PH market hanging tough

When the Philippine market closed last Friday at 7,665.52, it was up on positive territory while other major markets like the United States and those within the region ended on negative territory.

Though modest, our market made a weekly gain of 48.39 points or 0.64 percent.

Considering how the market had been in recent weeks, it was considered that its latest performance was more technical than fundamental.  In particular, this was due to the resulting price plays created by the actions of market participants in buying back into the market.

In comparison, the week turned badly for the three major US indices, namely the Dow Jones Industrial Average (Dow), the S&P 500 and Nasdaq. They were weighed down by fundamental considerations “on concerns about recent corporate results and renewed fear on global growth,” as one report put it.

As further reported, the Dow’s close last week was “its worst since January.” For the S&P 500 and Nasdaq, on the other hand, “it was their worst since March.”

For the neighboring markets, their drop was especially blamed on what was reported as “a surprising slump” on China’s manufacturing gauge, which, to common market understanding, meant a further weakness or deterioration in the prices of some major commodities.  Such anxiety has sent the Chinese stock market into its third weekly loss for the month.

Based on reports, the weakness besetting commodity prices is worrisome: “The prices of iron are now cheaper than the prices of cabbage in China; the prices of copper have likewise gone down to a six-year low; and the prices of gold have dropped to their lowest since 2010.”

We knew all along, too, that the prices of oil have been slipping.  Last week, the prices dipped to as low as  US$49 a barrel.

Statistical records

Of the six sectors making up the whole market, three are now up and three continue to slide from their index levels since the start of July.

The property sector leads the gainers. It is up 3.71 percent at the price-to-earnings ratio (PER) of 19.68x.  In second place—and up 3.52 percent at 25.17x PER—is the services sector.  In third place is the holding firm sector with a net gain of only 0.99 percent at 20.65x PER.

The mining and oil sector, with a 12.26 percent at 15.59x PER, leads the bottom-dwellers. The sector has tanked since the fall of oil prices and the suspension of new mining activities.

Another loser is the financial sector with a loss of 2.65 percent at 15.21x PER.  A little above it, with a loss of only 1.03 percent at 19.68x PER, is the industrial sector.

On how they fared since the beginning of the year, the summary of their individual records are as follows: Property, up 12.68 percent; Holding Firm, up 9.69 percent; Services, up 1.75 percent; Mining and Oil, down 23.31 percent; Industrial, down 3.66 percent; and Financial, down 0.39 percent.

Notice that the leading sectors have been maintaining their good performances over the past few weeks.  Interestingly, they have higher P/E ratios.  They are in the low of 19.03x to a high of 25.17x, while the losing sectors are playing between the 15.21x to 19.68x range only.

As captured in the Philippine Stock Exchange index (PSEi), the market was up 0.57 percent last week and up 6.02 percent year-to-date (YTD).  PER is 20.94x.

For the All Shares index, the market was up 0.38 percent last week and 2.59 percent YTD.  Overall PER is 17.96x.

Foreign investors’ trading activities, meanwhile, amounted to 49 percent of the total market for the week ending July 3.  This rose to 52 percent for the week ending July 10, then back to 49 percent on the week ending July 17. As of last week or the week ending July 24, it dropped down further to 42 percent.

Interestingly, the foreign investors had been net sellers except for the week ending July 3.

Despite this, the market did not follow the usual pattern of ending with a loss or with a gain whenever foreign investors turned net sellers or buyers, as the case may be.

After the market dipped to almost its year’s lows on July 8, it finally gained traction thereafter.  Note that the weekly average daily value turnover sunk to P6.47 billion on the week ending July 17, but it began picking up again.  As of last week, it was back to P8 billion.

Bottom-line spin

With these observations, the market is expected to bounce back.  Its rise, however, is evidently powered by local investors’ market activities.

This makes the market’s current advances in peril.  Local investors are generally proven to be more of short-term market players rather than long-term buyers. Their present bullishness might be cut short when foreign investors commence their selling activities.

Among the six sectors, however, it looks like the property sector is still the strongest. While at the top with 12.68 percent gain, overall PER is still low at 19.03x.

The services sector could soon be a target of sell-offs. While still up, its advance in the last four weeks is already slowing down.  It’s also trading at 25.17x PER.

One that is still down but may possibly soon take off is the financial sector.  The subject of a strong sell-off before, it’s already on the recovery since four weeks ago.  It is also trading at the low PER of 15.21x.

Starting to be an attractive buy, too, is the industrial sector.  Based on its progress since four weeks ago, it’s close to reaching positive territory.

(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.)