ANY seasoned trader knows the cyclicality of the market—it goes up and down. And at this time of the year, the Chinese ghost month, the markets will be down or flat at best.
“Our family pays close attention to ghost month because many of our clients hold many superstitious beliefs before and during the Ghost Festival. It thus becomes natural that we get influenced by these same practices as well,” Luis Limlingan, managing director at brokerage firm Regina Capital and Development Corp., said.
“Most common for us is to avoid taking huge investment risks during the said time period. There is some irony as most people sell their portfolios aggressively in anticipation so the prices become depressed and quite attractive for us,” he said.
There’s no capital flight happening during this month—the time of the year dreaded by many—but there will also be no major activity in the market as investors and fund managers usually are on a holiday.
“If your birth falls in the ghost month, avoid celebrating your birthday at night and blowing your cake. It will be better to celebrate during the daytime,” says a Feng Shui website.
This year, the ghost month falls on August 1 through 29, with its peak on the 15th. It is the seventh month of the Lunar calendar, a tradition observed not just by many Filipino-Chinese but also those in neighboring places—Hong Kong, Taiwan, Japan and other Southeast Asian nations.
During this month, it is believed that ghosts and spirits, including those of deceased ancestors, come out from the lower realm to wander and seek food on Earth.
There should be, as the general tradition goes, no major activity happening during the month, such as ground breaking of a facility, wedding, any major investments made, or even hiring a new employee.
It is also during this time of the year when a lot of fund managers go on vacation as well since a lot of holidays normally occur within the month of August. There was Eid al’Adha on August 12, Manuel L. Quezon Day (holiday in Quezon City) on August 19, Ninoy Aquino Day on August 21, Heroes Day on August 26.
“Perhaps that partially explains the drop in market activity,” Limlingan said.
As if on cue, the benchmark Philippine Stock Exchange index already fell early last week (Monday) to return to the 7,000-point level on huge selloffs.
“We had another situation, of foreign investors dumping Philippine equities while locals are scooping them up at low prices,” Christopher Mangun, research head at AAA Securities Inc., said.
It rebounded, however, days later.
“The main index recovered almost half of what it has lost in the last two days; however, we are still almost 100 points away from the 8,000 key level. The longer it stays below that level, the more bearish investors will become. I still believe that the improvement in economic fundamentals and corporate earnings growth should offset most external concerns. The weaker currency, however, may be a concern for foreign investors,” he said.
Bargain hunting, or picking up stocks that were made cheaper as a result of a fall, is one of the opportunities that can be gained during the month.
COL Financial Inc.’s chief technical analyst Juanis Barredo said August may be a turbulent month, as it has historically shown seasonally weak performance.
“We think this seasonal weakness is something you should take advantage of, rather than fear. Decades of historical data have proven that stocks go up over time, so if you’re investing for the long term, this should be viewed as a great opportunity to buy good quality companies at lower prices,” Barredo said.
Alvin Lao, president and CEO of chemical firm D and L Industries Inc., believes that there’s opportunity after the ghost month since it should be a period of lull, as the Chinese tradition dictates.
“You just have to prepare for it during the ghost month period as activities will surely go up just after the period,” Lao said.
Lao, however, said work still continues even during this time. DNL is currently doing construction works on its business expansion in Batangas, where it will sink some P8 billion in investments.
“We have already conducted the groundbreaking so our construction will continue,” he said.
That also goes for the Philippine economy as well since trading will continue despite a depressed market, including the second-quarter gross domestic product performance announcement and the announcement of earnings of firms, which they should announce before deadline August 15, ironically the peak of the ghost month.
“A lot of market-making activity also coincides during this month, especially economic data, and this later on influences the direction of the market during the last quarter. Some of these include GDP, the result of BSP’s [Bangko Sentral ng Pilipinas] meeting, inflation, quarter earnings and index rebalancing, to name a few,” Limlingan said.
Whatever ghost month may hold to different people, it seems one thing is clear: it is not luck alone that dictates the fate of business, but a reasoned, deliberate, well-conceived strategy based on an objective clear-eyed analysis of the situation.
Image credits: Yooran Park | Dreamstime.com, Nokhook | Dreamstime.com