Manila, Philippines

Au-Ghost Month for PSEi?

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As if on cue, PSEi went down heavily yesterday, the supposed day one of the Ghost month. The index fell by 1.86% to 7888 after reaching 8100 levels (YTD high).

Every year, market participants see August as ghost month, and this year, according to Chinese Lunar calendars, it will be from Aug 3 to 31. During this period, believers do not make any major investments, transactions or agreements as the period is well, inauspicious.

Incidentally, many traders from the West take vacations on August since it is summer over there, and maybe because they too see August as low volume trading anyway.

So which one is causing the market to go down? Lack of foreign funds buying since traders are on vacation, or the ghost month spooking buyers away? All of the above or none of the above?

You’re free to look at historical Augusts whether there is indeed a trend of markets going down in August. As for me, I won’t bother since my decisions should be based on where the market is expected to be going, regardless of what month of the year.

That’s the beauty with markets. We can scratch the surface trying to explain it, but in the end, the market does what the market does. It’s the aggregate of all participants emotions, generally grouped into greed and fear, acting on their own self-interest to gain money, or protect capital. Or in this case, to stay on the sidelines for now.

The past 2 days, TEL dropped big after it reported low 2Q earnings and cutting its dividend payout policy. TEL’s been bleeding on its Rocket Internet investment overseas for some time now. Don’t know what benefit they will realize from Rocket, or maybe they’re on the lookout for buyers on this bleeding business, but no takers?
Aboitiz Equity Ventures (PSE: AEV) also dropped after it disclosed that it sold treasury shares to a private placement, to take advantage of its lofty valuations.
Many other index issues seemed over stretched, with the likes of AC, MPI, SMPH, SM etc. PCOR‘s been going down due to low oil prices but CEB‘s been flying, precisely because of low oil prices.
It’s just a matter of time when all of them shall take a breather. Was it just coincidence that they decided to take a rest during starting August? Or August caused traders to finally realize that hey, let’s take profits and get out of the market for now. Income numbers are also starting to come in, so after this, what are other catalysts?
Expectations, expectations, expectations. Personally, I’d like to see this market go down further. The post-election rally was sure a welcome profitable run, but if we want a more sustained bull run until next year, taking a breather now won’t be so bad. Instead of reaching crazy heights soon, then falling much much sharper later on. If Western traders can afford to take a summer vacation without fear of getting left behind (the market will always be there so don’t chase stocks), maybe so should we.
See you on the other side of ghost month (if you believe). As for me, the market does what the market does. Prepare your bullets for potential bargains and baggers!
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