Random twists and turns
The Philippine Stock Exchange index opened slightly higher last Monday from Friday’s close, with the PSEi hitting 7,862.64 on favorable news on the economy.
But that turned out to be the highest for the day as trading weakened.
Ultimately, the index gave up 41.04 points or 0.52 percent and closed at 7,820.29, with traders pointing to negative news abroad.
Investors turned a bit more optimistic the next day with the index ending higher at 7,828.48 with a slight gain of 8.19 points or 0.10 percent.
The market lost ground anew on Wednesday with a loss of 37.78 points or 0.48 percent.
This happened even if there were more positive than negative leads in the market, thus illustrating the seemingly random movement of the market.
This incoherent relationship between trading results and market fundamentals prevailed for the rest of the week.
The market closed in positive territory on Thursday with a gain of 49.12 points or 0.63 percent and a loss of 30.21 points or 0.39 percent on Friday; and for the week, the market ended with a net loss of 30 points or 0.38 percent.
Wall Street’s trading results may have a lot to do with this new behavior of our local market.
Similarly, the Dow ended up 140 points on Wednesday, among others, as a normal reaction to the observance of the sixth year of the bull market.
Wall Street, in the same manner, fell on Thursday in reaction to “the sharp decline in the euro and its impact on financial assets” accompanied by the renewed fears of an imminent rate action by the US Federal Reserve.
Wall Street’s trading results turned disjointed like ours when US investors similarly digested not-so-good economic data before the end of last week and yet gave them a favorable twist.
As reported, “US retail sales fell for the third consecutive month in February, which should cause serious concern about the strength of the economy.”
Yet, “stocks recorded their biggest gains in more than a month,” the report continued.
It was explained later on, however, that the disappointing monthly retail sales figures gave US investors hope that the Federal Reserve will further delay the increase in benchmark interest rates.
To mention, the Dow Jones Industrial Average jumped 259.83 points or 1.5 percent to 17,895.22, the S&P 500 up 25.71 points or 1.3 percent higher at 2,065.95 and the Nasdaq up 43.35 points or 0.9 percent at 4,893.29—putting them on positive territory from their 2014 closings.
Bottom line spin
Funny, trading results have started to become a guessing game again because favorable fundamentals have not necessarily translated into market gains.
Conversely, negative events have not resulted in trading losses.
This is reminiscent of how the market behaved during its nascent period of recovery from the subprime crises and quantitative easing period that followed.
Come to think of it, these twists in trading results of the market are reactions with logic behind them.
On hindsight, the nature of the market in said periods was more due to technical than fundamental factors.
The market at the moment, however, remains fundamentally strong and sound. The market has plenty of room to grow.
Its growth prospects are merely overshadowed by critical global events that in the end, may not at all have an actual serious impact on the Philippines.
As to the current market make-up, investors have been unloading financial sector stocks but have started to slow down on the selling of industrial sector stocks.
Demand for holding firm sector stocks continues to go up. There are also fewer investors willing to sell at lower or current prices.
In the meantime, profit-taking continues to play out in the property and services sectors, with the mining and oil sector on fire sale.
(The writer is a licensed stockbroker of Eagle Equities, Inc.. You may reach the Market Rider at [email protected] , [email protected] or at www.kapitaltek.com)
