Pre-Closing "Dumps" Sent the Philippine PSEi 30 Tumbling Below the 6,500 Level

Pre-Closing “Dumps” Sent the Philippine PSEi 30 Tumbling Below the 6,500 Level

What the transition from pre-closing “Pumps” to “Dumps” mean

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Pre-closing dumps have become the prominent feature of “the stock market with Philippine characteristics.”  It represents a seeming shift in the price level “management” by unknown but influential participants of the PSE channeled via the principal equity bellwether, the PSEi 30.

August 4′s incredible “dump”—the largest since 2021—sent the PSEi 30 tumbling below the 6,500, a proverbial Maginot Line, a fiercely defended territory by the bulls.

Yet, 73% of this week’s 2.63% deficit came from Friday’s 1.92% “dump.” Pre-closing dumps occurred in three of the five trading sessions this week.

As a result, in a risk OFF week where only 4 of the 19 national benchmarks declined, the Philippine PSEi 30 was Asia’s laggard. 

Among the PSEi 30 members, the broadness and scale of the pre-closing selloff were incredible.

SMC (9.01%), JGS (7.69%), AEV (4.97%), and MBT (4.43%) were among the heaviest last-minute losers. In turn, these issues suffered the most in weekly returns, i.e., 11.01%, 12.06%, 10.04%, and 4.7%, respectively. 

Twenty-four of the 30-member issues were down this week. The broader market sold off too: Decliners (531) led advancers (342) with a 189 margin.

The top 10 brokers accounted for 60.68% of the weekly volume.  Last Friday, these creme de la creme intermediaries accounted for a remarkable 65.8% of the mainboard turnover. 

The daily mainboard volume (averaged weekly) jumped by 39.6% to Php 4.6 billion.   The cross-trades of some of the top brokers, which accounted for about 6.8% share, helped pad up the mainboard turnover. 

There’s more. The twenty most traded issues accounted for 83.54% of the mainboard volume last Friday and averaged 83.04% for the week, which means morsels for the 266 listed firms at the PSE.  As such, the average number of issues traded daily has been drifting close to the March 2020 crash levels.

The above numbers magnify the concentration of activities to a few issues and brokers.

As emphasized repeatedly, the prevailing low-volume environment makes equities prone to selloffs. 

In any case, the expanding share of the top 10 brokers signifies evidence of the decreasing participation of the general public, the increasing risks of the industry, and the vulnerability of the PSE to excess volatility.

Of course, Friday’s selloff could generate an early week recoil that should help the index recover some of its lost ground.   The announcement of the Q2 GDP this week may help. Maybe not. 

And considering that the selloff occurred in the aftermath of the CPI report, it is unclear whether there is a relationship with the coming Q2 GDP broadcast.

That said, the PSEi has been trading within a narrow range of 6,400 to 6,700. 

One can even interpret the 1-year PSEi 30’s chart harried by a bearish descending triangle pattern or a head-and-shoulder formation from the 3-year chart.

Nevertheless, reclaiming its resistance requires considerable volume improvements, which alternatively means that the PSEi could plod to defend its support level absent these. 

From the “pumps,” the remarkable shift to “dumps” underscore the deepening bear phase of the PSE and the PSEi 30 and its increasing fragility to excess volatility—as consequences of years of distortions from implicit price controls or interventions. 

As an old saw goes, all actions have consequences.