stock markets

[ANALYSIS] Light at the end of the tunnel: Time to take your pick

Den Somera

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[ANALYSIS] Light at the end of the tunnel: Time to take your pick
Bulls appear to be taking over the market

Current events last month looked too grim. I also felt the two long holiday breaks calendared for the end of October and the first week of November were just too irregular that I became simply negative about the prospects of the market, and everything else. With that attitude, I lost the fun of the long vacations and was even wrong about the market.  

But for someone whose job is also involved in being constantly on your feet largely to expect unfavorable events and developments, you sometimes get lost into confusion and paranoia. And this is just one of those times.  

As if to mock me, so to speak, the market opened up strong this week contrary to my expectations. Come to think of it, even with the only two separate days of trading we had last week, they all ended up positive.     

Of bulls and bears

Now, with the market’s good start this week some glimmer of hope seems to abound for market recovery. Bulls appear to be taking over the market.

Looking more closely at market records, bulls seemed to have started to come out since October 31. That day, the market ended on positive territory with a good trading volume of 0.42 billion shares and value turnover of Php4.09 billion. More significantly, the market was up 0.19% or 11.79 points despite foreign investors ending up as net sellers for the day.

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On November 3, the bulls held their ground, again. They started the day with a strong open. The market opened at 6,039.68, up 65.9 points from the immediately preceding closing index of 5,973.78 of October 31.  And while the market closed at the day’s session low of 5,989.27, it still ended comparatively higher by 0.25% or 15.49 points from that of the October 31 session. This only meant the bulls were able to withstand the pressure given by the bears, that was further emboldened by the continued net selling stance of foreign investors.  

At the start of this week last Monday, November 6, trading started again on the high side.  It opened higher by 17.32 points from previous closing, again. More than that, the market closed at the day’s session high of 6,078.03, up 1.48% or 88.76 points. This also happened notwithstanding the continued net selling tract of foreign investors, again.   

The trading results even got better the following day, November 7. The market opened higher at 6.081.44 and closed higher at the day’s session high of 6,132.32, up 0.87% or 53.29 points.  All counters were unmistakably up. Likewise, foreign investors obviously became net buyers for the day. 

The day’s trading total value turnover may have drastically dropped to about 75% or less of previous to Php2.99 billion only. Low as it is, I felt glad than worried. I believe this could only mean that bears are starting to retreat and bulls could no longer buy at lower prices anymore.

The same market story prevailed on Wednesday, November 8.  The market continued to inch up with foreign investors as net buyers, again.   

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Market fundamentals

Joey Roxas, the president of Eagle Equities Inc. gave me an exotic explanation for the market’s climb after tethering at breakdown levels for so long. One who also follows seasonal trends, he gave this cryptic explanation, “The Halloween is over.” 

Seasonal trends are one of the trading systems observed by some successful traders. It “refers to the recurring patterns of behavior, preferences, and activities that change with the seasons,” which can impact market situations as in the stock market.  

Examples of seasonal trends include the rise of sales due to the increase in spending activities of people around December in view of the Christmas season. Stock prices also fall during tax payment seasons, while energy consumption likewise increase during summer and the cold months; and so forth.

Like Roxas, the president and chief trader of Westlink Global Equities, Inc., Jofer Gaite, thinks the market is also currently buoyed by the country’s declining inflation rates.  Inflation is reportedly down to 4.9% for October, after hitting 6.1% in September.  

Wall Street’s latest performance is likewise fueling positive sentiments in the local market. Up to now, the local market continues to be highly influenced by developments in the US, which remains to be the market leader among the free economies.   

Stockbroker Rene delos Reyes of Abacus Securities Corporation, further declares that long-term US treasury yields have declined. Part of the explanation is related to the prevailing attitude of the US Federal Reserve as to whether they will still raise rates further. As they have been quoted, they “are done” with it.  

On the other hand, Joel de la Pena, the market strategist and chief trader of H.E. Bennett Securities, Inc., is not completely confident in the market’s current uptrend. He feels the market’s current trend is still under the shadows of the major technical downward direction of the market that goes as far back as 2018.

Similar to Gaite’s conditions for a sustainable market climb, the market needed more business volume which can only happen with the emergence of more catalysts. 

Looking at recent third quarter and first nine months operating reports (that started to come out in the news recently), we have enough catalysts that Gaite and De la Pena are talking about. Here are some of the good news, to mention a few: Bloomberry Resorts Corporation’s (BLOOM) nine-month net income reached P8.3 billion, up 106% year-on-year (YoY); Meralco Electric Company’s (MER) third-quarter income is up 59% to P10.6 billion; SM Prime Holdings, Inc.’s (SMPH) net income for nine months reached P30.1 billion, up 37% YoY; DigiPlus Interactive Corp.’s (PLUS) reported a nine-month jump in profits equivalent to about P2.1 billion, which is 37% higher compared to the same period last year; Aboitiz Power Corp. (AP) reported a nine-month core income of P26.7 billion, up 45% YoY; and Metropolitan Bank & Trust Company (MBT) reported that third-quarter net income grew to P10.9 billion, up 39%. 

Of course, there are these not-too-good to disappointing earnings results from some market favorites, too.  PLDT Inc (TEL) posted a nine-month core income of P26.1 billion, down 3.0% YoY.  Globe Telecom, Inc. (GLO) posted a nine-month core income of P14.8 billion, down 8% YoY. Semirara Mining and Power Company (SCC) posted a nine-month net income of P22.6 billion, down 37%. And, D&L Industries, Inc. (DNL) also posted a disappointing nine-month net income of P1.8 billion, down 29%.

For his views on interest rates and economic outlook, Secretary of Finance Ben Diokno has expressed confidence interest rates are already at their peak. Inflation is as well expected to fall lower even if consumer spending is anticipated to pick up next year.  

Last but not the least, one of the brokerage houses has these bold price projections on the following stocks:  AP, P45.00; BLOOM, P14.60; BDO, P158; SM; P1,050; MBT, P92.30; MER, P397.35. – 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 densomera@yahoo.com.

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