Staying intact from hard times
When the market resumed trading on Wednesday last week, it was forced to drop further. This led the benchmark index lower by 54.66 points at 5,152.15, equivalent to a 1.05-percent loss from the previous close. On Thursday, the market immediately sprang back to gain 50.69 points or 0.98 percent as it closed at 5,202.84. The recovery would have been quite significant if the market’s advance was sustained on Friday. Unfortunately, the market fell and the benchmark index was set back 59.49 points or 1.14 percent to close at 5,143.35.
Looking at past data, the market could be at some turning point. For instance, when it closed at 5,152.56 on July 26, the market immediately rallied and went on higher until trading was suspended on Aug. 7 due to Typhoon Gener.
After or due to this interregnum, however, the market’s balance seemed to have changed. The market tried to make a strong recovery upon resumption of trading on Aug. 8 only to be reversed the following day. And though the market closed higher again the next day, the advance was too small to be significant to justify a different conclusion.
Searching for more concrete explanations, it seems that the market’s bold attitude is slowly being eroded by the fear of additional losses the economy may sustain from bad weather conditions that are still expected to hit the country in the coming months. Also, the continuing weak economic news hounding the United States and Europe along with the poor market performances of leading economies in the region are affecting the market’s positive character.
With last week’s trading performance, therefore, the market could be at some critical point. But judging from the market’s daily volume of transactions, where it seems to have shifted back to higher cap stocks supported by a comparatively sizable value turnover, the market could still be more at a support level than at the point of breakdown.
Taking the first step
It is good that the Philippine Association of Religious Treasurers (P.A.R.T.) under their chair, Sis. Maria Lirio Gavan SPC, to have completed their series of “updates” to members from Luzon, Visayas and Mindanao to take the first step, among other things, and look at the potentials of investing in bonds and equities. It may well be auspicious for them at this time. The market is at a low. However, they could be limited in their investment preferences. For instance, they are not likely to invest in the mining business.
The reason for this apparent resistance or antagonism is the damage allegedly inflicted by mining activities on the environment. There are these reports on “direct discharge of tailings into rivers, periodic flooding and escape of acid mine water, collapse of tailings and waste rock piles, and contamination of soils and the food chain from heavy metals and other compounds.”
Not totally articulated by P.A.R.T members, they also appear not totally aware or convinced with the new management systems and technologies applied to address the following challenges to the mining industry: “the high expectations for environmental protection, lower risk to human health, competing land-use demands, and the value of the natural environment as recreational space, and as the repository of valuable biological assets, natural environment services and aesthetic appeal.”
In this regard, I thought the mining companies should take a more proactive role to enlighten the investing public, such as the P.A.R.T., in the advances made in the mining industry to correct past mistakes. For a highly endowed mineral country like the Philippines, certainly the mining industry can be a significant part to national development.
Changes in PSE index
On Sept. 10, the changes in the composition of the benchmark Philippine Stock Exchange index (PSEi) will take effect. This is in compliance with the policy of making periodic changes in the composition of the index to more accurately reflect the pulse of the market. The changes are the result of the exchange’s review of trading activities covering the period July 2011 to June 2012. Every March and September, the stock exchange implements a recomposition of its indices and sub-indices.
The criteria used to select the stocks for the PSEi index are: a free float of at least 12 percent of its outstanding shares; must be among the top 25 percent by median value turnover a month for at least nine months, and it must also be in the top 30 in terms of full market capitalization.
On top of the list is of Petron Corp. (PCORP). It will replace Cebu Air Inc. (CEB), which will be put on the reserve list along with Lepanto Mining (LC-A and LC-B), Security Bank (SECB), Philippine National Bank (PNB) and Rizal Commercial Banking Corp. (RCB).
To be further removed from the industrial sub-index are TKC Steel (T) and Vulcan Industrial and Mining Corp. (VUL). They will be replaced by Asiabest Group International Inc. (ABG) and Swift Foods Inc. (SFI).
To be dropped from the holdings sector are Alcorn Gold Resources Corp. (APM), Anglo Philippine Holdings Corp. (APO), Pacifica (PA), Solid Group Inc. (SGI) and Sinophil (SINO). Wellex Industries (WIN) and Zeus Holdings will take their place.
Century Properties Group Inc. will be added in the property sector while Boulevard Holdings (BHI), Puregold Price Club (PGOLD) and Waterfront Philippines (WPI) will be included in the services. National Reinsurance (NRCP) will be added to the financial sub-index. Lastly, Basic Energy Corp. (BSC), Dizon Copper Silver Mines (DIZ) and Philex Petroleum (PXP) will be included in the mining and oil sub-index.
Bottom line spin
Considering the stream of positive local news, I feel confident that the market is far from breaking down. First, with rice production as a gauge of agricultural productivity and local market condition, forecasts point to a robust supply. According to the revised forecast of the Bureau of Agricultural Statistics (BAS), palay output was conservatively placed at 17.8 million MT, even after accounting for more possible losses due to natural calamities for the remainder of the year.
This was just 7-percent higher than the 16.68 million MT produced in 2011. However, its more important implication is that the palay output forecast for 2013 could be achieved as early as the first half at current production capacity, barring natural disasters.
Second, domestic air passenger traffic continues to grow. According to reports from the Civil Aeronautics Board (CAB), total domestic air passenger traffic rose 13.33 percent year-on-year to 11.02 million from January to June of this year. Average load factor or the percentage of seats filled in every flight relative to the number of seats on the plane also improved to 75 percent or that one out of four seats on every flight is vacant. This meant further that total seats offered for the period also rose 12.12 percent from last year.
Lastly, because of a wider base of domestic consumers, low private debt and being not dependent on a single export, the country is poised to have a stronger market-based economy. It may just be a matter of time that the poor technical situation of the market will soon be broken by the play of its own strong fundamentals.
(The writer is a licensed stockbroker of Eagle Equities Inc. You may reach the Market Rider at [email protected] , [email protected] or at www.kapitaltek.com)
