No price rally yet

Philippine Daily Inquirer - - BUSINESS - DEN SOMERA

This week, stock prices may move side­ways first then down­wards be­fore sta­bi­liz­ing to­ward the end. It will get sup­port from the pre­dictable changes of the sea­son and by promis­ing de­vel­op­ments at the on­go­ing Asean Sum­mit.

And if we are to ex­pand our imag­i­na­tion a bit more, these could very well serve as cat­a­lysts to spur a mar­ket rally in the near fu­ture.

Cur­rent mar­ket data, for now, is not strong enough to power price ral­lies. Av­er­age daily value turnover is still within the P7 to P8 bil­lion range and trad­ing vol­ume con­tin­ues to be er­ratic. This cur­rent setup will only be snapped with the en­try of fresh money.

Note that for­eign in­vestors’ trad­ing di­rec­tion has been head­ing south. But not­with­stand­ing the cur­rent sit­u­a­tion, for­eign in­vestors are still net buy­ers and con­sis­tent strong mar­ket par­tic­i­pants.

Their par­tic­i­pa­tion aver­ages 50 per­cent of over­all mar­ket trans­ac­tion. They buy in bulk and sell in small vol­umes, an in­di­ca­tion they could just be trad­ing within an ac­cept­able range to take ad­van­tage of op­por­tu­ni­ties and re­al­ize easy gains.

How soon will more money en­ter the mar­ket? This ques­tion will def­i­nitely be an­swered by the at­trac­tive­ness of lo­cal stock prices vis-a-vis sim­i­lar prod­ucts in eq­uity mar­kets across the re­gion and on Wall Street.

While ours are not too pricey yet, our stocks can no longer be con­sid­ered bar­gain. What could en­tice the en­try of more money into our mar­ket would be the prospect for more growth and earn­ings.

In both ar­eas, we ap­pear to en­joy an ad­van­tage. We have the nec­es­sary eco­nomic funda- men­tals to sup­port these.

An­other ob­sta­cle that needs to be hur­dled is the avail­abil­ity of a va­ri­ety of stocks with mar­ket cap­i­tal­iza­tions that could pass the stan­dards of for­eign funds.

We may be a lit­tle short in this depart­ment. The good news, how­ever, is that our lo­cal mar­ket has more to of­fer now than be­fore.

For a long time, we could only count with our five fin­gers the num­ber of stocks that have mar­ket cap­i­tal­iza­tions good enough for big funds. This has served as a bar­rier to the en­try of more money.

Things have changed. We now have enough avail­able stocks ap­pe­tiz­ing enough to big in­vestors who could pro­duce big­ger value turnovers that, in turn, may drive higher price lev­els.

Need­less to say, this will not be ma­te­ri­al­iz­ing this week or even up to the so-called Santa Claus pe­riod for ral­ly­ing. At best, prices may just trade within a band fa­vor­able to trad­ing plays.

Bot­tom line spin

Let’s go back to my friend’s in­vest­ment port­fo­lio I men­tioned last week. He is about to earn his prof­its soon. To re­call, his strat­egy to buy at the start of the year (he ac­tu­ally made most of his pur­chases on the last week of March) has got­ten him ahead of the mar­ket.

Prof­its from his 10 additional hold­ings (which could also serve as your stock picks) were from as fol­lows: Ayala Cor­po­ra­tion (AC), 28.53 per­cent; Al­liance Global Group, Inc. (AGI), 27.29 per­cent; SM In­vest­ments Cor­po­ra­tion (SM), 44.89 per­cent; San Miguel Cor­po­ra­tion (SMC), neg­a­tive 1.65 per­cent; Met­ro­pol­i­tan Bank and Trust Com­pany (MBT), 19.97 per­cent; BDO Uni­bank, Inc., 21.82 per­cent; Bank of the Philip­pine Is­lands (BPI), neg­a­tive 5.35 per­cent; Manila Elec­tric Com­pany (MER), 5.91 per­cent; and Nickel Asia Corp. (NIKL), 17.65 per­cent.

Some­how strug­gling with the trend in mar­ket prices, he will be us­ing a me­chan­i­cal tech­nique to ex­e­cute his ex­its. This will em­ploy the use of a trail­ing stop.

A trail­ing stop is “an or­der to buy or sell a stock if its price moves in an un­fa­vor­able di­rec­tion” to your in­ter­est.

A trail­ing stop could pro­vide the in­vestor greater flex­i­bil­ity to profit, or limit a loss. “The stop level can be ex­pressed as ei­ther a fixed ab­so­lute amount or as a per­cent­age of the stock’s cur­rent price.”

A big price cush­ion in a trail­ing stop could make you max­i­mize your prof­its. And a tight price stop, on the other hand, could make you earn less. Us­ing a trail­ing stop to your ad­van­tage can be a bit tricky. A grasp on the mar­ket’s volatil­ity move­ment will im­prove your chances.

Lastly, the ad­van­tage of us­ing a me­chan­i­cal tool like a trail­ing stop takes away the emo­tion out of the de­ci­sion process, which of­ten turns out en­abling a loss in prof­its and in­vest­ment cap­i­tal. You may reach the Mar­ket Rider at mar­, den­ or at www.kap­i­tal­

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