BW-SSO Price Actions and Market Manipulations Signify as Twin Symptoms of the Raging Credit Bubble!

The Phisix closed up by a marginal +.12% to lift year to date gains to 5.77%.

The week’s activities appear fixated mainly to buoy the index. Within the basket, advancers trampled decliners by a ratio of 3 to 1 even as the broader markets went in favor of the decliners by a modest margin of 46.

Only one sector suffered a decline, the largest, the holding sector, which accounted for 39% of the PSEi. That’s mainly because the 4 majors suffered deficits for the week, namely, SM (-3.03%), AC (-.25%), JGS (-3.36%) and AEV (-1.42%).

Nevertheless, gains by the rest neutralized losses by the holding sector.

Despite the broad based advance within the PSEi 30, gains had apparently been dispersed.

This continues to exhibit of the ongoing intense volatility or price instability underneath the seemingly calm surface.

And these sharp price gyrations are related to operations to pump or bolster the index.

 

The facelifting operations via price fixing process on the PSEi operate virtually untrammeled.

For the week, a remarkable 70.21 points came about just to push the headline index higher. Such accounted for .97% of last week’s close! Remember, the PSEi was up by only .12%. Thus, 70.21 divided by 8.51 (.12%) equates to 8.25 or 8.25x the gains represented by the topline. Such also means without these 3 day price fixing at the close the Phisix would have been a lot lower.

Friday’s .24% mitigated decline should be an example. At pre-market intervention phase, the PSEi was down by a hefty .59%. However, a massive pump on ALI (+2.25%) and TEL (+1.5%) would have turned the headline index into positive had SM not suffered a dump (-.74%). Nevertheless, the pump reduced the pre-runoff losses by more than half!

The numbers involved in manipulations have been breathtaking!

ALI closed the week up 3.27%. This means that the interval between the pre-market intervention and the closing bell which pushed ALI by +2.25% last Friday delivered 68.81% of the week’s gains! 

TEL closed up 2.7% for the week. This means Friday’s price fixing translated to 55.5% share of the gains for the week!

This shows that 5 hrs of trading in 5 days are really a waste of time. That’s because the gist of the gains or losses has been derived from last minute pump (and dumps)! Worst, a TGIF pump!

Yet, unknown to most, the massive volatility being exhibited by prices of PSEi issues are manifestations of the mountain of distortions generated by the continued manipulation in support of the index. It’s a concrete sign of pricing disorder. The market is being systematically deformed.

And these direct manipulations piggyback on the indirect manipulations by the BSP channeled through negative interest rates.

If the Philippine stock markets stand on solid grounds as alleged by the mainstream then all these would not be necessary. Res ipsa loquitur

Aside from these, I have been pointing out of the emergence of multiple accounts of BW-SSO price actions at the PSE.

Arthaland Corporation (ALCO) should be a prime candidate (lower window). ALCO had delivered a stunning 34.78% gain for the week, a shocking 387.5% from the start of the year and staggering 738.1% over the past 52 weeks. ALCO’s price looks like an ICBM that has just been launched from the missile base.

These growing incidences of vertical price movements have not been isolated from the progressing entropic developments at the PSEi as a result of massive manipulations.

Most will be rationalized from a demand shock—new information that alludes to G-R-O-W-T-H regardless of the validity of its premises.

In reality, both market manipulation and vertical prices are symptoms of the mortal sins of unabated credit expansion or currency debasement.

To quote again John Maynard Keynes: As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

And also the great Henry Hazlitt: Like every other tax, inflation acts to determine the individual and business policies we are all forced to follow. It discourages all prudence and thrift. It encourages squandering, gambling, reckless waste of all kinds. It often makes it more profitable to speculate than to produce

Understand first that vertical price spirals were conspicuous in several PSEi issues during the 33% 6 month January to July 2016 meltup. These price spikes led to numerous record highs. Unfortunately, such gains failed to hold, hence most came crumbling down. Some were even afflicted by Newton’s Law.

However, the plunge protection team came into action. They saved the Phisix from another the bear market test through a low volume 2 week meltup, viz from end of the week December through New Year week.

So while these pumps helped buoy most PSEi issues, it wasn’t enough to lift the index past 7,400.

What it did instead was to spawn spillovers to select second and third tier issues which pushed some issues like ALCO to the stratosphere.

Prices don’t operate from a vacuum

 

The PSEi’s % yoy and monthly nominal performance has largely tracked or undulated along with the rate of credit growth of the financial intermediation sector, with a little time lag, since 2014.

That’s with the exception of the last quarter of 2016 when the PSEi plunged even as financial sector credit growth expanded at an accelerating pace: 11.63% October, 13.34% November and 15.63% December

The huge amount of credit being generated by the financial intermediation (finance and insurance) sector had to find an outlet.

And such could be the most likely reason for the 9 day buying splurge at the PSEi. And such could also account for the price spikes that have occurred in many speculative issues.

So the “mark the close” could likely fall under the domain of these participants.

Given the furious clip of general credit growth that continues to put pressure on the peso and the two measures of inflation (CPI climbed again to 2.7% in January while GRPI soared to 4.3% last December the gap continues to widen), the scale of such credit growth will likely hit a wall very soon.

And it would be interesting to see how these numerous varieties of modern day BW-SSO bubble strains would perform under such circumstances.

Here is a guess: Newton’s Law will prevail.

PSA and Nikkei PMI December Manufacturing Data Goes in Opposite Directions

A short note on the government’s manufacturing data.

 

I have frequently harbored suspicions that the Philippine government has been exaggerating their manufacturing data.

For December, the PSA reported that industrial production soared by a blistering 19.4%. (upper right window). This came with the recovery of exports (+4.5%), part of the market for manufacturing output.

Yet as I have been pointing out here, those numbers are meaningless if they are not confirmed by credit growth, a key source of their working capital.

December’s credit growth rate plunged to 6.32%, the lowest since May. Bank lending to the manufacturing sector peaked in September (+12.48%) and has turned lower since (lower window). December credit growth has almost halved the September rate.

Based on Nikkei’s PMI, Philippine manufacturing data fell to 55.7 last December, for a third straight month of decline.

In tandem with credit growth, Philippine PMI peaked in September.

Worst, PMI plummeted to 52.7 last January (upper right window)! PSA has yet to report its January findings

The Nikkei numbers appear to coincide with BSP numbers and not the PSA.

Interestingly, based on reported NGDP, manufacturing output was at 7.8%. But based on the PSA’s industrial survey, the numbers were October 6.3%, November 11.3% and December 19.4% for an average of 12.33%

There seem to be lots of holes in the way the government produces their statistics.

The odd thing here is that everyone seems to swallow hook line and sinker what the government discloses.

Season of the Third Liners: Multiple Manifestations of BW-SSO Strains Part II

I probably don’t need to show anew the charts of BW and SSO.  

Yet the mission or the goal of the re-publishing of these BW-SSO charts is as a refresher to usually forgotten blighted (politically distorted) market dynamics. These charts reveal not only of the shifting stages of bubbles—first the boom—but its ultimate consequence: the bust.

Importantly, the extent of the bust have almost always paralleled or equaled on the scale of the boom: or they are plagued by the Newton’s Law.

And the proliferation of vertical price actions (booms) haven’t been about firm specific price anomalies,instead, they serve as a thermometer or as a barometer to the state of the broader markets.

Or, one must not see these strains as “local” or issue specific developments, but rather as a “big picture” phenomenon.

In short, these signify as symptoms of a progressing chronic disease, or subtle entropic forces gnawing at the very foundations of the current market conditions.

Early this week, I sent charts of PHES, TUGS, ALCO, RLT, MG and WPI which have manifested pathological strains in terms of price vertical spirals (Season of Third Liners: Multiple Manifestations of BW-SSO Strain Surfaces! February 7, 2017)

Below are the other fledging or formative BW/SSOs at work via charts of indicated securities

Chart 1: PA, LMG, ALT, PRMX, BSC and ACE 

 

Such symptoms have appeared even in some second tier issues

Charts 2: PNX, SGI, DFNN, PHEN, MED and PF

 

Recall that a fantastic spurt in vertical price spikes surfaced in PSEi 30 issues during the January to July 2016meltup. The 33% surge in 6 months prompted for a string of record highs mostly within the 15 biggest market caps. Unfortunately, a majority of these failed to hold on into these gains. Momentum eventually caused significant retracements. Some even suffered from Newton’s Law.

Now the same convulsive impulses have percolated into the second and third tier issues given the relative underperformance by the PSEi 30 (which is still below 7,400).

The obsession for free money has filtered into issues of lesser status.

Nonetheless, the 9-day meltup that occurred at the end of the week December close to New Year week has somewhat reenergized selective vertical price movements in the PSEi basket. And the jury is out as to whether these would spread and transform into a generalized dynamic.

Yet in recollection, vertical price actions have consistently failed over the long term in all 50 years of PSEi’s history. A PSEi breakdown should extrapolate to a spillover to the broader market.

Finally, and interestingly, a demonstration of security specific episodes of the boom-bust cycle through the prism of two issues.