Price Fixing Backlash: From PSEi 7,800 Back to 7,550; Updated PERs of the PSEi 30

Markets have their peculiar way of resolving anomalies. (That’s why I trust the markets)

Remember, yesterday’s mindboggling record 1.55% “marking the close” pump which 2.15% gains sent the Phisix spiraling back to 7,800???

 

Well, the domestic stock market vehemently pushed back on this today as the PSEi plummeted 2.01% to expunge entirely the 1.55% pump.

Worst, the headline index gave back about 94% of yesterday’s 2.15% advances!

It seemed like poetic justice meted against manipulators.

This doesn’t mean today’s activities had been without attempts at price fixing. 

Financials had furiously been pushed at the close (BDO +1.8%, BPI +.95%, SECB +1.14%). Unfortunately it was insufficient to do any material improvements. Price fixing at the financial sector lopped off only .05% off the pre runoff loss of 2.06%

What goes around comes around.

And another thing. Here is the PSEi 30’s PERs, as published at the PSE, based on September 16 closing prices. (given the weekend, one can go to the PSE website and confirm the numbers)

 

The PERs represent 2015 eps. (This incorporates SECB which replaced Bloom. By the way SECB has been a favorite by manipulators. Hence another new record high)

When SM declared a 50% dividend last August, the PSE didn’t adjust on SM’s PER to reflect on the additional shares issued. So it unduly “cheapened” SM’s PER. I wrote the PSE and told them that the adjusted PER was at 23.78 per share. So they revised the indicated numbers. As of today (September 16) close at 660, SM’s PER (2015 eps) was 27.75—as manifested at their website

This means that from July to September 16, the PSE has been broadcasting PERs based on 2015 eps. Yet the declared figure at the BSP’s website, as shown yesterday, seemed still anchored on the pre 2015 eps figures. The intent looks like to deliberately dampen the severely mispriced PERs.

Of course, when statistics are tortured enough, it will confess to anything. So one can cite pre 2015 numbers, or probably, “expected earnings” (ala Bloomberg) in order to sterilize the degree of mispricing. As a side note, that’s if expected earnings are fulfilled, but expected earnings have missed a lot in 2015-1Q 2016 with exception of 2Q 2016

But then again all these won’t take away the fact that the PSE remains the most expensive in Asia. Putting lipstick on a pig doesn’t take away the pig’s features.

And as today’s lesson shows, markets functioning as a process, eventually, resolve on existing imbalances—at its desired time.  It may be tomorrow, it may sometime soon. But surely what is unsustainable won’t last.

Have a great weekend!

July OFW Remittances Plunged 5.4%!

To give credit to the BSP, this time they didn’t hide the bad news. 

In the recent past, they produced positive data first, then after a few months, revised them downwards—so as to elude the public’s attention.

 

From yesterday’s disclosure: (bold mine)

Personal remittances from overseas Filipinos (OFs) for the first seven months of 2016 grew by 2.9 percent year-on-year to reach US$16.9 billion, Bangko Sentral ng Pilipinas Governor Amando M. Tetangco, Jr. announced today. Personal remittances from land-based workers with work contracts of one year or more reached US$13.1 billion while compensation of sea-based workers and land-based workers with short-term contracts (excluding their expenditures abroad) totaled US$3.6 billion. However, personal remittances for July 2016 amounted to only US$2.4 billion, 5.4 percent lower than the level posted in the same month last year.

Cash remittances from OFs coursed through banks summed up to US$15.3 billion for the period January–July 2016, representing a growth of 3 percent year-on-year.  In particular, cash remittances from land-based and sea-based workers totaled US$12.1 billion and US$3.3 billion, respectively. About 80 percent of cash remittances came from the United States, Saudi Arabia, the United Arab Emirates, Singapore, the United Kingdom, Japan, Qatar, Kuwait, Hong Kong, and Germany. 

The BSP still engages in the framing of the presentation of the OFW data though, by focusing on the positive. In previous reports, in the condition that growth is positive, they’d report or mention the monthly data ahead. Now it has been relegated to the end of the paragraph.

Yet note that in a one year period, i.e. July 2015 and 2016, monthly remittance (cash and personal) have posted 5 out of 12 months of negative growth. This is the key reason the downside trend has been magnified. Even the cumulative segments have been rapidly trending down.

And if the trend continues, as I expect it will, then both monthly and cumulative numbers will eventually register negative growth. The BSP will be left with little or no framing option for presentation purposes.

Yet more signs in this direction from the BSP’s own report…

Remittance inflows for the first seven months of 2016 remained stable despite the decline in deployment of skilled Filipino workers. A preliminary report from the Philippine Overseas Employment Administration (POEA) showed that the number of deployed land-based workers (new hires) dropped by 10.3 percent year-on-year to 235,895, while that of sea-based workers fell by 44.4 percent to 134,360.

So not only has the amount being sent been reduced, now even deployment has started to register downside growth. Reduced manpower deployment will amplify the declining trend.

Truisms influencing OFW trends, as I previously updated (As Growth Rates Slow, The BSP Toys with OFW Remittance Data Anew! June 19)

One, the world economy has been slowing down fast.

Two, the law of diminishing returns simply means that considering the size (over 10 million people or 10% of population), OFW growth cannot expand FASTER than the population growth forever. That’s unless authorities have tacitly been working on to significantly drain the resident population!

Three, the quality of overseas job openings may also evolve.

Fourth, currency factors play a role. Weakening currencies where OFWs are employed may see their remittance diminish.

Fifth, global political developments also matter. The rise of nationalism (anti-immigration, right wing politics) may prove to be a significant barrier to overseas employment.

Sixth, the BSP can’t seem to take into context the contributions of domestic economy. For instance, the government has been shouting at the top of their lungs that the economy continues to boom, where jobs have allegedly been growing! Yet if true, then why wouldn’t OFW growth slow? Has the government come to believe that the Philippine residents can multiply its population at the rate of how Gremlins populate?

In a genuine economic boom, where job and income substantially grows, there will be little incentives for residents to work overseas or seek migration. The fact that there remain a good number of people looking for job overseas essentially defies the government’s account of an economic boom!

Now what happens to the race to build the supply side (malls, hotels, vertical and residential properties and etc…)?

With exports down (as imports surge) and remittances down, what happens to US dollar stocks?

Could this have also been another reason why the BSP engaged in a stealth stimulus in 4Q 2015 and Q 2016?

The PSE Deodorized PSEi's July PER

I thought so

Given how PSE officials have censored eps performance for 2015 for PSE universe, I harbored doubts if they will actually report on PERs based on 2015 EPS as basis for their July numbers (published at the BSP). My suspicions were validated. They didn't. Instead they resorted to accounting/statistical acrobatics.

   

I regularly take note of the PERs of all PSEi issues as published at the PSE on a weekly basis. This I base as the official PER

And that's what it looked like at the close of July (averaged). The above is the sum of PERs divided by 30 (issues)

Moreover, the numbers that I get are always smaller than what the PSE published. So it's the first time not only for the huge difference but of a reverse of the numbers shown by the PSE on their weekly data and the official PER

Manipulation of stocks. Manipulation of statistics. 

Anything to justify a pump