Another run-up in the offing?
Even if the market closed on positive territory last Friday, the second time during the week, the market still ended with a weekly loss of 125 points or 1.48 percent.
This was four times bigger than the loss the market had the week before, which surprisingly got me nervous then, but do not bother me now.
Several factors affecting the fundamental outlook have turned out more solid and clear. The first of this is the issue of world peace and stability. Some said the trade of insults and threats of nuclear war between the leaders of North Korea and the United States could “accidentally” trigger a global catastrophe. As has been said, “Accidents could always happen, anytime”
Preponderant expert opinion, however, finds US President Donald Trump more deliberate and calculating than how he is depicted by popular media. And add to this the current American public opinion, a nuclear war accident could not “imaginably” happen coming from their side.
The North Korea leader, on the other hand, also could not simply afford to play reckless. Kim Jong-un’s recent actions that seemingly gave no more hope to diplomatic alternatives over the weekend (he claimed his most powerful warhead “could shut down the US power grid and kill the vast majority of Americans”) will only leave allies threatened. Thus, notwithstanding US offensive power, North Korea could face terrible retaliatory actions more than its people could endure.
A scenario like that, considering the silent but intensifying opposition in the hermit country, according to observers, “could lead to the mysterious death of Kim Jong-un” and the collapse of his regime.
There’s also the US economy. Third quarter gross domestic product (GDP) was reportedly to have grown by 3 percent. This was better than its projected growth rate of 2.5 percent for the period.
This happened despite the hurricanes that smashed into the US gulf coast during the period. An “increase in inventory and a smarter trade deficit” reportedly helped offset the slowdown in consumer spending and decline in construction due to the hurricane season.
On the second largest economy of the world, China’s growth for the third quarter also provided encouragement. Official data say China’s GDP grew by 6.8 percent.
This was above Beijing’s annual growth rate target of 6.5 percent for 2017. This was also consistent with its growth rate of 6.9 percent in the first and second quarters.
With more economic and financial reforms planned by the current regime in the ensuing months, China’s economy is anticipated to transition “from a phase of rapid growth to a stage of high-quality development.”
Meanwhile, the Philippine GDP is expected to maintain its strong performance based on the present administration’s move to hedge the country’s economic growth to its P8.4-trillion “Build, Build, Build” program.
The huge spending budget for the infrastructure development drive would inevitably need added support from the local debt market, which in turn will augur well for the financial and banking sector.
In this connection, the Bangko Sentral ng Pilipinas (BSP) issued a new ruling last Friday that would ease the credit limit of banks imposed on subsidiaries and affiliates. The move will effectively free up more funds for big-ticket projects and thus attract multilateral financial institution (MFI) guarantees.
Bottom line spin
Aside from the expected uptick that usually follows seasonal patterns, the character of the market’s technical performance last Friday appeared to indicate that a run-up is indeed in the offing. It may start this week until next week when market punters will be back from the long vacation.
The benchmark Philippine Stock Exchange index ended positive on Friday with a value turnover of P4.6 billion only. Average daily value turnover for the week was at P7.28 billion.
The nature of foreign investors’ transactions has changed, too. They sold less than what they have bought.
Moreover, out of the market’s gain of about 21.27 percent since the beginning of the year, the last six percent were realized only in the last four months.
