Grappling for direction
DEN SOMERA
Last Monday was a bloodbath that dragged down the Philippine Stock Exchange index (PSEi) to a 14-month low at 7,414.11.
The fall continued on Tuesday with the market closing again lower at 7,312.61 following the global sell-off due to the increasing tension in the brewing trade war between the US and China wherein US President Donald Trump threatened anew to slap an additional $200 billion worth of tariff on Chinese goods.
On Wednesday, the market fell further by another 50.99 points or 0.69 percent when it settled at 7,261.62. The market’s further weakness was fanned by the decision of the Bangko Sentral ng Pilipinas (BSP) to raise the benchmark interest rate by another 25 basis points. Inflation rose to a five-year high at 4.6 percent last May.
While the first increase of the overnight borrowing rate was made only last May 10, the country’s interest rate was unchanged for nearly four years.
Like the US Federal Reserve in its decision a week ago, BSP was also “ready to adjust further as necessary” to contain the continued rise of consumer prices.
In the meantime, last Wednesday’s fall brought the market’s year-to-date loss to 1,334.73 points or 15.59 percent. Based on its 52-week high of 9,059.37,the PSEi has fallen by as much as 1,797.75 points or 19.84 percent since then.
Technically down 20 percent from the said record session’s high, the market has entered bear territory.
Before we look closer at the possibilities, let’s finish the audit review on the performance standings of the two most active players after 15 weeks of play in the virtual stock trading challenge.
Race for No. 1
The race for number 1 in the game after 15 weeks is now left between the two most active players in the game namely Play Hard and Pixiu.
Play Hard is the youngest contestant with a relatively little experience in the market. He is also currently working in a very different industry.
So far, Play Hard has a total of about 60 trading orders. All of his stock picks are among the first and second line actively traded stocks in the market. This generally makes all of his trading orders doable.
Pixiu, on the other hand, is the only female player in the contest but seemingly with the most experience and familiarity with the nuances of stock market investing and trading among the players. She is a housewife but working part time at present with a stock market-related financial outfit.
As of the end of Week 15 (June 11-15, 2018), Pixiu has submitted a total of 126 trading orders, or a ratio of 8.5 trades per week. Deducting the number of holidays observed during the period, this will come out to about two trading orders per day.
A number of her trading orders were “not done” simply because they were priced either above (as when selling) or below (as when buying) the traded prices of the stock for the day.
However, since trading orders were submitted just before midnight the day before their execution, a good number of her trading orders were either bought lower or sold higher than their posted bid or asked prices like they had been in the case of the other players.
Like in the case of Play Hard, Pixiu also had one trading order that can’t be executed due to insufficient funds. This happened when her cash balance was not enough and the expected sales proceeds from some stocks she wanted to sell were not sold on time.
Many times, Pixiu displayed more interest in latest financial results than to a stock’s historical market performance when making her stock picks. This made her experience difficult instances to sell. There was a time when one of her stock picks didn’t have any transaction for the day when she wanted to sell it. This is the difficulty when you pick up stocks with irregular transaction volumes.
With her supposedly weak standard in choosing her stock picks, Pixiu has nevertheless emerged as number one in the leader board. Her sheer number of trading moves seems to have compensated for the lack of a regular standard for stock selection.
Table 1 shows her investment summary and performance standing for the week ending June 15, 2018:
Play Hard was hard put to find the magic touch with his investment portfolio. With the market’s continued slide, the value of his investment portfolio slipped by as much as 3.37 the week before to end with an ROI of only 96.69 percent at the end of Week 15. Table 2 shows his investment summary and performance standing for the week ending June 15, 2018.
Bottom line
The market as of its close on Wednesday was yet to confirm its slide to bear territory. By today, we should already know if indeed it has.
Meanwhile, BSP expressed confidence that inflation is nearing its peak and this should soon be felt.
However, the recent rate increase in the US will continue to inspire further the exit of foreign funds which in turn will continue to drive down the market lower and the peso. As in the past, though, these developments proved to be not entirely negative but positive to our market as well.
Likewise, China’s move to fix its currency at “stronger-than-expected level” encouraged other Asian equity markets to rebound and, again, beneficial to us.
Therefore, it doesn’t look far fetch to imagine that their positive, rather than negative, impact on our equity market will prevail.
Den Somera is a licensed stockbroker. The article has been prepared for general circulation for the reading public and must not be construed as an offer, or solicitation of an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise. Moreover, the public should be aware that the writer or any investing parties mentioned in the column may have a conflict of interest that could affect the objectivity of their reported or mentioned investment activity. E-mail address of the writer is den.somera@manilatimes.net
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