I'm Trying to Understand the Recent PSEi Decrease from 7,000+ to 6,800+

Business World Online

The Philippine Stock Market Index (PSEi) has had another decrease. The score reached 7,000+ and I was getting pretty excited. I was thinking, "Should I sell my stock index or should I continue averaging into it?" I'm still holding some funds because I'm going to invest more in the long term than do day trading. I agree with Charlie Munger that day trading is nothing more than a speculative orgy. I got through Google News and found some factors that caused the recent decrease. I'd like to do this not as an analyst but as a lay investor and blogger. 

Profit-taking before key data

The Business World website sites that there was profit-taking before key data. I was reading through and found out that there was indeed some profit taking The score that went from 7,000+ to 6,800+ can be affected. Here's an excerpt of the report which caught my attention:

“Philippine stocks were sold ahead of the January inflation print tomorrow, and investors kept cash with many awaiting the latest economic updates globally,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message on Monday.

A BusinessWorld poll of 15 economists conducted last week yielded a median estimate of 7.6% for January headline inflation, close to the lower end of the 7.5% to 8.3% forecast given by the Bangko Sentral ng Pilipinas.

If realized, this will be slower than the 14-year high of 8.1% in December 2022 but faster than the 3% print seen in January 2022 and the central bank’s 2-4% target. 

Aside from the inflation report, employment and foreign direct investments data will also be released this week, he said.

Investors are waiting for US data on trade, mortgage and consumer sentiment.

“The local stock market gauge corrected lower for the second day in three days, considered healthy profit taking, after the dollar-peso exchange rate corrected…,” Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said in a Viber message.

On Monday, the peso closed at P54.39 versus the greenback, declining by 71 centavos from Friday’s P53.68 finish, data from the Bankers Association of the Philippines showed.

Mr. Ricafort said the market also priced in the government’s offer of retail Treasury bonds that starts on Tuesday, as it “could siphon off some of the excess liquidity from the financial markets and from other alternative investments.”

All sectoral indices closed lower on Monday. Services went down by 23.58 points or 1.33% to 1,747.51; financials lost 22.49 points or 1.21% to end at 1,827.91; property retreated by 36.88 points or 1.2% to 3,020.59; holding firms declined by 70.39 points or 1.03% to 6,703.81; industrial dropped by 78.98 points or 0.78% to 9,932.95; and mining and oil slid by 36.50 points or 0.33% to 10,992.54.

Right now, I try to understand not as a financial analyst wannabe but as a civilian. We're seeing some good news such as the PHP finally recovering against the USD. It was pretty much high during the earlier days of the administration of President Ferdinand Romualdez Marcos Jr. Now, the exchange rate has corrected. We see that the PHP is getting stronger to a certain extent. 

The American stock market rally 

Meanwhile, there are still worldwide data to consider. I may want to keep an eye on the American stock market next since I'm indirectly invested in US stocks using ATRAM's feeder funds. It would be important to note that there's still the stock market rally of 2023. Here's an excerpt from the Business Insider:

After US stocks' dismal performance in 2022, many Wall Street experts expected more pain in the market this year. But they've performed so well in the early going that even longtime investors have been taken aback.

"I think the upside surprised a lot of veteran traders, including a few old fogies like me," trading legend and UBS floor director Art Cashin told CNBC.

January is a month when investors typically stand down from high-risk assets, so the optimism in the market was "odd to see," according to Wells Fargo equity strategist Anna Han.

The benchmark S&P 500 US stock index has rallied over 6% in 2023 so far. It's risen mainly thanks to expectations that cooling inflation will allow the Federal Reserve to pull back on its aggressive interest-rate hikes, which typically weigh on asset prices and economic growth.

Pretty much, the US Stock Market is still in an unusual turn. I can't determine how long the rally will last. Investors are still looking at how the American economy is performing, which in turn, will affect the stock market. These areas are trade, mortgage, and consumer sentiment. These all affect the industry performance, company performance, public perception, and economic factors. Economic factors may include currency performance, inflation vs. deflation, economic outlook, economic policies, and interest rates. This can affect both local and world trade. 

Since the Philippines has been longtime allies with the Philippines--it might be a good move for investors to wait for US data on trade, mortgage, and public sentiment. 

Foreigners are also unloading their holdings

The Inquirer website also shares information regarding foreigners unloading their holdings.This would be something worth noting as to why the PSEi went down from 7,000+ to 6,800+ right now:

Trading activity declined from the previous day after a total 940.9 million shares valued at P6.52 billion changed hands while foreign investors cut their holdings as net selling reached over P800 million.

All PSE subsectors closed in the red with industrial stocks taking the lead after a 1.71-percent decline.

Property stocks fell 1.27 percent, followed by holding firms (-0.99 percent), financials (-0.82 percent), services (-0.34 percent), and mining and oil (-0.22 percent).

SM Investments Corp. was the top traded stock as it shed 1.54 percent to P895 per share.

It was followed by SM Prime Holdings Inc., down 2.09 percent to P37.50; Metropolitan Bank & Trust Co., up 0.67 percent to P60.20; Ayala Land Inc., down 0.34 percent to P29.10; and Ayala Corp., down 1.96 percent to P700 per share.

International Container Terminal Services Inc. was down 0.28 percent to P211.40; SP New Energy Corp., up 3.25 percent to P1.59; Metro Pacific Investments Corp., up 1.93 percent to P4.23; Figaro Coffee Group Inc., up 1.96 percent to P1.04; and Robinsons Land Corp., down 0.73 percent to P16.30 per share.

Overall, there were 112 losers against 81 advancers while 45 companies closed unchanged, stock exchange data showed.

What would define a holding? The Investopedia gives its definition of holding as follows: 

Holdings are the contents of an investment portfolio held by an individual or an entity, such as a mutual fund or a pension fund. Portfolio holdings may encompass a wide range of investment products, including stocks, bonds, mutual funds, options, futures, and exchange traded funds (ETFs).

With some selling, there would be some decrease in activity later on. It's like you can expect a not-so-busy day after a Christmas sale or Valentine's sale. It's because demand will not be as high as during those times. After Christmas, some businesses may not even operate until the break is over. Some businesses may even choose to close on certain days such as a procession or barrio fiesta. Sales may increase before the barrio fiesta but not during the day or right after the day. It's pretty much like a cooldown period. In a product life cycle, there's the maturity stage and then the decline stage. In short, business isn't always going to be good.