This Power Elite directly employs several millions of the country´s working force in its factories, offices and stores, controls many millions more by lending them the money to buy its products, and, through its ownership of the media of mass communication, influences the thoughts, the feelings and the actions of virtually everybody. To parody the words of W. Churchill, never have so many been manipulated so much by few--Aldous Huxley, Brave New World Revisited
In this short but chart-rich issue:
The Philippine PSEi 30 Jumped 3.9% Courtesy of the "National Team," The "Powell Pivot:" A Christmas Gift to the Wall Street of the World?
I. The "Powell Pivot:" A Christmas Gift to the Wall Street of the World?
II. Market Euphoria Spillovers to Asian Currencies and Bonds
III. Buoyant Asian Pacific Equities led by the Philippines, Australia, Hong Kong and Record-Breaking India
IV. Four Days of Pumps (and a Dump); The Fabulous Friday’s Ayala Corp Pump
V. Pumps Concentrated on Heavyweight Holding Firms
VI. Retail Sidelined Anew: Lethargic Breadth and Anemic Volume
VII. Foreign Trades Agnostic to the Pumps
VIII. Trade Volume Concentration Benefiting Heavy Caps
IX. Broker Concentration: Symptoms of the "National Team" in Action
X. PSEi 30’s Weekly 3.9% Return Courtesy of the Philippine "National Team?"
The Philippine PSEi 30 Jumped 3.9% Courtesy of the "National Team," The "Powell Pivot:" A Christmas Gift to the Wall Street of the World?
Was the "National Team" the principal force behind the PSEi 30's weekly gain of 3.9%?
I. The "Powell Pivot:" A Christmas Gift to the Wall Street of the World?
Figure 1
The ZeroHedge wrote (December 16, 2023): Powell "pivoted" and everything exploded (bonds, stocks, rate-cut expectations, gold, oil, and crypto) as the dollar dumped…And world equity and bond markets added $4 trillion this week alone, and are up over $15 trillion since the November FOMC...(Figure 1, topmost window, bold original)
Global financial conditions have been dramatically easing.
Many Emerging Markets central banks have gone ahead of their developed market peers in slashing rates. Global financial markets have front-run the Fed's change in policy stance over the past weeks. Gold recently set a new price high.
And last week's Powell Pivot or the US Federal Reserve Chair Jerome Powell's drift to a dovish stance also whet their insatiable speculative appetites.
The "Powell Pivot" seemed like a Christmas gift to the world's Wall Street.
II. Market Euphoria Spillovers to Asian Currencies and Bonds
The global euphoria spilled over to Asia.
The US dollar index $DXY fell by 1.34% this week.
Except for the Philippine peso (+.64%) and the Malaysian ringgit (+.11%), most Emerging Asian currencies rose against the USD dollar. (Figure 1, middle graph)
Reversing last week's gains, the USD dropped most against the Thai baht (-1.84%).
Asian bonds rallied feverishly. 10-year Asian yields fell unanimously, or prices rallied. (Figure 1, lowest chart) South Korea, Hong Kong, and Singapore treasuries rallied the most.
III. Buoyant Asian Pacific Equities led by the Philippines, Australia, Hong Kong and Record-Breaking India
Figure 2
Asian-Pacific equity benchmarks manifested this intensifying speculative mania. (Figure 2, topmost chart)
Fourteen of 19 national bellwethers closed higher with an average of 1% WoW return.
The Philippines' PSEi 30 bested its regional contemporaries, followed by Australia's All Ordinaries, Hong Kong's Hang Seng, and India's Sensex--which has been on a back-to-back record-breaking streak.
Yet, the PSEi 30's blazing weekly return of 3.91% was the largest since July 14 this year. In the context of the PSEi 30's "full" market capitalization, the "Powell Pivot" granted its member-majority owners an impressive Php 287.4 billion bonus!
But how robust was the rally? Could this mean the return of the bull market, as many in the establishment predict?
IV. Four Days of Pumps (and a Dump); The Fabulous Friday’s Ayala Corp Pump
First. Pumps and Dumps. 35% of the PSEi 30's weekly return came from net- aggregate pumps. (Figure 2, middle charts)
Four days of massive pre-closing pumps and dumps have magnified the end-session volatility of the PSEi 30.
One of the most remarkable events was Friday's (December 15) stunning gargantuan pump on Ayala Corp [PSE: AC]. [Figure 2, lowest pane]
AC was last quoted up by 2.8% at the start of the pre-close floating phase. At the runoff, AC's gain spiraled to 7.93%! So, the index managers used the five-minute float to control and push AC's upside that fed into the index with an additional .4% gain from .68% to 1.06%.
V. Pumps Concentrated on Heavyweight Holding Firms
Second. Pumps on Holding Firms.
Figure 3
The top 10 issues were the primary beneficiaries of the week's gains. Essentially, the three biggest holdings firms—SM Investments (+9.7%), AC (+14.8%), and JG Summit (+8.5%)—posted the largest advances. (topmost graph)
Although a majority (19/30) of the PSEi breadth leaned positive, the benchwarmers barely participated in this upside.
Three. Pumps boosted the free-float share of the heavy caps.
Pumps centered on these holding firms (SM, AC, and JGS) reflected the spike of their free float share of the PSEi 30. (Figure 3, middle pane)
In effect, together with the biggest holding firms, the top 10 issues closed the week with a remarkable 70.8% share of the free float market cap. (Figure 3, lowest diagram)
Again, a few elite issues determined the fate of the PSEi 30!
VI. Retail Sidelined Anew: Lethargic Breadth and Anemic Volume
Four. Breadth and volume reflected the lack of retail participation.
Figure 4
The aggregate weekly advancers led decliners by only 11 despite the PSEi 30 sizeable gains. The average daily traded issues barely bounced from the 2014 lows! (Figure 4, topmost graph)
Though mainboard volume improved (up 42.8% WoW), helped by cross-trades, it remained below the week of December 1st level. Besides, volume remained within its downtrend channel. (Figure 4, middle window)
VII. Foreign Trades Agnostic to the Pumps
Five. Little help from foreign savings.
As stated here, shrinking volume is a symptom of declining savings.
In view of this, savings or credit should improve, or the PSE would have to rely on fickle flows from foreign savings. Net weekly flow posted a negative Php 74 million as Friday's Php 448 million of inflows was short of offsetting the outflows of the three sessions.
Importantly, while the foreign share of mainboard volume continues to rise, this comes amidst the backdrop of declining volume. And since foreign money has been net sellers, they have countered actions of the local version of the "national team." (Figure 4, lowest chart)
Figure 5
The BSP's Foreign Portfolio data showed a net outflow of USD 714 million from January to October 2023. (Figure 5, topmost window)
VIII. Trade Volume Concentration Benefiting Heavy Caps
Six. Heavy caps signify the center of the main board volume activities.
The latest gains by the heavyweights resonate with the market liquidity or volume.
For instance, the volume share of the three largest free-float market caps, represented by the Sy group, has been rising in tandem with the PSEi 30. (Figure 5, middle diagram)
The top 20% share of the mainboard volume has also climbed alongside the PSEi 30, which marks an increasing concentration of trading activities towards the heavyweights. (Figure 5, lowest graph)
Again, the concentration of trade volume and price actions on the same issues are signs of coordinated activities.
IX. Broker Concentration: Symptoms of the "National Team" in Action
Last but not least is the increasing broker concentration.
Figure 6
The top 10 brokers had a 61% average share of the mainboard volume this week. Its share has been on an uptrend as the PSEi 30 tumbled. (Figure 6, upper window)
Alternatively, the other (114) brokers have been fighting for the crumbs.
The dominant majority of these elite brokers are institutional (caters to banks, non-bank finances, and other non-financial institutions), which means domestic and foreign institutional (private or public) clients are likely the source of the bulk of transactions.
Bank lending to the financial industry has coincided with the gyrations of the PSEi 30. Could some of it represent margin trades or trades by the industry—funded with leverage? Along with the PSEi 30, bank lending growth to the finance industry has declined throughout 2023. (Figure 6, lower graph)
Has the slowdown in volume also reflected the reduced participation by the financial industry?
As retail participation dissipates, these elite institutions represent the marginal price setters. Some of them could be the likely local version of the "national team."
Could the Maharlika Investment Fund have been part of it?
Unfortunately, mispricing from such artificial "pretend and extend" activities distorts capital valuations, resulting in deeper resource misallocation that leads to more capital consumption. Therefore, aside from eroding savings, small brokers may carry the yoke of the increased activities by the "national team."
In any event, Hong Kong's bear market has caused a wave of (small- and medium-scale) brokerage layoffs and closures.
Sadly, unless volume improves, Hong Kong's predicament represents a likely template for the Philippines. It pains me to say that the bear market could strike hard on the marginal brokers of our industry.
X. PSEi 30’s Weekly 3.9% Return Courtesy of the Philippine "National Team?"
In the end, trades, price activities, volume, and broker activities, which the market breadth reflected, showcased a likely methodical and coordinated tactic designed to embellish the PSEi 30 by the "National Team," rationalized and piggybacked on the "Powell Pivot."
Though seasonal factors may help the interim momentum, it remains a bear market rally or a "bull trap" considering the increased fragility of the economic and financial structure.
The Chinese government has repeatedly attempted to quash their bear market through the "national team" and other measures. Authorities have even warned the financial industry from making bearish calls. Bankers have even been banned from displaying their wealth!
Still, China's equity benchmarks continue to find a floor.
