Waiting for market to get its groove back
The market again lost steam last week as the benchmark Philippine Stock Exchange index (PSEi) ended with a weekly loss of 140.40 points or 1.99 percent, while the All Shares index lost 59.95 points or 1.49 percent. Both indices closed last Friday at 6,911.38 and 3,963.65, respectively.
Once again, foreign investors’ trading activities largely fueled the market’s fall. Their trading transactions for the week remained high at 51.44 percent of total market transactions and their selling activity was also 30 percent higher from the week before. They were performing mostly as net sellers, causing the market to drop lower.
The services sector was the biggest loser last week. It closed last Friday at 1,777.48, down 3.08 percent from a week ago and also lower by 12.11 percent in the last four weeks.
The industrial sector was the second biggest loser. It ended with a weekly loss of 2.67 percent when it closed last Friday at 10,528.76. This also brought its total loss in the last four weeks to 6.20 percent.
The property sector managed to trim its losses last week, but not without slipping to second worst performer in a month. Closing at 2,826.12, it was down 1.55 percent last Friday and 6.81 percent down in the last four weeks.
The holding firm sector, on the other hand, was down 1.81 percent. In four weeks, it lost 5.36 percent.
A consistent loser, but surprisingly with the least losses in the last four weeks, was the mining and oil sector. It was down 1.67 percent for the week, but managed to lose only 5.30 percent in the last four weeks.
The most traded in the market last week was the holding firm sector with 37.43 percent of total market transactions. The property sector was next with 17 percent, followed by the industrial sector with 16.16 percent.
The services and financial sectors followed at 14.13 percent and 14.05 percent, respectively. The mining and oil sector managed to get only a 1.23 percent chunk.
Market capitalization also dropped to P13.38 billion. This was 1.18 percent lower compared to the week before.
Average daily value turnover for the week shrunk to P5.4 billion. This was 30 percent lower than the prior week’s P7.76 billion.
While foreign investors’ trading activities continued to dictate the movement of the market, their participation to total market transactions was actually 8.32 percent lower than the week before. This was 56.11 percent of total market transactions.
In total, the market already lost 319.19 points or a drop of 4.41 percent from the start of the year.
Stock plays
Like I thought they would, some of the big stocks displayed price volatility last week. With a total volume of 228 million shares and a total value turnover of P551 million, the Philippine Long Distance and Telephone Company (TEL) was supposed to be a possible target for day trade.
On Sept. 10, the share price of TEL dropped by as much as P86.00 apiece compared to the previous day. It had a closing price of P2,306.00.
Calculating the trading cost that includes a broker’s commission of no less than one-half of 1 percent, the exercise would have resulted in a net return for the day of at least 2.43 percent, or 48.6 percent in one trading month.
A gain could have also potentially come from the Energy Development Corporation (EDC). Its share price dropped 4.72 percent lower from the previous day. This created a net spread of about 3.55 percent, or 71 percent in one trading month.
The amount of trade would have been limited, however. EDC only had a total volume of transaction of 24 million shares with a total value turnover of P125.8 million.
A one-week swing trade with Double Dragon Properties Corp. (DD) stocks also showed promise. At its closing price of P16.60 per share last Friday, it was up 12.16 percent for the week. Total value turnover for the week was at least P346.96 million.
A net spread for the one-week swing trade would have been 10.99 percent or 43.96 percent in one trading month.
If you bought DD stocks four weeks ago and sold them at their closing price last Friday, the possible spread would have been astounding. DD stock price rose by as much as 29.49 percent during the period. This meant a similar return on investment of 29.49 percent for the month, or 353.88 percent for a year.
Another was Nickel Asia Corporation (NIKL). If you sold your NIKL shares a week ago and bought them back last Friday at the closing price of P7.48, the exercise would have netted you a return of at least 7.31 percent. If you sold them four weeks ago, your net spread would have been 16.72 percent, or 200.64 percent for a year.
Bottom line spin
Like what I have said the last time, the market may yet reach a turning point. A volatile market may continue up to this week.
The Chinese market has also yet to stabilize. It has been a critical factor in the trading performance of most regional markets, including ours.
The total recovery of the Chinese market remains uncertain. In fact, the interventions made by policy makers could actually delay a retreat needed before swinging toward a final recovery.
The impact of the Fed’s decision to raise interest rates will also possibly come into play this week. The move will still create some market volatility, which may continue until the end of the month.
Some claim it’s the right time to buy considering the market was 4.4 percent lower from where it started this year.
If the fundamentals of the company you are eyeing have not changed along with their prospective outlook in the next one to two years, a buy at this moment could be considered a good gamble. Add to this the fact that the company’s stock price has considerably gone down since the market peaked.
On the other hand, market wisdom dictates that it’s safer to wait for a clearer sign of recovery before buying even if it would mean buying at a higher price.
