The question asked repeatedly is what is going to make the Philippine stock market go higher. The new exciting word is “catalyst,” which is defined as “a person or thing that precipitates an event;” in this case, investor buying.
If in fact there is such thing as a catalyst for the stock market, then March 20, 2009, is the key date as the Philippine Stock Exchange (PSE) began its 10-year bull run.
A search of world news around that date shows “China’s retail sales increased 15.2 percent in 2009” and “Bernard Madoff pleads guilty surrounding his $65-billion Ponzi scheme.” For the Philippines, you will find that nothing of significance happened in March 2009.
Buying shares is not that different from buying anything else. We buy a new car air freshener or a pair of socks from a need. But no one needs to buy the stock market. I just bought a television that I did not want or need because the price was lowered to the same level as the one I bought two years ago. We do buy “cheap prices,” and we are told constantly the PSE is cheap but still there is no move higher.
A catalyst is that something happens to get things started. Think of a snowball going down the side of a mountain that becomes an avalanche wiping out a Swiss village.
All year long, the experts have been thinking that the next event would be the catalyst. The primary driver was supposed to be the low inflation rate. But after months of lower inflation, nothing has happened. Maybe lower economic growth is the problem. However, annual growth has been stable since 2012 between 5 percent and a little over 6 percent. There certainly was not any particular “negative catalyst” to hamper stock prices.
Another factor to consider—as I have been saying for months—the market has been boring. The trading range this year is about 8 percent from weekly close high to low. That compares with about 20 percent to 25 percent in 2016, 2017 and 2018.
Looking at 2009, we find that from October 2008 through the middle of March 2009, price movement was equally boring. The weekly range was from 1,800 to 2,000, or about 10 percent. Then the bull market started. However, the rally started from a bottom. What happens when boredom comes in when prices are near a top?
That happened in 2005 and when the market started moving higher; it went up more than 100 percent before making a trend lower. While one man’s floor is another’s ceiling, there is no reason to believe that now is a top and not a bottom.
The experts are looking for the catalyst in all the wrong places. It is not found in the economic data today anymore than it was in 2009 and 2005.
Economic growth in 2005 was less than 1.5 percent and in 2009 was 2 percent. Inflation was going down dramatically in 2009 but in 2005 it was over 6 percent. In both instances, prices did not go up for months. But prices did not go down either. The same thing is happening now.
I bought my Sony BRAVIA 65-inch 4K Ultra HD with HDR Processor television, including a free wall rack for the same reason the stock market will go higher. I believed that the price would never be any lower.
Eventually it will kick in to investors that this is the low. Maybe sooner, or maybe later. The experts will still not find a catalyst and will miss the beginning of the next run higher. Don’t be an expert.
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E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.