End of Ghost Month scoreboard
As calendared, the Chinese Ghost Month is to end on Sept. 12, Saturday. In this connection, the timing of its end this year could not have been any better. China’s stock market has been rapidly falling since the onset of the Ghost Month. Measures applied to stem it have invariably failed, so far.
Last week, it got a needed break when the Chinese government declared, among others, a suspension of stock market trading on Thursday and Friday in order to commemorate what officials proudly advertised as “the 70th anniversary of China’s victory in war against Japan aggression” in World War II.
The rest of the markets around the world, which have been also hurting as they were affected by China’s slowing economic performance, were left to track on their own. Weekend commentaries characterized their various trading activities into a picture of “relatively muted sessions.”
Browsing through the market reports, transactions were truly low and slow. In addition, trading sessions generally opened higher but always closed lower at the end of the day. Many markets ended “nearly flat” as in the case of Europe and most of the Asian markets. Big markets like the US and Japan settled lower into negative territory.
In the case of the US, its major indices largely tumbled on a conflicting signal created by the released report on the status of job employment for August. Data showed the US economy added only 173,000 jobs, which was lower than what was generally expected. The report, however, also showed that the unemployment rate fell to a 7-1/2-year low at 5.1 percent.
The data, according to market observers, painted a mixed picture of the US economy that did not give a clear signal to quash the plans by the Fed to raise reserve interest rates as early as this September. Due to this blurry report, the performance of the US market last week resulted into what was described as its “second-worst weekly performance for the year.” At 16,102.38 last Friday, the DJIA was down 272.38 points or 1.66 percent; the S&P 500 was down 29.91 points or 1.53 percent at 1,921.22, and the NASDAQ was 49.58 points or 1.05 percent at 4,683.92.
In Japan, the Nikkei was reported to have “posted its biggest weekly fall in almost a year and a half” when it closed last Friday at 17,792.16, ending with loss of 2.2 percent. This fall of the Nikkei index was also its fourth week of consecutive declines that, within this period, it had fallen by as much as 7 percent. Reviews stated that Japanese investors chose to stay risk-averse as speculators sold futures holdings as well to be risk free for the weekend.
Home front
At the back of the country’s economic growth for the second quarter and recently released news on the profits of listed companies, at which both did not apparently satisfy market expectations, our market has been tumbling from the onset of the Chinese ghost month up to last week, too.
When it resumed trading last Tuesday, after the observance of “National Heroes’ Day” on Monday, Aug. 31, it traded again on a “sea of red,” as one analyst described it. The economy’s growth rate for the second quarter was calculated at 5.6 percent. Economic Planning Secretary Arsenio Balisacan defended it as the “third fastest” among major Asian economies behind China and Vietnam. He added that this was achieved owing to the success of the government’s efforts to properly address critical issues that would have otherwise pulled back the economy’s growth in view of the many natural calamities the country had faced not too long ago in addition to prevailing weak global economics.
Government spending, especially for public infrastructure, picked-up during the quarter. Consumption expenditure also “rose 3.9 percent from zero growth a year earlier.” This also meant a 129-percent rise from the first quarter’s “1.7 percent figure.” Private sector investment added further boost to the economy’s growth performance, too. Capital formation grew by 17.4 percent in the quarter, compared to 8.3 percent in the previous year and 11.6 percent in the first quarter.
With these results, the country’s economic fundamentals could be strong and maintain a “respectable rate of growth in the future quarters and remain to be an attractive market and investment destination,” as Balisacan described it. This may explain why the market was able to resist the general trend on Thursday and mitigated selling activities of foreign investors as the market closed for the week. This may have also led to the market’s small day’s loss of 46.98 points or 0.66 percent on Friday when it closed at 7,051.78, and ended the week with a net weekly loss of only 47.03 points of 0.66 percent—ending “nearly flat” like most of its regional neighbors.
Bottom line spin
The lavish military parade (and declaration of a new national holiday) by China last week could be an indication of how stock markets, especially in the Asian region, may look like after the end of the Chinese Ghost Month.
The statement of the director general of the People’s Bank of China in an interview last Saturday in Ankara, which claimed “the rout in Chinese stocks is close to ending”—expressing likewise that its “financial markets are expected to become more stable”—is another collaborative basis. This is why markets within the region, including ours, probably tended to close “nearly flat” last week. This was in addition to investors’ anticipation of the usual rebound and recovery that follow after the end of the Ghost Month.
Western media analyses, nevertheless, tended to lean toward the opposite of what China’s stock market would look like in the ensuing days as declared by Chinese authorities.
To my mind, China will exert an effort to stop the free fall of its stock market the way it displayed its military might and hardware, giving way to opportunities for swing or day trading within the rest of September. But expect a more definitive trend to emerge by the start of the fourth quarter in October.
The writer is a licensed stockbroker of Eagle Equities Inc. You may reach the Market Rider at [email protected] , [email protected] or at www.kapitaltek.com
