Market Rider

The market’s peak for 2012

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As of the end of trading last Friday, the benchmark Philippine Stock Exchange index, or PSEi, rallied to a new high of 5,794.20, just a few points away from the expected yearend close of 5,800.

Because of favorable economic developments like low inflation, the index may easily breach 5,800 and even hit 6,200.

Thus, even ordinary investors are speculating on how the market will reach these targets.

The market made a big weekly gain equivalent to 158.75 points, or 2.81 percent, last week—certainly a good start for the month of December.

It was also the market’s biggest weekly gain since June 22 when the market closed the week with a total weekly gain of 189.44 points.

The biggest contributor was the mining and oil sector that posted a weekly gain of 193.28 points. Next was the holding firms sector with a weekly gain of 116.48 points, followed by industries, property, financials and services.

Since June, the sectors have performed as follows: financials sector, up 246.13 points, or 18.86 percent; industrial sector, up 1,070.76 points, or 13.65 percent; holdings firms, up 583.90 points, or 13.01 percent; property sector, up 298.07 points, or 15.46 percent; services sector, 10.47 points, or 0.60 percent; and mining & oil sector, down 6,393.07 points.

As a result, the PSEi has gone up by 552.79 points, or 10.54 percent, and the All Share Index was also up 263.94 points, or 7.64 percent.

Based on the data, the mining and oil sector is the laggard. As of end-June, the mining and oil index closed at 24,269.48. In July, it shed 950.39 points, or 3.86 percent, to close at 23,679.09. It fell by another 2,718.36 points, or 11.48 percent, to close at 20,960.73 in August.

At the end of September, the sector was again lower by another 1,120.74 points, or 5.35 percent, to close at 19,839.99. By October, it made a slight recovery, going up by 72.89 points to hit 19,912.88.

But by the end of November, the sector shed another 1,869.75 points, or 9.39 percent, to end at 18,043.13.

As of last week, though, it was up 193.28 points, at 18,236.41, helping boost the market.

The loss of stock plays in the mining and oil sector was largely due to the controversy spawned by the government initiative to change existing mining policies and operating laws.

Any chance for it to recover anytime soon is nil. Therefore, expect the price of mining issues to stay soft. This kind of softness may even linger long after the local elections in May next year.

Remedies to reinvigorate the sector seem so remote at the moment. Even P-Noy has not shown any sign that he is about to look at the situation of the industry. Until then, the mining sub-sector will continue to pull down overall performance.

This may not be the case for oil issues. The market prices of oil issues with drilling activities next year seems to be just above their 52-week lows.

A good section of the investing public continues to see oil issues as interesting stock plays. So, oil issues could counter the softness of mining issues and take away their negative impact on overall performance.

The service sector, on the other hand, may just produce surprises that will offset the poor results of the mining and oil sector. This may come from its casinos and gaming sub-sector.

Local issues engaged in this business have been the subject of previous trading plays. But looking at how they have so far performed, it seems that they may fail to deliver by the end of the year. Thus, this sub-sector may also not help make the market advance any further by the end of the year.

With last week’s trading results, though, the 5,800 mark is no longer an issue. To hit 6,000 may no longer be a problem, too. End-of-the-year window dressing activities have obviously started and these could propel the market to hit the high mark.

But breaching 6,200 could pose more of a challenge.

(The writer is a licensed stockbroker of Eagle Equities, Inc. You may reach the Market Rider at marketrider@inquirer.com.ph, densomera@msn.com or atwww.kapitaltek.com.)

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