSEi 30’s Push to 7,000: Desperately Seeking A Bull Market

 

The establishment has been seeking desperately to inflate a stock market bubble.

 

The thing is, inorganic rallies tend to devitalize market structure. Bear markets slide down the ladder of hope. 

 

Three critical factors depict the underlying health of the alleged renascence of the "bull market."

 

First.  Despite the winning streak in 7 of 8 weeks in 2024, sluggish volume remains the dominant feature of the PSE.  The depressed volume reinforces the long-term underlying trend.   At the same time, lackluster volume manifests unhealthy or divergent breadth or the distribution of gains and deficits.

 

Two.  End-session pumps and dumps continue to shape the PSEi's 30 daily outcomes.

 

Three.  The PSE continues to be plagued by the concentration of trading activities that have led to increasing market pricing contortions or mispricing. 

 

Figure 1

The PSEi 30 closed the week up .58%, extending its winning streak to 7 in the eight weeks of 2024, increasing YTD returns to 7.2%—one of Asia's leading performers. The Philippine bellwether ranked fifth in the region as of February 23rd. (Figure 1, topmost graph)

 

Buoyed by global financial easing, 15 of the region's 19 national indices closed higher in the week YTD, with an average return of 3.2%.

 

This week, the equity benchmarks of Japan (Nikkei 225) and Taiwan (Taiex) joined the group of national equities that has recently carved all-time highs (ATH) like supposedly "unstoppable" Pakistan’s K-100 and India’s Sensex.  Australia's AU200 seems next in line.

 

The once laggard Philippine equity markets now want to "keep up with the Joneses."

 

Let us deal with this in detail.

 

II. PSEi 30 Almost Reached 7,000 on Lethargic Volume—Despite Foreign Inflows

 

Surprisingly, inertia in mainboard volume has accompanied the push towards the PSEi 30 7,000. (Figure 1, middle window)

 

Yet, mainboard volume includes cross (or intra-broker) trades, which account for about 5 to 10+% of the total.

 

Rapidly rising prices should have enticed the public to redirect excess savings to the stock market, but instead, there has barely been growth in the daily (or even weekly) mainboard volume.

Figure 2

It seems no coincidence that lukewarm growth in universal-commercial bank loan growth and M2 savings have coincided with the general trend of the PSEi 30's recent bear market and the long-term slowdown in volume. (Figure 1, lowest chart; Figure 2, topmost graph)

 

Yet, could rising PSE eventually echo with improved bank loan growth and liquidity in the coming months?

 

And it seems odd that the increased foreign fund flows—while boosting the index levels—have barely contributed to the total turnover growth. (Figure 2, middle pane)

 

In 2024, the PSE reported Php 11.09 billion of fund inflows or about 5.3% of gross volume (as of February 23).   These inflows occurred in 7 of the eight weeks.  Foreign trades accounted for 49.23% of the total turnover.

 

Increased foreign trades are likely symptomatic of mounting leveraged carry trades on the backdrop of a weak Japanese yen, Chinese yuan, record low Malaysian ringgit, and others alongside global financial easing.   

 

But the irony is, why the seeming deficiency in the expansion in volume given the streak of foreign inflows?

 

Were these foreign funds—for real?  Or were these part of the international satellites or affiliates of PSE-listed firms owned by the elites?   

 

Why were local institutions selling their "appreciated" holdings of select PSEi 30 firms to these international trend-following institutions? 

 

Aside from volume and price levels, market breadth would have been more potent from these supplementary inflows.

 

III. PSEi 30 7,000: Gaming the Index with End-Session Pumps and Dumps

Two.  Gaming the PSEi 30.

 

As recently explained, if the PSE wanted to improve the efficiency of the capital markets and the economy, it would work to ensure an effective market pricing process.

 

Instead, not only do we get inert volume, but the PSEi 30 levels have been determined by relentless (pre-closing) pumps and dumps via increased volatility of share prices of select market cap heavyweights. 

 

These were the biggest daily (pump and dump) movers during the last two weeks. (Figure 2, lowest diagrams)

Figure 3

 

Although the weekly % share of the top 20 traded issues has risen in 2024, it has slowed recently.   Last week's 81% average (daily) remains significant despite the 2024 average of 83%, meaning some of the volume has spread to the broader market. (Figure 3, topmost pane)

 

IV. PSE: Concentrated and Organized Pumps on Lack of Retail Participation

 

Three.  Concentrated trading activities.

 

The good news is that though some trading activities have spilled over to the broader market, most of the trading actions remain in the hands of the top 20. 

 

Further evidence of this is the bounce in the weekly average of the daily traded issues, which recently hit a one-year high but partly retraced this week. (Figure 3, middle chart)

 

While this may partially signal the perking up of retail activities, the overall turnover and other market internals suggest otherwise. 

 

Instead, the rise in traded issues indicates active trading of institutional accounts spreading to the broader market.

 

Figure 4

 

Aside from the volume slack, the weekly averaged daily trades remain in the doldrums, as the output per trade has bounced in 2024, which suggests increased wholesale transactions (by institutions). (Figure 3, lowest graph: Figure 4, topmost graph)

 

Market breadth remains tilted towards decliners.  Oddly, weekly declining issues were ahead (5/8) in 2024.  The aggregate spread in 2024 was a negative 10 (favoring decliners)—despite the 7.2% increase in the PSEi 30! (Figure 4, middle window)

 

The paradox showcases the participation vacuum from retail activities.

 

Meanwhile, the top 10 (mostly wholesale or institutional) brokers continued to corner a substantial 57.42% of the mainboard volume in the week ending February 23, but slightly lower than the YTD weekly average of 59.32%. (Figure 4, lowest graph)

 

V. PSEi 7,000: Price Pumps Concentrated on ICT and Banks

 

Figure 5

 

The PSEi 30 continues to be driven by the top 5 market heavyweights as their share slipped from a record 48.5% to 48.3%, primarily from the partial pullback of the parabolic ICT.  (Figure 5, topmost chart)

 

Aside from ICT, institutional trades have been rotating towards banks. 

 

The market cap share of the banks—consisting of three PSEi 30 banks—hit an all-time high on February 23, as trades shifted from near-record BDO and BPI to MBT. (Figure 5, middle window)

 

Possibly echoing the Q4 2022, Q1 2023, and Q2 2023, Other Financial Corporations (OFC) were the primary buyers of bank shares.  Could they be today's buyers?

 

Ironically, the rotational manic bid on banks comes amidst slowing profit growth (2023) and a rising liquidity gap, which is unlikely to diminish substantially anytime soon.

 

And the panic bids have barely spilled over to the non-PSEi banks, with former members Security Bank (-.14% YTD) and Union Bank (-10.63% YTD) hardly recovering from their recent lows.

 

Such selective outperformance could mean attempts at bolstering the PSEi 30's facade.

 

By the way, BDO (9.27%) has supplanted SMPH (9.24%) as the second-largest free float market cap share in the PSEi 30 (February 23).

 

Once again, the distribution of the market cap share of the PSEi 30 resembles the power law, with seven of the thirty issues commanding a considerable heft. (Figure 5, lowest chart)

 

The market share of the top 10 issues accounted for 71.23% of the PSEi 30 (as of February 23).

 

Yes, the market cap share of other issues contributed to PSEi 30's recent rise (GTCAP, MONDE, BLOOM, and CNPF), but these played a minor role.

 

VI. PSEi 30’s Version of "Blow off Tops," the "Rising Wedge," and the US Tech’s "Mother" of All Bubbles!

Figure 6

The concentrated pumps have led to "parabolic" or extreme upside price actions.

 

Despite the PSEi 30 below 7,000, three issues broke records in 2024 (ICT, MER, and CNPF), while BDO and BPI are at a hair-breadth distance from all-time highs.  (Figure 6, topmost charts)

 

As a side note, even at extended overbought levels for some issues, there should have been a few entities who would take on "shorts." Ironically, there have been ZERO takers for the PSE's "short sell" program!  (I haven't seen any since the PSE began posting the daily short sale on its website)

 

The latest bidding shift to Metrobank, which spilled over to GTCAP, demonstrates the rotational pumps to buoy the PSEi 30.

 

Please observe that intense daily pumps have been directed at a few market cap heavyweights, accompanied by the complimentary push on the other top 10 issues to "power" the PSEi 30 higher—on low volume.

 

Like the artificial peak of 9,041.2 on January 26, 2018, driven by select elite issues (9 record highs that year with little broad market participation), concentrated and organized pumps eventually wear down. 

 

Though agnostic on chart patterns, the PSEi 30 bears the shape of a "rising wedge," which could mean an eventual reversal unless a new formation takes over.  

 

Aside from fundamentals, the recent developments in the PSE's internal structure hardly support a sustained upside momentum, which seems to support the "rising wedge" pattern.

 

Nonetheless, forcing an upsurge in the "markets for the big boys" hardly constitutes organic and spontaneously rooted market pricing, which worsening distortions translate to the mounting risk of a market bust.

 

After all, Philippine BVAL treasury yields continue to rise and have recently steepened across the curve.  Rising yields translate to losses in fixed-income security holdings.  It could heighten inflation risks and escalate liquidity and credit-related strains on an economy swimming in debt.  It could spur higher HTM holdings for banks. (Figure 6, middle pane)

 

In closing, this incredible US tech chart outperforming global tech, which has not only soared way past its long-term average but likely forged a "tailed-event," depicts the extent of intensifying leveraged hyper-speculative activities. (Figure 6, lowest graph)

 

Some would call this a "blow-off top."   

 

It also looks like the "Mother" of all bubbles.

 

Yet, when the US market sneezes, the world markets catch a cold.

PSEi 30 6,700: Organized and Concentrated Pumps; China’s Launches Massive Stock Market Rescue

 

The ultimate result of shielding men from the effects of folly is to fill the world with fools—Herbert Spencer

In this issue

 

PSEi 30 6,700:  Organized and Concentrated Pumps; China’s Launches Massive Stock Market Rescue

I. PSEi 30 Bested ASEAN Peers; China’s Government Launches Massive Stock Market Rescue

II. PSEi 30’s Organized and Concentrated Pumps: Muted Volume and Selective Winners

III. Renewed Pumps on PSEi 30 Banks

IV. Concentrated Activities: Centralization of Broker Activities, Lack of Retail Participation

V. Foreign Inflows, Rising Yields of T-Bills, and a Flattening Treasury Curve

 

PSEi 30 6,700:  Organized and Concentrated Pumps; China’s Launches Massive Stock Market Rescue

 

A slice-and-dice perspective of the Philippine PSEi 30's weekly 2.8% gains before the 2023 GDP announcement.

I. PSEi 30 Bested ASEAN Peers; China’s Government Launches Massive Stock Market Rescue

 

Figure 1

 

In the face of drastically loosening financial conditions, the Philippine PSEi 30 surged by 2.8% to reverse the 2.1% loss from the other week that stole the thunder of its ASEAN peers. 

 

Notably, benchmark stocks of the Asian region were mixed—10 of 19 up with an average of .43%, mainly from the biggest winners. (Figure 1, upper graph).  East Asian and Australasian bellwethers closed higher, while profit-taking pulled most ASEAN and South Asia indices lower.

 

Weekly advances in the national equity indices of Hong Kong (HSI +4.2%) and China (SSEC 2.8%) also led the advancers and buoyed the region's average returns. (Figure 1, lower charts)

 

A seemingly desperate Chinese government announced several substantial measures to stem the $6 trillion stock market rout, including a widening ban on short selling, bigger-than-expected RRR cuts, talks about a $278 billion stock market rescue package, targeted lending, easing of regulatory restrictions on home purchasing, and more coming.

 

However, from a five-year perspective, this week's rally in China and Hong Kong’s stocks emerged from substantial oversold conditions.

 

From our humble perspective, bailouts only kick the proverbial can down the road with nastier consequences.  This band-aid approach barely deals with the issue of malinvestments and instead contributes to the erosion of savings.

II. PSEi 30’s Organized and Concentrated Pumps: Muted Volume and Selective Winners

 

Back home, although the PSEi 30 appears to be testing its resistance level, it's hardly a generalized speculative frenzy.  This week's gains pushed YTD and November 2023 returns to 3.7% and 12.15% (as of January 26th).

 

The outperformance of the principal PSEi 30 seems to be a product of organized, coordinated, and concentrated pumping.

 

Aside from easing conditions, the PSEi 30's sugar high could signify a frontrunning of the pre-announcement of the 4Q and 2023 GDP on January 31st.

Figure 2

 

The PSEi 30 has been rising in the backdrop of declining volume. 

 

This week, the average daily main board volume dropped 17.4% from Php 5.01 billion to Php 4.14 billion.  (Figure 2, topmost chart)

 

Though the average daily gross volume jumped by 11.6% from Php 5.99 billion to Php 6.68 billion, special block sales comprised 38%.  Cross trades have also bolstered the main board volume.

 

The primary winners were the largest market capitalization heavyweights.

 

And though 18 of 30 issues closed higher with one unchanged, five of the top 6 market cap issues delivered an average weekly return of 4.32%.  (Figure 2, middle window)

 

In turn, the top 5 issues (SM, SMPH, BDO, BPI, and ICT) now command a 48.15% share of the PSEi 30.  The top 10 has a 71% share.  Briefly, these elite issues led the path to 6,700.  (Figure 2, lowest graph)

Figure 3

 

As a result, the selective pumps have exacerbated the skewed distribution of market cap weighting. The weight distribution resembles and depicts the Power Law. (Figure 3 topmost graph)

 

SM's 6.32% spiked its market cap share to 14.61%, as well as the Sy Group's 33.35%.  (Figure 3, middle pane)

 

The Sy Group's share of the main board's volume also increased to 24% from 19.8% a week ago.  The Sy Group has been amassing buying interests from institutional entities since December 2023. (Figure 3, lowest pane)

 

III. Renewed Pumps on PSEi 30 Banks

 

The surging share of PSEi 30 banks via outsized weekly returns has also been a factor. 

Figure 4

 

Banks' share of the PSEi has risen to 20.61% (as of January 26th), fast closing in on its record 20.75% last September 2023.  (Figure 4, topmost graph)

 

Up by 5.2%, the financial index outperformed the other sectors. (Figure 4, middle window)

 

Thanks to the BSP's Php 2.2 trillion injections, subsidy on deposit liabilities via historic low rates, and the various relief measures, the trio’s bank (BDO, BPI, and MBT) share of the PSEi 30 surged by 62% from August 2020 through last week. 

 

Notably, the bidding spree was limited to banks of the PSEi 30.  Similar to 4Q 2022 until 2Q 2023, were the buyers the non-bank financials?  The BSP has yet to report on the 3Q conditions of the Other Financial Corporation survey.   

 

Essentially, the October-November trough coincided with the sharp drop in bank loans to the financial sector.   Have banks reopened their lending spigot to their non-bank peers? (Figure 4, lowest chart)

 

IV. Concentrated Activities: Centralization of Broker Activities, Lack of Retail Participation

 

Broker activities also manifest the concentration of trading activities.

 

Figure 5

 

While the average daily share of the top 10 brokers fell from 65.2% to 57.9%, the elite (mainly institutional) brokers remain significant.  (Figure 5, topmost window)

 

These elite firms are responsible for a chunk of cross-trades.

 

The remaining 113 or so brokers compete for the morsels.

 

It is not a surprise that end-session pumps or dumps have become a regular feature.

 

Despite the 12% surge of the PSEi 30 from 4Q 2023, the lack of participation of retail money remains apparent.

 

The average daily traded issues bounced while remaining on a downtrend.  Or the increase in trading coverage comes with low volume. (Figure 5, middle graph)

 

On the other hand, decliners have led advancers for the last three weeks while the average daily trades continue to flounder.  Incredible. (Figure 5, lowest chart; Figure 6, topmost chart)

Figure 6

 

Though there were minor improvements on the retail side, January's trades remained a game for the big boys—who have been trading among themselves.

 

V. Foreign Inflows, Rising Yields of T-Bills, and a Flattening Treasury Curve

 

The index managers got some help from foreigners.

Foreign money reported inflows of Php 793 million and Php 4.31 billion in 2024.  (Figure 6, middle graph)

 

Global financial easing may have prompted some overseas funds—via carry trades—to chase returns here.

 

Ironically, despite the inflows, volume remains lackluster.

 

As a caveat, in a world of globalization, trades by offshore entities or direct and indirect affiliates of listed firms may be counted as foreign money.

 

The PSEi 30s' recent ramp tells a story of stage-managed trading activities (organized, coordinated, selective, and concentrated), which is hardly a sign of a bull market.

 

Rising T-bill yields, amidst a flattening curve, also hardly translate to a sustained Risk-ON scenario.  Instead, it lays the groundwork for negative surprises. (Figure 6, lowest chart)