Is the worst over?By Den Somera
Philippine Daily Inquirer
August was a dull or—as I have described it before—an “uneventful” month. There was no excitement as there was little activity owing to the scarcity of positive news that could spur active trading.
Aside from that, trading sessions were limited. Trading was first suspended on August 7 due to bad weather caused by Typhoon Gener. This was followed by the loss of three more trading days in the last two weeks of the month, namely by the observance of the end of Ramadan (the month of fasting and prayer) or Eid’l-Fitr (the first day of the Islamic month of Shawwal) on August 20, the death anniversary of “Ninoy” (father of P-Noy) on August 21, and the National Heroes Day on August 27.
Fortunately, as the month of August ended last week, the market managed to end with a solid gain. The benchmark Philippine Stock Exchange index (PSEi) closed higher by 46.88 points, or 0.09 percent, from the previous day at 5,196.19. It also ended higher by 52.83 points, or 1.03 percent, on a weekly basis as the market closed at 5,143.35 the week before. This gain of the market, even though slight, was significant. The market has been on a downward glide after a promising performance at the start of the month.
It was only when the market closed for the week on August 3 that the benchmark index was up 66.36 points, or 1.27 percent, on a weekly basis at 5,285.91. Thereafter, the market went into a continuing weekly fall. It retreated and fell 22.56 points, or 0.43 percent, at 5,263.35 as it closed for the week on August 10. The same story happened the following week. At the close of trading on August 17, the market again dropped by another 56.54 points, or 0.01 percent. This was followed by another drop for the week ending August 24 when the market fell by another 63.46 points, or 1.22 percent. The benchmark index then closed at 5,143.35.
On hindsight, this turned out to be the market’s lowest close for the month. This proved me right about my observation then that the market was near or was already at its critical point. And that, if this was the case, I said that “the market could still be more at a support level than at the point of breakdown.” As it happened, the market stopped from its fall and quietly turned around last week. The question now, however, is if this turnaround of the market is for real or not?
“And, why not?” says a friend who has been following the market, too. “Despite weak external market developments, the economy has stayed robust,” he continued.
On Thursday, the government announced that the economy grew by 5.9 percent in the second quarter. This was higher than popular forecasts and at par with government estimates. This also brought the first-half growth to 6.1 percent. More importantly, this was definitely much better than the 3.6-percent growth in the same period last year. This was also the highest in Asean.
Growth, according to the report, was supported by government spending, construction activities and strong performance by the services sector. The services sector registered the highest growth at 7.6 percent. This was “supported by gains in transport, storage and communications at 9.6 percent; real estate, renting and business activities at 8.5 percent; and other services at 8.3 percent.”
Construction posted the fastest rate at 10 percent. Its impact to overall growth, however, was lessened by the effect of the slower growth of 4.6 percent by industry and 4 percent by manufacturing. This was further lessened by the impact of mining and quarrying, which actually fell by 7.3 percent. Agriculture output was not of much help, too, to overall growth. It only grew by 0.7 percent.
Meanwhile, government spending grew by 5.9 percent, with spending on public construction alone by 45.7 percent in the second quarter. Lastly, capital formation grew by 2.3 percent, which was a great improvement from its minus 10.1-percent performance in the same period last year. Not only to sustain but bolster the growth of the economy for the third quarter, the government will continue to rely on government spending.
Considering last week’s trading results, it is very likely that the market’s direction will be confirmed in the next two weeks. This will coincide with the end of the Chinese Ghost month, which basically is a consolidation phase.
(The writer is a licensed stockbroker of Eagle Equities, Inc. You may reach the Market Rider at email@example.com, firstname.lastname@example.org or at www.kapitaltek.com.)
Short URL: http://business.inquirer.net/?p=80198