More uncertainties to come

The market closed lower for the third consecutive week last Friday, which also marked the end of September and the third quarter.

Except for the run-up in July, the market fell in August and September.

With the gains in July, however, the market’s decline was limited to a total net loss of only 166.52 points or 2.34 percent for the quarter.

Forcing investors to sell rather than buy within the period was the continued slow progress in the world economy and disturbing geopolitical tensions.

Next is the negative impact on investors of the often reported but-yet-to-happen interest rate increase by the US Federal Reserve this year.

These were further complicated last week by rising concerns over what may happen if the US justice department proceeded to make Deutsche Bank “pay a potential $14 billion fine for allegedly packaging up ’toxic mortgages’ between 2005 and 2007.”

The amount could seriously undermine the fragile financial health of the lending institution that could lead to its possible fall.

This will, in turn, likely conjure bad memories among investors who suffered horrible losses following the collapse of the investment banking powerhouse Lehman Brothers and the resulting world financial meltdown in 2008.

On hindsight, the market started on higher ground before tanking to hit bottom for the year at 6,084.28 on Jan. 21.

It recovered to reach 8,118.44 on July 22, with a net gain of at least 700 points or 9.45 percent.

But in July and August, there was significant selling by foreign investors. The selling transactions, however, tapered in August that they completely reversed into net buying by the end of September.

Also, while the percentage of foreign investors’ transactions to total market went down to as low as 35.48 percent at one point in July, this gradually rose to an average of about 47 percent in August.

Last Friday, foreign investors’ transactions jumped to as high as 58.17 percent of total market on the back of strong net buying activities.

Due to this gradual but steady rise in foreign investors’ transactions to total market business, average foreign investors’ transactions have risen to 50.14 percent for the year.

Liberty’s minority stockholders 

The average daily transaction, on the other hand, has been moving in a different direction.  In July and August, this hovered over the P10 billion mark, the market’s current observed minimum to sustain a market trend—albeit south within these months.  This declined to P8.5 billion in September, a value turnover proven too low at present to support a market turnaround.

Lastly, the P/E ratio (the company’s share price divided by its earnings per share) of the benchmark Philippine Stock Exchange index (PSEi) has declined to 21.05x and to 19.22x for the All Shares index.

Notwithstanding the positive signs last week, the market’s low value turnover may still prove too weak against uncertainties in the market.

Speaking of more uncertainties, Liberty Telecom’s minority stockholders remain on uncertain ground as the SEC continues to mull over what to do with their plight.

The tender offer for their shares will still end on Oct. 20.

The minority stockholders sent another letter to the SEC last week to seek its immediate decision and action which they feared might not be taken until the last moment of the tender offer.

Bottom line spin

The market will likely remain weak, especially this October.

As Mark Twain said, “October (may again be) “one of the peculiarly dangerous months to speculate in stocks.”

However, some stocks may soon be ready for bargain hunting.

(You may reach the Market Rider at [email protected] , [email protected] or at www.kapitaltek.com)