Our market's year-to-date gains were erased last Wednesday. Yes, it's like starting over again... and worse, to some, present sentiment is bleaker than in January. There are doomsayers who want the index further back to 5200, back to exactly a year ago (instead of just beginning 2013), when Ghost month was also ending.
Fortunately, the index bounced back +6% in two days, and I profited from the swing. The first gain was from a purchase in GTCAP, which I believed did not deserve falling -10% in one day. And then by early Thursday, when there's an apparent chance of a big bounce, I got in in AGI, CPG, TA, and VLL (these also tumbled down to below 'strong support' on Wednesday). By Friday, there was already a positive general sentiment. Our sell points for AGI and VLL got hit, bringing back cash position to above 30%. We came out okay for the week.
Now, what's next? We're ending Ghost month next week and the past 3 years show consistent good performance from this time up to year end. The problem though is the volatility that remains in our market. Bleak conditions, not present last year, like the impending bombing of Syria and QE easing of US Fed, continue to bring us a shaky market. If you observe the exchange of trades in a stock like SM, even for just a few minutes, you can see the extraordinary tussle between bulls and bears. And worse, the bears are mostly foreign funds that seem violent, with bad intentions, seemingly intending to leave carnage, when they exit. Although I have some doubts in divesting AGI (this stock prove to be one of the most resilient across the PSE), it's only right to secure some profit and better our cash positions in this backdrop.
It's also useful to consider that many traders are resigned to the scenario that we will not be able to go back to a 7 K index this year. Most of them are just hoping to go back to 6600. And 6600 should be an easy target, if we base on the +11% that happened last year. I would also be happy if we hover between 6600-6800, BUT with stability. It feels not an even playing game when there's always a threat, that 'easiness' from foreigners to bring down a blue chip by -10% in a day. And the minute they decide to do that, you may be occupied in a meeting in the office in your day job.
What would bring that stability? 1) the Fed should announce a firm timeline on what they want to do. 2) the foreigners should finish withdrawing 3) probably more Pinoy buying strength. It's interesting to note that we're still net-foreign-sell days during the big bounce on Thurs and Fri. Local funds believe in our companies in that two days enough to prop our market back. I think this is not empty fear, but a threat that is apparent and which we should be defensive against.
On another macro point of view, going back to January prices somehow disregards all the good news and achievements (of our OFW's, of our call center agents, et al) from start of the year to now. It's like the pride-inducing GDP disclosures, investment upgrade never happened at all. And the rosy corporate earnings are negative instead. Should we be part of this group that disregard this solid data?
On the other side, we could also look at it this way: we could have been on a lower level today if not for those catalysts. And yes, we have to be at peace with the fact that our PSE is one of the most vulnerable to outside factors because 1) it is not that big enough yet and 2) we Filipinos who participate in equities are also not yet that many. Following foreign funds is still one of the most safest trading strategy until we find resolutions to the factors. If I use this, I should divest (or at least lessen) big position in MBT... that's something to ruminate about at the start of the week.
Bottom line, I envy those starting at 100% cash today. It's a good time to start. Or if you cut loss, it's a good time to start over again...
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