Record closings and the sucker’s rally

The market flirted with record highs last week, buoyed by the good news from the National Economic Development Authority (Neda) that the country grew by 6.8 percent in the last quarter of 2012, bringing the full year growth performance of the economy to 6.6 percent.

The result was described as “better-than-expected” and a “big surprise” because this exceeded the growth target for 2012 of 5-6 percent, and was faster than the 3.9 percent growth in 2011.

On the supply side, the growth in the economy was largely credited to the performance of the industry, services and agriculture sectors.

On the demand side, household consumption was cited as the largest contributor to growth in 2012, growing by 6.1 percent.  While actually slower than the 6.3 percent registered in 2011, it was still considered positive because of the acceleration from 5.1 percent in the first quarter to 6.9 percent in the fourth quarter.

The government claims that this is the result of the following factors: the higher level of economic activity; low and stable inflation; inflows of remittances from overseas Filipinos and government transfers, mainly through the conditional cash transfers or the CCT.

To sustain the economy’s growth over the medium term, the government aims to transform the economy from one that is consumption-led to one that is investment and industry-led with industrialization as its main goal.

Among its priorities is to implement a program to raise the energy capacity of the country.  It wants to ensure adequate and reliable supply of electric power, and expand rural electrification, with the requirements of Visayas and Mindanao as immediate concerns.

To make sure that this particular program is successful, the government will “harmonize policies and guidelines among concerned agencies on the exploration, development, utilization and conservation of natural resources for energy projects.”

As a general policy, it will also “tighten the mechanism to strengthen the link of policy making and investment programming through governance reforms to ensure that local and regional plans are in sync with the government’s strategies.”

Taking note of the adverse impact of a stronger peso on the “competitiveness of the business process outsourcing and exports sectors, the profitability of local production over imports, as well as the purchasing power of the earnings of overseas Filipinos,” the government is taking steps to best address the issue.

Compared to three of the country’s regional neighbors, the fourth quarter performance of the economy is about 25.93 percent better than the reported 5.4 percent growth rate of Vietnam and 518.18 percent higher than that of Singapore.

This is, however, some 12.82 percent lower than the reported growth rate of the People’s Republic of China of 7.8 percent for the same period.

Because of the good economic numbers, the market advanced and established new record highs last week.

It hit the all-time intraday high of 6,320.60 on Wednesday and closed at the all-time high of 6,271.23.

However, on the following day, the market hit the intraday high of 6,332.27 but closed lower with a loss of 28.49 points or 0.45 percent at the end of trading at 6,242.74.  This prompted some news articles to carry the headline that the remarkable performance of the economy failed to excite the market.

Things turned more exciting last Friday.  Trading immediately opened higher at 6,253.86.  Next, the market climbed to establish another all-time intraday high at 6.392.72.   At the close of trading, however, the market dropped lower to 6,318.61.

And as if to answer the seemingly negative observations made on the price movements of Alcorn Petroleum Resources Corporation (APM), Trans-Asia Oil and Energy Development Corporation (TA) and Philex Mining Corporation (PX), their share prices climbed last week.

And as if to deny claims that the stocks were riding on a so-called sucker’s rally, the prices of these stocks continued to climb.  The stock with the highest price advance was TA.

On Jan. 25, TA was only doing at P1.41 a share.

By the close of trading last Friday, it made a net price advance of 26.24 percent at P1.78.

APM was a far second with a net price advance of 2.58 percent; and PX was last with a net price advance of only 1.50 percent.

Market participants observe, however, that the impact of riding on a sucker’s rally may not yet manifest this early.

(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)