ACCORD CAPITAL EQUITIES CORPORATION
EC-058 GF East Tower, PSE Center, Exchange Road, Ortigas CenterPasig City, PHILIPPINES, +(632)687-5071
TD 155-156_August 10-11, 2011
WO complementary perspectives poses a plausibleexplanation for the market's strong rebound off Tuesday'srout: the technical view and the fundamental outlook. Whicheverschool of thought one adheres to, however, there is a commonthread that runs through and joins both: the three-day slide hasbrought stocks prices to bargain-levels – that is, if they haven'tbeen so in the first place even before this fears mounted.
The PSEI rallied 133.11 points to close the session just tipping aresistance line at 4,290.14, erasing three-fourths of the prior day'sslide and pushing the measure back into positive year-to-dateterritory. The rebound reverberated across all sectors with the Servicegroup posting the least advance at +1.25% while Mining and Oilcounters cumulated a 6.26% rise.
Chartist would by an large define today's recovery as leaning towardsa “technical bounce.” Whether it is of a dead-cat type is debatable.What is clear is that a rebound was a reasonable expectation after the measure dropped -393.5 points or -8.65% in six days, a bigpart of which (nearly 90%) were registered in the last three. At that point, both RSI(14) and STO(14,3,3) had nose-dived intooversold territory and an inverse move was imminent. From yet another perspective, Tuesday's sudden slump created a gapbetween 4,320.58 and 4,208.55. Technically, sooner or later this gap has to be closed, and Wednesday may be seen as an initialattempt to do just that. (
Market breadth was widely positive, 149-17, reversing Tuesday's -156. Nevertheless, the +90 spread covers just a little over one-fifth of the three-day negative gap, suggesting the “force” behind today's massive points rebound lacked substantial support fromthe broad market. The ADL remains under last week's closing level, which in turn was lower than the preceding period. Thisinternal measure's bias continue to be negative. (
Value turnover came in slightly thinner than Tuesday's total at php7.46 billion (net of block sales), but nevertheless is still more than1.5x the year-to-date daily average which has risen to php4.715 billion. Shares turnover likewise stayed at 2.4x the same periodaverage, even as the day's total fell -3.2% less than the previous session.Foreigners have kept on the sell side in the last five (5) sessions, aggregating net sales amounting to php4.477 billion. The suddenchange in their trade direction is clearly observed at the tail-end of the chart (
Fundamentalists on the other hand argue that the consecutive days the market dropped has pulled stock prices below fair values, inlight of the positive numbers most reporting entities have posted through the first six months of the year. In a prior report, we havehighlighted that eleven of the 13 earnings reports have come in positively – with most registering double-digit year-on-yearincreases.From a valuation standpoint, the market PE has dropped to 15.1x in line with historical averages. Using this as a screen, we find six(6) of the PSEI components under 10x earnings, and another seven (7) which are under the PSEI level. (
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