THESE LAST FEW DAYS ENDING the year and the Christmas season, trading has been light and slow as anticipated.
Trading volume and value have been about 30 percent lower than the usual P3 billion plus in turnover that has created market flurries during the year, and which subsequently have carried up the main market index to where it is now.
Were it not for the relative buoyancy of stock prices that is perceptibly felt not necessarily caused by end-of-the-year window dressing efforts, the market?s lackluster activity could be mistaken for the makings of an impending market reversal.
Market review
As it is, the market is trading on diminished volume and value, with transactions remaining within a narrow price band confined within 70 points above the 3,000 psychological level of the Philippine Stock Exchange index or PSEi.
As a result, market momentum has remained weak with prices appearing to be at ?overbought? level.
Stifled in the process are several market trends that should be unfolding in several first and second line stocks. For instance, the share price of Globe Telecom Inc. (GLO) has been on the up-move from P885 to P940 just before last week. The price run-up was cut short and stalled forcing the price of GLO shares to trade at P920 or lower in the past few days.
The same is observed to have happened with Philippine Long Distance Telephone Co. (TEL), Ayala Corp. (AC), Alliance Global Group Inc., Jollibee Foods Corp. (JFC), Bank of the Philippine Islands (BPI), Banco de Oro Unibank Inc, Metropolitan Bank & Trust Co. (MBT), SM Investments Corp. (SM), and Megaworld Corp. (MEG) and Energy Development Corp. (EDC).
The situation has also given rise to profit-taking that resulted in pronounced share price drops in select stocks.
For instance, First Gen Corp. (FGEN) suffered this fate because of its just concluded stock rights issue. Investors unloaded their FGEN shares to take advantage of the price differential.
Based on its closing price of P15.75, the adjusted price of FGEN after the rights issue was P10.40.
This meant a price differential of P5.35 or a spread equivalent to some 51.0 percent. This has made FGEN a natural target for profit taking and sell-off.
Bottom line spin
In summary, the current market weakness is not the result of a dwindling market. It is not also the result of a deliberate migration of money to some other hot investment areas.
This is but the result of a seasonal occurrence that arises at this time of the year owing to the absence of market makers who are mostly out for the holidays.
Supporting this view technically is the apparent buoyancy of stock prices while volume and turnover value stand small.
And while stock prices seem overbought or unable to go up any higher than at current levels, they have remained stable and are moving sideways sans any sign leading to a reversal or change in trend direction.
On a fundamental note, world markets are moving higher albeit cautious. Their performance provides evidence to the continuing economic recovery happening in global markets, especially the United States.
If you will also remember, the market stood more or less at the 1,780 level of the PSEi when it started out early this year. At the current index level of about 3,070, the market has gone up by as much 71 percent already.
Therefore, any lingering movement of stock prices at current or even at slightly lower levels should be considered a healthy act of market consolidation.
A price climb equivalent to 71.0 percent is no small climb in any type and form of market condition. Such rate of price advance necessarily needs some type of market breather or consolidation that would allow fresh hands to replace old hands that would bring the trading play of stocks to the next level.
In short, there is nothing wrong or something to worry about in the current market slowdown. We are just having a quiet week of trading.
?Happy New Year!? and a profitable year ahead to all of us.
(You may reach the Market Rider at marketrider@inquirer.com.ph or directly at densomera@yahoo.com)
