The Third Quarter 2012 Philippine Stock Market Report

When Two Market Tools Agree

The PSEi was within a range in 3Q12 after its rise from 4Q11 onwards to just below 5,500.  The two rallies in the line chart were caused by the drops in the Philippine 10-Year Treasury Note from 5.42% on May 8, 2012 to 4.83% on July 31 and then to 4.69% on September 11.  Further cuts can be expected due to spillovers from the US’ continuous Quantitative Easing.  This bodes well for the PSEi.  Equities will continue to be in the limelight.

What has been perplexing in 2012 is that the PSEi has been in high and even euphoric high levels in our PSEi Bands but the PSEi Tracker has been very bullish throughout the year.  One fundamental tool offsets the other, but still, bargain stocks have provided high growth and a safe haven throughout the year (Please see previous article).

So when will the PSEi Bands, which currently says downside is high, and the PSEi Tracker, which has been bullish throughout the year, agree together?  Assuming all things equal, the answer is when the PSEi average PER is 19.29x.  That’s when both tools will agree that the PSEi is already a Sell than a Buy.  As of this moment, the PSEi average PER is 18.06x, and the PSEi is at 5,434.13.  That’s somewhat close to 19.29x already but still shows good upside before the cookie crumbles.  Going further, the resulting PSEi at 19.29x PER is 5,746.72.  Coincidently, that’s close to the PSEi Bands’ Euphoric High or top of 5,741 for 2012.

From the present PSEi, that’s around 300 points away.  Third quarter corporate and economic results are coming.  Their rosy figures may spur that remaining 300-point upside along with the announcement of the new US president in November.  2012 has been great overall, and its grand finale is yet to be seen by the market.


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