Save for last Monday, April 27, when the benchmark index settled at 7,958.07 with a daily gain of 10.82 points or 0.14 percent, the market fell all the way down last week, overwhelmed by foreign investors’ selling activity, stirred by the recent weakness gripping most equity markets.
Notice that the market managed to end on positive ground when foreign investors became net sellers on Monday with their market participation at 53.52 percent of total transactions.
But, as observed in the past, as foreign investors’ trading activity persisted towards the same direction and their trading participation to total market transactions also continued to increase, the bearing of the market started to change.
The market, therefore, slipped on Tuesday as foreign investors continued to be net sellers and their market participation also inched higher to 54.31 percent. The market fell to 7,886.57 with a daily loss of 71.50 points or 0.90 percent.
On Wednesday, foreign investor’s trading activity continued in the same direction. Their market participation also further increased to 57.70 percent. As a result, the market fell 61.10 points or 0.77 percent at 7,825.47.
Again, foreign investors’ continued to be net sellers on Thursday, the last trading day of the week as well as the end of the month of April. Foreign market participation, this time, also rose significantly to 60.59 percent.
The market ended with a daily loss of 110.65 points or 1.41 percent. This was about half of the market’s total loss for the week of 232.43 points or 2.93 percent.
When you compute for the market’s net loss for the month of April, you will notice it was even lower than what it sustained last week. The market’s net monthly loss only amounted to 225.67 points or 6.67 points less than last week’s losses.
This may look favorable but, from another angle, it is precisely the reason for you to find the market’s current trend worrying.
The market started out strong, riding on a 211.92-point gain from the month of March. Just one day into the month, it established a new record close at 7,993.09. This was on April 1, Wednesday.
A string of record highs were established in the next five trading days. The market hit the session’s high of 8,136.97 on April 7, and another record close on the same day. Another record close was established on April 10 when the market settled at 8,127.48.
The market started to struggle the following week. Its daily trading movements were pushed down one after the other within the week, save on Thursday, April 16, when it regained footing with a 41.74-point gain.
On hindsight, the market’s ascent reached an equilibrium point on April 10. It was all downhill from then on, except for some futile rallies on April 24 and 27.
In summary, the market’s weekly performance in April was downhill. It was up 115.13 points or 1.46 percent on the week ending April 3; followed by another gain of 134.39 points or 1.68 percent on the week ending April 10; then dropped with a loss of 180 points or 2.22 percent on the week ending April 17; followed by another loss of 232.43 points for the week ending April 30.
Bottom line spin
Trading is entering the month of May this week. With the market’s downturn in the last two weeks, and observed quickening pace of its fall last week, some now ask if we should “sell in May and go away” as the saying goes.
In the US, the prevalent answer last weekend was no. Stock prices bounced back by the end trading last Friday. Partly responsible were some good news on the consumer front and in the automobile industry.
As gathered from further news developments, it seems that this bold outlook by US analysts and traders stems from the speculation that the US Fed may push back the timetable of its planned rate increase.
It is possible that as the US economy turn again to disappoint lately, and the trade off is the resultant pressure it puts on the Fed. Such economic developments may force the monetary regulators to move their scheduled rate increase to next year instead of the widely expected second half of the current year timeframe.
Experts had claimed that the profitability of companies arising from an artificially supported low interest rate regime by government is not healthy. It does not breed strong financial sustainability and corporate fundamentals. This is the reason why the US market was always spooked into a downturn every time there were imminent threats of rate increase.
The fact remains, however, that the current low interest rate regime has brought strong profits to US companies. As a result, US investors had always reacted positively to the extension of the program of “subsidizing” interest cost and its termination is met with negative reaction.
The Philippines has also benefited from this low interest rate regime spearheaded by the US. However, local officials claim that the country now has the necessary fundamentals to contend with a higher interest rates.
Among those elements that would support the country’s positive footing are low oil prices (that would likely remain low for some time) and the impact of heightened productivity. They will fuel further long-term growth and built a commensurate positive long term impact in the local equity market.
In the meantime, as the direction of stock prices are dictated by the decisions taken by investors based on the wrong reasons like they are in the US, it is more prudent to roll with—rather than buck—the trend to stay ahead in your play in the market.
As is said, you make money only when your trading moves coincide with the market’s twist and turns.
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