The new year 2018 started with a bang and a boom on the Philippine Stock Exchange (PSE). During the first three days of trading, the Philippine Stock Exchange Composite Index (PSEi) gained 2.47 percent, reaching another historic high.
JG Summit Holdings and Universal Robina share prices gained over 8 percent. San Miguel shares rose 7.5 percent. Ayala Corp., GT Capital Holdings, Metrobank, BPI and SM Prime Holdings went up in the 5-percent range.
However, the first three trading days of 2018, in a sense, illustrate everything that is both right and wrong with the local stock market.
With that kind of price movement, there should have been dancing in the streets. But there was none because the local stock market is like the 1980 movie The Blue Lagoon with Brooke Shields. Two young children are marooned on a tropical island. As they grow older, they are faced with menstruation and erections but have no idea what these experiences mean because they never learned the facts of life.
I trade the stock market because my father did and his father before him. My sons learned of the market from watching my daily market television show when they were practically still in diapers. Knowledge of stock-market investing skipped nearly two generations in the Philippines from the 1970s—when mostly only insiders made money—and the Filipino millennials are just now trying to catch up.
Most people are as ignorant about the stock market as a 6-year-old child is about where babies come from. There is some very general knowledge, but that is all. Commentators, such as stock-brokerage analysts, are better versed but must keep it simple, imparting wisdom on the same level as “You were born from Mommy’s belly.”
The stock-price takeoff was almost a sure bet. Just before Christmas, net buying by foreign-held stock accounts jumped on one day to nearly P2 billion. That is a big deal. Before the New Year, there were two consecutive days of net buying in excess of P1 billion. That is a bigger deal. You never saw that mentioned in the local press or media, and yet that is what clearly predicted the first week’s PSEi advance.
Having said all that, our local stock market is great because it substantiates the fact that money is never wrong. Forget all that nonsense about the local market being manipulated. “Crooked” price movements happen because there are crooks meeting sometimes-careless victims. Which should we ban: riding in jeepneys or wearing jewelry because a snatcher grabs a necklace?
Money is always right in its search for profit. Should you have followed the money and bought Bitcoin at $1,000? Of course. Should you have also bought at $19,000? Also, of course. But what a person should have done is follow the money leaving Bitcoin at the $19,788 high.
Notice also how money ignores “common wisdom.” Over the past weeks and months, we have been bombarded by these “truths”: “The PSE is too expensive.” “The market will go down because Duterte is probably the devil.” “The increased stock-transaction tax will scare investment away.” “Philippine inflation is going to skyrocket because of the new tax laws.”
Who knows? Maybe all of these are true. However, for the moment, money—both foreign and local—is rushing into local stocks. If and when —and for whatever reason—money starts flowing out, it will be obvious if you know what to look for. In the meantime, not investing in local blue-chip issues is the financial equivalent of shooting yourself in the foot. Enjoy and profit.
E-mail me at [email protected] Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.
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