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Market Rider

Not just yet

/ 05:09 AM January 16, 2018

Our market ended in positive territory last week, just like most regional bourses, but without the apparent strength and momentum. Due to this, the benchmark Philippine Stock Exchange index (PSEi) only managed to make a net gain of 44.62 points or 0.51 percent for the week.

Largely responsible for weighing down the market were the selloffs that happened in the property and industry sectors. a

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Net gains in the four other sectors of the market were not also substantial enough to completely negate the trading results in the property and industrial sectors.

Both respectively ended with weekly losses of 1.84 percent and 0.25 percent.

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The property and industrial sectors were then, as well, trading at the price-earnings ratio (P/E ratio) of 26.45x and 16.69x.

Three other factors also appeared to be behind the market’s unimpressive play.

The first two are the relatively low trading activities made by foreign investors within the week and by their action when their participation rose above 50 percent of total market transactions. Third was by the market’s relatively low daily transaction average.

Foreign investors’ trading activities during the week ranged from a low of 39.77 percent to a high of 52.88 percent of total market transactions. Interestingly, when foreign investors’ trading participation was only at 39.77 percent of total market transactions, the market fell despite efforts by foreign investors to buy and end up as net buyers.

Likewise, the market also fell when foreign investors turned net sellers and their trading participation rose to 52.88 percent of total market transactions.

Lastly, the market’s daily transaction average for the week was only equivalent to P7.53 billion per day. This was much lower than the previous week’s daily average of P9.01 billion wherein the market ended with a much bigger weekly gain.

Bottom line spin

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The market’s poor trading momentum and weak advance last week was said to be the result of investors’ effort to recalibrate their stock positions at this time.

These recalibrations were attributed to the optimism investors had in conjunction with healthy forecasts on the economy and on the improving market sentiment.

There is no doubt then that we should start efforts to make our stock picks at this time—no matter how small or big your capital is. We need to know just where to exactly put our money in the coming market plays.

In the choice of stocks, I’ve expressed preference for those that are dividend-paying in my recent articles. Part of the reason behind this was to take advantage of the chance to receive some “fixed income” while retaining the chance of making a profit or “capital gains” from the stock investment.

Also, based on reviews on the market performance of several types of stocks, dividend-paying stocks never lagged far behind. They also always made good.

You may notice, however, that some of these dividend-paying stocks could have high P/E ratios. P/E ratios are but an expression of how many times the earnings of a company is priced by the investing public.

A high P/E ratio, therefore, should not discourage us from picking up a good stock. We have stocks across the board—from the different sectors of the market—that have high P/E ratios but have outperformed many stocks with lower P/E ratios.

From the stocks that I previously listed as good stock picks again for the year, among them traded on relatively higher P/E ratios. But just the same, they had good market performance because of their intrinsic values rather than anything else.

To answer the question of whether we should enter the market now or wait for some more time, the answer seems to be obvious. Not just because we need to wait for the latest corporate results to better help us in our stock selection, the market is still technically weak and erratic.

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TAGS: Business, Philippine Stock Exchange index (PSEi), Stock
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