*** Philippine stock picks thread ***

[Retz]

Time to buy stocks of power companies as they are about to have record profits?

[marktams86]

Just bought Smph. Ang baba! Pati AC!

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[Monseratto]

Metrobank from a peak of P137 now closed at P71...

[Monseratto]

Sinking feeling...

Are Philippine Stocks Heading For A Bust? - Forbes

12/12/2013 * 11:10PM
Are Philippine Stocks Heading For A Bust?

A few weeks ago, I wrote a controversial report in which I showed why I believe that the Philippines’ economy is growing on the back of a credit bubble. Since then, the Philippines PSE Composite stock index has fallen sharply by 8 percent, which wiped out all gains for the year.

Philippine stocks, along with most other emerging stock markets, have fallen in recent months as the U.S. Federal Reserve appears likely to soon taper its $85 billion per month quantitative easing program that has helped to inflate asset and credit bubbles in emerging economies.

In this post, I will apply technical analysis to the Philippine markets to ascertain their next move.

There was a serious technical breakdown yesterday in the Philippines PSE stock index that caused it to break below its important two year old rising uptrend line. In addition, this past spring’s surge and crash appears to have been a blow-off top pattern that typically marks the finale of an asset bubble. There is an extremely important support level at 5,600 that, if broken, would be the final technical trigger needed to confirm that a bear market is ahead. The PSEi is likely to touch the 5,600 support level and consolidate for some time just above that level before making its next directional move.



The chart below is the same as the one above but with the 200-day moving average plotted. I watch the 200-day MA to determine the direction of a market’s trend so that I can trade with the trend instead of against it. I use this indicator differently than most technical analysts: I focus on its slope in addition to its conventional use as a support and resistance line. When the 200-day MA is sloping upward – as it was in the PSEi until recently – I have a preference for taking on bullish trades, and vice versa. I pay strong attention to 200-day MA trend changes, such as when the average curves over from being in an uptrend to a downtrend, which is exactly what happened in the PSEi in recent weeks. The fact that the 200-day MA is now in a downtrend makes a bearish move more likely.



PHMA

The Philippine stock market’s technical breakdown is also confirmed by the Peso to U.S. Dollar exchange rate, which broke its important 4 year old uptrend line this past spring:



Peso

If a bearish move is ahead for Philippine stocks, property developers and banks are likely to experience the most pain as they are most sensitive to rising interest rates, which would be a side-effect of the Federal Reserve’s QE taper. As a reminder, a break of the 5,600 support level is needed as a further technical confirmation before a bear market signal is triggered.

[uls]

Sinking feeling...

Are Philippine Stocks Heading For A Bust? - Forbes

self reinforcing negative feedback loop

foreign funds come in with dollars, convert to pesos, buy local stocks

when they take profits they convert pesos back to dollars

dollar demand drives the dollar higher

as the peso weakens foreign funds get less dollars with their pesos

so they dump more stock before the peso weakens even further which drives the dollar even higher

[Retz]

5,812.54 12/16/13 15:40:00

[uls]

inverse correlation ang USDPHP and local stocks

when the USD weakens stocks go up

[userfriendly]

Metrobank from a peak of P137 now closed at P71...

I bought at 77 thought it was already low. Still went down to 70.6

[robot.sonic]

Ako investor mode muna. Di na tumitingin ng portfolio ko. Iwas high blood. Hehe.

[Retz]

^

Oo nga sir sana kumita na next year (cross fingers).


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