Tightening Upside Potential Appears

FACTS

The P7.75 billion value turnover managed to push the PSEi to a new high of 6,542.51 despite the defeat of the Advancers in the hands of the Decliners (72/84). Non-index stocks also participated in the surging force evidenced in the new high achieved by the PSE All Shares Index at 4,103.86.

 

McDonalds franchisee in the Philippines, Allied Global Group Inc (AGI), topped the most favorite stock of the day with P615.09 million value traded. Its price dropped 2.88% though at closing.

 

ANALYSIS

Lately the surging force continues to gasp every around two days, indicating that despite the huge investment money invested in the stock market, the bullish pressure is getting weaker and unsustainable. The investors simply are not as bullish anymore as some of them preferred to hold long-term. Traders can only push the market to new highs to a certain point. Only growth stocks seemed able to keep on gaining new grounds when liquidity is high.

 

The A/D Ratio of 0.86, the weak surge in PSEi High, and the stronger surge in the PSE All Shares Index indicates a potential dip in PSEi tomorrow with trading focused primarily among non-PSEi issues. Value turnover may dip to P6.0 billion.

 

RECOMMENDATION

Long-Term Investors

Except for those who stayed cheap during the recent bullish surge, no new cheap stocks are expected to appear tomorrow or in the following week, unless a drop of PSEi to 6,000 happens. Stocks are still generally overvalued. Keeping some cash ready for that proverbial "rare elephants" maybe a wise thing to do.

Short-term Traders

Certain issues, particularly the speculative stocks, continue to behave with wide swings. There is still a respectable profit to make there at this level. But it would be harder to do this time than late in 2012. Depending on your trading capital, single-digit stock prices may be better alternatives for a trader to speculate with rather than the double- or triple-digit priced ones.

Historic Turnover Rebounded PSE Index

FACTS

The PSE Index (PSEi) reached another new high today as it went beyond the 6,500 milestone, registering 6,531.79. This occurred as interest in the stock market surged anew with a value turnover of P11.84 billion, the highest so far since November 2012. It more than doubled the anemic turnover of P4.63 billion yesterday. Gainers left behind the Lossers with an Advance/Decline Ratio of 2.15.

 

The All Share Index High however continued to slip down to 4,069.42 from 4,077.00. This indicates a concentration of the surging stocks among the 30-stock PSEi, which spred to the other index stocks. The general market continue to be on a slow downtrend.

 

Puregold Price Club Inc (PGOLD) is the most traded, involving a value turnover of P1.50 billion; followed by Universal Robina Corp (URC), P693.2 milllion, and; SM Investments Corp (SM), P628.8 million. Advance rate however topped only at 8.88% with Megaworld Warrants 2 (MEGW2). And the Decline rate reached only 16.61% with Berjaya Philippines Inc (BCOR).

 

ANALYSIS

The historic rise in the value turnover in an 11-digit figure may not be sustained tomorrow. Value turnover will slide as the buyers of today may not be able to get out from their positions tomorrow and buy new stocks with the proceeds. But it is expected that Gainers will continue to dominate the day. Favorite stocks may continue to reach record highs tomorrow fueled by those who sold their stocks today.

 

RECOMMENDATION

Look out for sell opportunities tomorrow on those stocks that are already being overvalued. Long-term investors however may find their holdings grow more; while growth investors may continue to bet on the surge's ability to be sustained further within the week or so.

 

Battered Bull Failed to Register a New High

FACTS

The PSEi continues its downward beat pulled down by an anemic investor interest, as indicated in the worsening anemia in value turnover at P4.63 billion from yesterday's P5.85 billion, and from last Wednesday's P9.98 billion, the highest level this year. The PSEi change rate, on its 3rd day, also behaved like the four-day down ward behavior last week.

 

Moreover, Gainers finally gives in to the overwhelming Lossers, 55-106.

 

Most stocks behaved with uncertainties, and continued within a well-defined channel where they had stayed in a week or so. Some though already experienced gathering disfavor, such as Metro Pacific Investments Inc (MPI), Filinvest Development Corporation (FDC) and Alsons Consolidated Resources (ACR). Still a few managed to take on a new high (e.g. Allied Global Group Inc, AGI) or simply growing patiently (e.g. San Miguel Corporation, SMC).

 

ANALYSIS

The market tomorrow has an 80% chance of continuing its downtrend if the value turnover does not improve to the P9.0 billion level. And, although the market in general continues to be overvalued, another downturn tomorrow is expected to already pull down the prices of many stocks, back towards more fair levels.

 

RECOMMENDATION

Review your prospect lists for potential buys tomorrow if the market goes down once more. There is a good chance that a few of these may already be around 10% premium or below. Still traders may find a few opportunities to sell stocks intended for short-term trading. Long-term investors may found more value for value for their money; although no so much as in bear markets.

 

It is still not a bear market though.

Crawling Bull Managed to Break New High

FACTS

Today's market closed with unexciting behavior. The value turnover is thin at P5.85 billion, the fourth day in a series of dropping liquidity since it reached a peak of P9.98 billion on Wednesday (February 6). Gainers barely outmatched Lossers 83-to-81. Last Friday Gainers failed to outdo Lossers at a deuce.

 

The good news however is that despite the crawling movement of the exhausted bull, the PSEi managed to breakthrough a new high and at the milestone level of 6,500, and just barely did so at 6,500.08.

 

The anemia of investor interest can be seen in the value turnover of the Top Three most-traded stocks of the day. Globe Telecom Inc (GLO) had a measely turnover of P210.34 million; SM Investments Corp (SM), only P182.87 million, and; Bank of the Philippine Islands Inc (BPI), P150.76 million. Compare that to the most favorite stock on Wednesday--BDO Unibank Inc (BDO)--which logged on a value turnover of P1.82 billion.

 

ANALYSIS

The PSEi performance is mimicked by the PSE All Shares index, indicating that the market malaise has been widespread in the market.

 

Today belongs to the second set of dissipating market interest; the first of which occurred last week from Monday through Thurdays, wherein PSEi change was at its highest of 117.17 and then dropped boldly in the succeeding days--to 29.87 on Tuesday; 7.14 on Wednesday, and culminated into a negative figure (-26.46) on Thursday. Today is the second day in the downtrend of the PSEi change (from 29.91 yesterday to 10.18 today), which may result into a negative figure tomorrow and Wednesday, bringing the market prices downward and more strongly... unless buying interest recovers at the level of at least P8.00 billion.

 

Nonetheless, the general prices in the market continues to be very high; that is, overpriced. A persisting bull with renewed spirit this week remains possible which can bring the PSEi to new heights. There is however a probability of profit-taking when such occurs, which can dampen the buying momentum.

 

Should a reversal occur, and a sustained one, value investors would be opening their purse wider. But that could spell the end of the Bull market. And who wants to end the enormouse stock pricing growth than those who had not bought in at attractive prices?

 

RECOMMENDATION

Despite the impending persistence of the downward pressure, this week's prospect continues to be a wait-and-see situation. The drop in prices may not dint the overvaluation that is reigning in the market. And the absent P4.0 billion funds in the market can become a buying force that will push the level much higher this week. There is a strong probability though that the traders who have already gained so much profit (at least 20%) on paper may decide to cash in on it when the market players decide to push the prices once more. At this pricing level, these are a trader's most tempting times.

An Imperceptible Shift

FACTS

Despite the dominance of Gainers (116) in the Philippine stock market today, PSEi experienced its first real drop since its rally in the last ten days at 6,057.48. The value turnover of P8.92 billion helped Gainers surge from their closing prices yesterday, having increased almost P500 million in fresh funds. But then again it failed to prevent the drop in the PSEi value. This happened even under low participation levels (210 companies).

 

BDO Universal Bank Inc (BDO) is the most favorite with a value turnover of P1.09 billion. Unioil Resourcs and Holdings (UNI) topped the Gainers with an increase in price by 12.0 percent. The Worst Loser of the day is Lorenzo Shipping Corporation (LSC), which dropped by 17.68 percent.

 

ANALYSIS

The dominance of Gainers over Losers indicates that the gains came from an increase in prices from very low levels. It involves mostly secondary issues instead of the stocks listed under the PSE index, explaining the drop in PSEi. Traders may have found the blue chips too expensive to buy into, and opted instead to go for the cheaper secondaries. This indicates an increased presence of heavy speculation considering most companies even among the secondaries are also mostly overpriced.

 

The 40.66-point drop in the High PSEi level provides an early signal of a downturn coming. It may not be on Monday; but there is greater probability that on Monday, the index drop may continue and at a bigger figure than today. With cash tied up in the buying today, the sellers today may have to buy back in strong in order to prop up the PSEi. If that happens, a correction may only be happening. Although it is still too early to say that it will be a bearish trend setting in.

 

RECOMMENDATION

Monday would be a good time to SELL acceptably profitable holdings, especially when morning session indicates a serious movement downward. The increased buying today may stiffle the buying power of investors, eliminating the chances that loose cash can propel the prices high next week. If prices goes up on Monday, it would probably be a modest one, perhaps enough to make up for the lost level of today's downturn in PSEi.



The Bull Dropped for a Day

FACTS

Although the PSEi edged higher though neglegibly at 6,098.14, it closed low today as reds dominated the sectoral indices at closing. Rumors of a "market bubble" to erupt anytime may have stricken the traders with fright to sell down their holdings in drove. Losers exceptionally dominated consisting of 120 stocks, the highest so far even in the last two years, as Gainers dropped to 52 companies. The profit-taking marked a value turnover of P8.44 billion, a huge cash that can bring the market back up when conditions allow.

 

GT Capital Holdings Inc (GTCAP) topped the value turnover list with P1.0 billion transacted for the day. Imperial Resources Inc, Class B (IMPB) bested everone else in price gains that reached 50.0 percent. Loser of the day is Chemical Industries of the Philippines (CIP), which dropped 41.13 percent.

 

ANALYSIS

As noted in yesterday's post, the weakening of the Bull finally gave way today to the bearish forces. But this does not necessarily mean that the Bear is going to be riding the market down in the coming days. Our hope rests in the sturdiness of the 6,000 PSEi level that many traders may fight to the death to let back down to the 5,000 levels. The reputation of the Philippine stock market is at stake in keeping the 6,000 mark stay.

 

Unless serious bad news come in tomorrow that will cast another round of fear among traders, the huge cash available today from the profit-makers can become a fuel for a resurgence of the market tomorrow. We will hope that more investment funds come in to buy securities in the market tomorrow so continued surge can reach higher levels, hopefully at 6,500. That's the positive side of the event of the day.

 

Expensive stocks however continue to dominate the market even after the decline today. Value investors may hold back capital tomorrow to wait for cheaper prices in the coming days. That will remove enough money from the market which can make the trading tomorrow anemic. And a surge may be weak at best. At worst, another round of price decline can happen as traders run after sellers at lower prices levels.

 

RECOMMENDATION

If you have cashed in part or whole of your portfolio today, your cash may be your best bullets to shoot rare elephants that may start appearing tomorrow. But of course, it is wiser to pay for better price.

 

If you have stayed with your portfolio to wait for another surge, you may need to put in more money to shop for cheaper prices tomorrow. High buying behavior tomorrow may encourage traders who made money today to go back to the market and run after higher prices again.

The Weakened Bull Pushes On

FACTS

The Bull Market is on its 9th day today. And with fresh funds of more than P20 million plus the liquid cash of around P7 billion from yesterday's profit-taking, the PSEi moved up much stronger than yesterday but half the force it showed at its peak on Monday. Value turnover reached P8.4 billion as PSEi rose to a new high of 6,095.07 (from 6,055.42), an increase of 39.65 (compared to the Monday increase of 73.46).

 

Gainers continued to outrun Losers at 109 and 73 respectively; stronger than their performance yesterday and on Monday, but with more resistant sellers and lower participation levels at 214 (vs. Monday's 216). 

 

Metrobank still topped the favorites with a value turnover of P593.4 million. Top Gainer, Century Peak Metals Holdings Corporation (CPM), managed to gain 27.55 percent. Worst loser of the day is Apex Mining Corporation, Class B (APXB) shares, which is down 6.67 percent.

 

Few issues reached new highs as the rest struggled to buy into positions at much lower levels compared to what had been attained on Monday. The gains reflect a surge occasioned by a contest to reposition in other stocks at still lower prices for a potential windfall tomorrow. But there had been no strong perceptible upward pressure that can push prices to higher levels than what the Monday performance achieved.

 

ANALYSIS

Despite the surge--all indices rising and no overwhelming selling within the day--the selling pressure continued to be strong because of limited new funds available to support a stronger rise in the market.

 

With buying dominant in the market today, a reversal may happen tomorrow as traders try to cash in their profitable positions today unless fresh funds as high as P8 billion enters tomorrow. Otherwise tomorrow will another day of profit-taking and repositioning in neglected stocks as the rest of the market experienced lower price levels.

 

RECOMMENDATION

There are still available opportunities for speculators and traders to make money from price difference tomorrow. Value-oriented investors however may find more opportunities to get into though.

 

An Ill-Advised Repurchase

THE ANNOUNCEMENT YESTERDAY that Century Properties Group Inc made to repurchase 800 million shares at current price is an ill-advised move and defeats the very purpose of a buyback program that aimed at increase the value of shareholders.

 

At the high-price of P1.77, the company would be paying an expensive price for reacquiring those shares. And that's not increasing the value of shareholders but diminishing it. For a buyback to be value enchancing it must be purchased at a time when the shares are selling at a discount to its book value. At a book value of P0.88, based on the 3rd Quarter Financial Report, it is practically paying double its worth; paying P1.416 billion for a value of only P704 million. This move will deplete cash resources, which the company subtly admitted it does not have; thus, the spread of the buyback program for two years starting this month. These resources could be profitably used in rolling out developments that can make profits for the shareholders.

 

These facts hint an advise from someone who based the recommendation for the buyback on the low Price/Earnings Ratio of below 10.0. In speculators' parlance, a low P/E makes the selling price cheap, regardless of the true book value. The fact is, the P/E was low because of the high net income, and not on the cheap price. A bull period like we have right now seldom gives cheap prices even among value-laden enterprises. Price valuation based on P/E provides a false cheap price that makes repurchase decisions like this costly to the shareholders, instead of being profitable.

 

The increased earnings can be treated as a bonus. But to be profitable to the shareholders, the decision to buyback must be based on the book value of the company not on the market price adjusted for the earnings.

A Weakened Bull

FACTS

After seven days of consecutive runs that went through the long pause for the Holidays since 2012 December 21, the surging Bull shows a day of weakening today as some investors cashed in their profits from the strong surge yesterday as the PSE Index (PSEi) breached the 6,000 mark. While the PSEi reached a high of 6,055.42, sectors suffered the brunts for the strong selling in the morning session which had partly made up for issues that experienced heavy buys. Favorite issues in the previous day dropped to almost its previous levels. The Financial, Properties and Services sectors reddened.

 

As disinterest marked certain stocks yesterday when traders ran after the surving prices, these neglected issues got much of the attention today. Seven fewer companies participated in the trade today. Gainers dropped to 85 as Lossers tried to overtake it but failed at 78.

 

Metrobank (MBT) led the most active at a turnover value of P626 million. Philex Petroleum Corporation (PXP) led the top Gainers with a moderate price increase of 10 percent. The worst Loser of the day is the Philippine Racing Club (PRC), which dropped by 18.33 percent.

 

ANALYSIS

The value turnover of P7.37 billion indicates a continued strong stock market interest today, which may continue tomorrow. Only that the favorite stocks today are not so much the stocks favored yesterday, and may reverse tomorrow. This hiccup however can be a very temporary respite before another surge continues tomorrow. But such higher surge can happen only if more funds--P10 billion or more value turnover--come in to prop up the prices to newer heights. Otherwise the strength of the Bull will weaken, allowing the Losers to overrun the Gainers. And that can become a trigger that will let loose the Bear. Speculative stocks can experience a steep dive in market price.

With the 6,000 mark achieved there will be lesser motive for a stronger surge until the inflow of funds is strong enough to bring the PSEi up to 6,5000. There is however so much motive in keeping the PSEi at the accomplishment, providing hope that certain issues may not go back anymore to their lower market valuations until the next Bear awakens and dash the prices to the ground.

 

RECOMMENDATION

Review your portfolio for the intentions you had when you accumulated them. Speculative buys that have made profits around 20 percent may be disposed at the highest opportunity tomorrow if the Bull continues to show weakening. Cashing in your profits can give cash power that can repurchase your favorite issues at lower prices.

 

Keep your stocks bought for value unless its market price got so speculative in today's session reaching as much as 40 percent in profit. However keep at least half of your holdings in these value stocks, especially those bought at the lowest price, for long-term keep.