Bull running on 4 legs
The quiet bull has matured into a raging bull running on all 4 legs. This is how I see the market in the coming months. Last Friday, the PSEi closed at 2,992.0 with value turnover increasing significantly to P3.5bn. From experience, value turnover, more than the index level is the best barometer in gauging the market. This is a powerful signal for me. As I always like to stay, the writings are (clearly) on the wall.
For the last 3 years, we have seen the PSEi bull running on “just” 2 legs. Essentially, foreign funds and local market insiders have pushed the market to the 3,000 levels. However, there are signs that the other “2 legs” – local institutional funds and retail players are beginning to enter the market.
With the bull running on 4 legs, we should expect value turnover to reach P4.5bn per day soon. As for the PSEi, this will likely push the index to 3,400 level.
The appreciating Peso and the sharp drop in T-bill rates are the key impetus in generating additional liquidity into the stockmarket.
Local institutional funds have no choice but to increase their exposure in local stocks. The continued decline in interest rates will switch liquidity into the stockmarket. Fund managers can no longer justify generating 5% return to their investors. On the other hand, retail players who have been sidelined for the last 10 years have more excuses (now) to play the market. The opportunity costs to speculate in stocks have declined considerably with 91-day T-bill rates at 3.75% and the P/$ rate hovering at 6-year highs – P49.096: US$1.0.
On the flipside, the market might be entering its last leg. The big gains have been made. The PSEi will likely be in its last 10-15% run before cooling off. Whatever it is, there still money to be made in the market. So, ride the bull and enjoy the run while it lasts.
For the last 3 years, we have seen the PSEi bull running on “just” 2 legs. Essentially, foreign funds and local market insiders have pushed the market to the 3,000 levels. However, there are signs that the other “2 legs” – local institutional funds and retail players are beginning to enter the market.
With the bull running on 4 legs, we should expect value turnover to reach P4.5bn per day soon. As for the PSEi, this will likely push the index to 3,400 level.
The appreciating Peso and the sharp drop in T-bill rates are the key impetus in generating additional liquidity into the stockmarket.
Local institutional funds have no choice but to increase their exposure in local stocks. The continued decline in interest rates will switch liquidity into the stockmarket. Fund managers can no longer justify generating 5% return to their investors. On the other hand, retail players who have been sidelined for the last 10 years have more excuses (now) to play the market. The opportunity costs to speculate in stocks have declined considerably with 91-day T-bill rates at 3.75% and the P/$ rate hovering at 6-year highs – P49.096: US$1.0.
On the flipside, the market might be entering its last leg. The big gains have been made. The PSEi will likely be in its last 10-15% run before cooling off. Whatever it is, there still money to be made in the market. So, ride the bull and enjoy the run while it lasts.
posted by jack galt at
9:07 PM
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