The market last week was a witness to one of the biggest one-day single stock transaction in recent history. The record trading run up that also happened last week made the market break several highs in the process.
These developments have also turned the market outlook for October as well as the fourth quarter to appear exciting and promising.
The excitement becomes even greater when you look back at how the main Philippine Stock Exchange index (PSEi) had done since the beginning of the year. The PSEi has managed to log a net gain of 1,470.24 points, equivalent to an average investment return of 21.49 percent—something that was not seen in the annual performance of the market in the last two years.
In view of these observations, together with the market’s unpredictability which had led to many sudden price downturns in recent past, investors are placed in quandary as to what to do now.
A quick survey of the market reveals that investors are equally divided on the matter. Some are convinced that it’s time to buy. An equal number see it otherwise. They claim it’s time to sell—and play safe with earned profits. As is said, “a bird at hand is worth two in the bush.”
In addition, like what most seasoned traders say, you can always “hop in the bandwagon” when the market heats up again.
Yet, investors remain unsettled. The decision to sell now could also make one miss the big breakout that everyone has been waiting for as the market has been consolidating for the longest time.
Review of trading results
The market hit the session’s high of 8,406.34 on Monday, which proved to be a record. On the same day, the market logged a trading gain of 84.35 points or 1.84 percent, the highest daily gain for the week. This happened through a total transaction volume of 1.4 billion shares and total value turnover of only P7.41 billion.
On Tuesday, the market closed above 8,300 for the first time. The market closed at the all-time high of 8,312.93, up 56.65 points or 0.7 percent, on a similar volume and value turnover as that of Monday.
For the second successive day, the market set another record high on Wednesday, with an all-time record close of 8,344.08. The market’s net advance, however, was noticeably limited to 31.12 points or only 0.37 percent.
Also, as the market surged higher on Wednesday, trading figures ended differently. Total volume was very high at 2.48 billion shares while total value turnover fell by 11.49 percent to P6.55 billion compared to the average value of transactions in the previous two days.
On Thursday, investors were treated to a P64.5-billion shares transaction which involved the divestment of 10.6 percent interest in Energy Development Corp. (EDC) by Lopez-led listed power firm First Gen Corp. (FGEN) and the acquisition of 21.1 percent more shares from the public tender offer that ran through Aug. 10 to Sept. 11.
The buyer was Philippine Renewable Energy Holdings Corp. (PREHC), the corporate vehicle used to buy the EDC stake by fund managers Macquarie Infrastructure and Real Assets (Mira) and Arran Investment Pte Ltd, an affiliate of Singapore-based investment firm GIC, formerly known as Government of Singapore Investment Corp., a sovereign wealth fund.
The transaction price was at P7.25 per share. This reflected a premium equivalent to 21.8 percent over the closing price of P5.95 per share that prevailed before the tender offer period.
Since PREHC will end up with only 31.7 percent stake in EDC, FGen will keep control. And as public float will be reduced to 12.5 percent from 49 percent, this will be below the recent mandate of the PSE to increase public float of listed firms to 15 percent. PREHC and FGen agreed to delist EDC voluntarily later on.
Bottom line spin
The market’s record highs last week and the P64.5-billion acquisition deal on EDC by PREHC could be hailed that signified confidence in the country’s economic growth and prospects. Nevertheless, the market was hard put to rally further that it only managed to close at 8,310.88 at the end of trading on Friday.
More importantly, the market failed to break its all-time high close of 8,344.05 which it established on Wednesday.
Surprisingly, too, the rally on Wall Street last week did not encourage buying by foreign investors in the local market. Instead, foreign investors served as net sellers in all of the five trading days of the week.
Under these confusing circumstances, it may be best to follow the advice to sell whenever the reason for your buying has changed.