After the Philippine Stock Exchange Index or PSEi closed at 7,417.25 last Monday, September 23, resulting in a climb of no less than 20% from its immediate low last June 21, it officially entered bull market territory.
The feat was capped by a day’s gain of 164.93 points or 2.27% advance on a value turnover of P8.72 billion only, arising from a price rally across the board led by the financial sector, that was evidently driven by net foreign buying, which also boosted the performances of the holding firms, property, industrials and services sub-indices.
In the financial sector, notable performers included BPI (+1.88%; P163.00), Metrobank (+2.38%; P79.45), Security Bank (+7.82%; P96.50), China Banking Corporation (+6.86%; P54.50), and BDO Unibank (+1.88%; P163.00) leading to a 3.68% gain on a value turnover of P2.83 billion.
SM Investments (2.10%; P991.00), SM Prime Holdings (+1.86%; P32.80), Ayala Land (+2.48%; P37.20), International Container Terminal (+2.63%; P414.00), ACEN Corp. (+1.35%; P5.25), Aboitiz Equity Ventures (3.11%; P38.15), Jollibee Food (+1.04%; P272.80), to mention a few, provided the additional boost to push up the rest of advancing sectors, while the only losing counter for the day, which was the mining and oil sector, was pulled down largely by Philex Mining and PXP Energy.
However, trading on Tuesday became visibly affected by profit-taking activity. Despite a high total value turnover of P11.79 billion, the market only managed to advance 14.96 points or 0.20%, although the financial sector continued to tear.
Fortunately, foreign buying further increased and accounted for 52.1% of total market transactions compared to its last Monday’s participation of 43.98%. This arrested the profit-taking activity which was obviously carried out by local investors who were previously almost always left behind holding the bag by foreign investors whenever the PSEi made a run to challenge — but without success — the 7,000 level many times before.
Bull market a.k.a. bull run
The common metric for a bull market to have started is when stock prices, represented by the main benchmark index, like our PSEi, has risen 20% from its most recent bottom. Nevertheless, prices may also rise and fall in the process during the period but stock prices rise in the overall. As proof that it has actually set in, the rise is continuous and sustained. The market rally would last for a long period of time, like several months or even years.
Also, a bull market commonly starts when the economy is said to be strengthening or is already strong. Further observations claim, “they tend to coincide with a strong gross domestic product (GDP), a drop in unemployment, and a rise in corporate profits.”
Likewise, bull markets are characterized by widespread optimism, solid investor confidence and strong expectations that the market rally will continue for an extended period of time.
Conversely, stocks tend to receive higher valuations, as investors pay more for them due to the perceived potential for price appreciation. There is also greater liquidity in the market as there will be more buyers than sellers.
Companies that are performing well in a bull market may also likely choose to reward their shareholders by increasing dividends. In turn, this will make their stocks become more attractive for income-focused investors.
Likely to occur in a bull market period, too, is that there will be an increase in the number of companies going public and raising capital through initial public offerings (IPOs), and provide investors with the additional opportunity to participate in the growth of new, promising companies.
Low expectations
Unfortunately, the unfolding market rally has left me hanging considering the result of my initial conversations with industry buddies.
The first stop was with Joey Roxas, who is the chief trader and president of Eagle Equities Incorporated. While he recognizes the fact that the market has entered bull market territory, he doesn’t seem to be too excited, much less enthusiastic, on how far it would go. To him, the market’s advance will be greatly hampered to swing beyond 7,500 or its thereabouts considering what is all happening around at the moment. If ever, the market may be able to climb by another 300 points only by yearend.
A seasonal follower, too, Roxas is especially worried of what the month of October may bring. The month could prove to be hard and difficult. Like the famous quote attributed to Mark Twain about the month of October, “This is one of the peculiarly dangerous months to speculate in stocks.”
Prodded for a more concrete clarification, he simply came up with this cryptic explanation, “different year, different reasons, but always October.”
Market strategist and chief trader of H.E. Bennett Securities Incorporated, Joel de la Peña, sings a similar tune about the current market trend. To him, the market has entered the bull market territory as part of the usual “last quarter rally” and lifted momentarily in reaction to the rate cuts being initiated by monetary authorities.
De la Peña reserves to give further comments about the market’s run until he sees more trading volume across the board. Until then, he has no clear picture on how high the market could ride. “Healthy bull run must be supported by healthy market volume,” he added.
Stockbroker Rene de los Reyes of Abacus Capital & Investment Corporation, also believes that despite latest developments in the US and China, most especially, the market in its current run will meet strong resistance in several levels before it may finally end the year at 7,700, at the most. These resistance levels are seen to be within the proximities of 7,464 and 7,552.
De los Reyes remembers that “the PSEi had a bull market from October 1, 2022 to January 18.2023 but that didn’t really feel like a bull run and prices eventually drifted lower over the next 18 months.”
Likewise, while sentiments are very positive, he is in some quandary as to whether the bull run is sustainable, for he is worried about the two factors that are largely driving the market at the moment. These are the positive sentiments built as a result of the announced policy on monetary easing here and abroad, and the reversal of foreign fund outflows into net inflows, which never lasted in the past.
The reversal could be traced to have started from the middle of the year, and that its impact could drive the market by another 200 basis points more — but here is the catch — as this may still happen through the end of 2025 considering that “gross volume of foreign buying hasn’t actually improved and remains in a downtrend.”
Also, liquidity is said to have “more than doubled, using a 20-day moving average,” which to their observation “was spiked by heavy turnover resulting from the rebalancing of the indices of the MSCI (last August 31) and that of the FTSE (on September 20). “Excluding these, current (daily value turnover) average is closer to P5.6 billion only,” he added.
Jofer Gaite, president and chief trader of Westlink Global Equities Incorporated, is a bit more hopeful. The market could go past 7,500 all the way to 7,800 or as high as 8,200 if supported by succeeding new rate cuts. To what he knows, too, serious foreign fund clients have been accumulating since June, a development that was also spotted by De los Reyes’ company.
Again, Andro Leo “Andoy” I. Beltran, Vice President of First Metro Securities of the Metrobank Group, says the bull run “won’t happen that fast.” Profit-taking, which has become a trading mantra by current market participants, is in the way.
However, because of new initiatives to draw higher economic growth around the world, including China, Beltran and his stockbrokerage firm feel “the market will continue to form higher highs in the process.”
Similarly, it is believed that the current market rally is driven largely by the euphoria created by the promise of additional interest rate cuts until next year by monetary authorities to bolster economic growth and by the apparent net buying activities of foreign investors, which must be closely watched because of their mutable record in the past.
Under some market circumstances his company has described, the bull run may continue to break beyond anticipated resistance levels, and hit 8,000 by the end of June 2025,” he added.
Mona, the argonaut
On the same day last September 23, suspended ERC Monalisa Dimalanta (after several postponements since the first week of August this year) finally appeared as guest speaker of the Monday Circle, a forum to foster financial literacy particularly in the development of a well-informed and intelligent investing public that may, at the same time, lead to the promotion and further development of the capital market that contributes to a sustainable and equitable financial system.
Her appearance became more significant since she has been suspended, and her suspension questionably came out first in the newspapers before she actually received the formal notification.
In an order dated August 27, 2024, the Office of the Ombudsman levied a six-month preventive suspension on Dimalanta “in connection with the complaint filed by the National Association of Electricity Consumers for Reforms Inc. (NASECORE) for grave misconduct, grave abuse of authority, and conduct prejudicial to public service.”
As reported in the newspapers, “NASECORE said that the ERC failed to act urgently on the appeal to recalculate Meralco’s rates prompting the company to purchase power from the Wholesale Electric Spot Market (WESM) which resulted in unauthorized billing of consumers.”
Uphill legal battle
Dimalanta confirmed that she filed a motion for reconsideration with the Office of the Ombudsman, contending that “grounds for her suspension are moot because the ERC already decided on the issue raised against her.” The decision on Meralco’s rate application, according to Dimalanta, was finalized on August 21, which was before the Office of the Ombudsman’s issued order dated August 27.
As bared by Dimalanta before the members of The Monday Circle, the Meralco case was already resolved as of August 21, in which “the ERC commissioners, by a 3-2 vote, decided not to review Meralco’s rates for the fifth regulatory period, effectively freezing any changes to the distribution rates until June 2026.”
By the way, Dimalanta is not one of the three but of the two members of the board who cast a dissenting vote on the matter.
Among the reasons being raised against her suspension by industry players and participants being among the few and possibly the only professionally competent functionary of the ERC — and except for her only fault of having been a legal officer previously of a private company against some of the big contenders vying for business in the energy sector – it is inordinately clear from its legal mandate, that the ERC is a collegial body so that they find it questionable why the Ombudsman’s suspension order was directed to Dimalanta alone. “The blame should not be Dimalanta’s alone, but by all its commissioners,” they further added.
Yet, by the way the suspension order has been crafted, the prospects of a difficult if not losing legal battle is awaiting Dimalanta. As declared by the Ombudsman, “The evidence on record shows that the guilt of respondent Dimalanta is strong and the charges against her involve grave misconduct, grave abuse of authority, gross neglect of duty, and conduct prejudicial to the best interest of the service which may warrant her removal from the service.”
Not just yet
This reminds me of the final scene of the Oscar-winning movie “Gladiator.” The African slave Juba (played by Djimon Hounsou) was placed in a situation requiring a choice between equally undesirable alternatives.
Will he accept the invitation of death as in the case of his friend, the Roman general-turned into slave Maximus Decimus Meridias (the main character of the movie played by Russell Crowe)? As a gladiator, a harsh life awaits him further. But he has unfinished business. The line he delivered to signify his choice gave the movie a fascinating closing act.
I’d like to borrow the same line with the same charm that it brings to encourage suspended ERC Chair Monalisa Dimalanta not to give up her fight — not just yet. – Rappler.com
(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. You may reach the writer at [email protected])
