Sideways all the way to Holy Week

The local market tumbled when it closed last week, but its Asian peers posted gains. On Friday, the benchmark Philippine Stock Exchange index (PSEi) ended lower by 149.18 points or 2.02 percent at 7,146.27, with 3.73 billion volume of shares on a total value turnover of P7.38 billion.

The wider All-Shares index likewise fell 59.42 points or 1.38 percent at 4,343.39. However, trading volume rose to 3.74 billion shares valued at P8.01 billion. Decliners outnumbered advancers 102-72, with 47 issues unchanged.

On a weekly basis, the PSEi closed lower by 100.85 points or 1.39 percent while the All-Shares index also dropped lower by 42.47 points or 0.97 percent.

Like what they have been doing for a time now, foreign investors continued as net sellers, accounting for a bigger percentage of total market transactions at 56.23 percent.

Daily trading average also remained low. Total value turnover hit only P7.44 billion although total trading volume had been ramping up.

Because of this, market capitalization for the week slightly dropped to P15.26 trillion compared to P15.37 trillion the previous week from Feb. 27 to March 3.

Stocks in play

A lower market capitalization coming from a high trading volume but lower value turnover is reflective of an overall decline in stock prices.

Based on what happened last week, investors obviously dumped most of their stocks in the holding firms sector. The sector was the most badly hit in terms of price decline. It lost 257.68 points or 3.51 percent from the previous week.

Stocks in the industrial sector came next on the sell list of investors. The sector lost 189.23 points or 1.71 percent.

Stocks in the property as well as mining and oil sectors were likewise not spared, albeit with a slight fall.

Stocks in the financial and services sectors were quite fortunate. Both registered actual gains.

As of last week, the price-to-earnings (P/E ratios) of the market and its sub-sectors still appeared on the high side. The benchmark PSEi remained relatively high at 18.32x and the All-Shares index at 17.22x.

Despite the continuous rise in price, the financial sector’s P/E ratio remained attractive at 15.09x. When planning to plunge money into this sector, however, it is probably better to observe further.

The already big losses of the industrial and holding firm sectors should also be taken as a sign to exercise caution more than an encouragement. Both sectors have a relatively acceptable P/E ratios of 15.74x and 15.37x, respectively, but their market performances are expected to still go down as what have been seen in the last four weeks.

Because of the property sector’s continued slide starting four weeks ago, the sector may still face more problems, not to mention that its current P/E ratio is at 23.38x. Plans to re-enter should be put on hold for further assessment.

It’s the services sector that seems to have the brightest outlook even if its P/E ratio is at 22.91x. Its market performance has been on the uptrend.

Bottom line spin

If we are to explain the market’s lackluster performance, look no further than the comments of National Economic and Development Authority (Neda) Director General Ernesto M. Pernia last week. Assessing his description of the performance of the economy last January, it did not appear as impressive as to elicit really strong growth.

The present dispensation, at the same time, appears we are still grappling with organizational matters such that developmental programs seem to be not moving forward.

Together with questions on the extrajudicial killings, alleged corruption by appointed officials of the President, the stalled peace talks with the communists, peace and order problems sowed in Mindanao by the Abu Sayaf, and the rising political militancy of the opposition, there is an emerging consensus that while the country’s short-term prospects appear upbeat, concerns are growing that politics and governance would threaten the long-term.

With these concerns hanging on the horizon, it is certain the market may continue to move sideways for the meantime all the way to the Holy Week.