The last trading week of August ends today, and regardless of whether it will end lower than its recent record close, it can be said that the market’s performance for the month has been extraordinarily exciting and exceptionally good in an otherwise considered seasonally bad or dull trading period.
The month of August has been seasonally regarded as an inauspicious period for business and financial dealings — or even in the stock market — as it falls on the traditional Ghost Month of the Chinese calendar, the time when the “gates of the underworld and heaven are opened, allowing spirits to wander and roam the earthly realm.”
These spirits are said to be “those who have not found peace and wander the earthly realm searching for food, pleasure, prayers, and offerings.” As such, the Ghost Month is also referred to as the “Hungry Ghost Festival.”
These spirits are also often found “causing mischief and bringing bad luck” to the living, thereby rendering the period unfavorable, if not, dangerous and not good to one’s fortune.
The performance of some rituals and offerings to appease the spirits gradually grew into a colorful yearly event that likewise transformed to serve as a reminder to respect and honor the deceased, ensuring that their souls are at peace. The event is observed and celebrated in China, and across Asia like Taiwan, Vietnam, Singapore, Malaysia, Hong Kong, and Japan.
Due to the significant presence in the country of people with Chinese ethnic origin, the Ghost Month has become an essential part of Filipino life and practice, too.
Hindsight analysis
Incidentally, the month of August has been found to be also an unfavorable period for the stock market in the US, even without the impact of the superstitious practices and beliefs on the Ghost Month observed by Asians living there.
In a study on the New York Stock Exchange’s (NYSE) Composite index conducted between 2004 to 2023, it showed that over the last 20 years there were five months of the year that served as the market’s best trading time. An equal number of months during the year also appeared to be the market’s worst trading period.
The NYSE’s best trading months are found to be in April, July, October, November, and December. On the other hand, the market’s worst trading months are found to be in January, February, June, August, and September.
While August is also one of our seasonal dull months, this did not happen this year. This was because the market was supported by emergent good fundamentals here and abroad, such as easing inflation rate, favorable response to the decision of the Monetary Board of the Bangko Sentral ng Pilipinas to cut overnight reverse repurchase rate by 25-basis points to 6.25%, weakness in oil prices, reduced concerns over existing geopolitical hot spots, and overall optimism over potential US interest rate cuts in September, among others.
The market also became technically resilient provided by the steady rise of stronger local hands — reinforced by the recent change in the trading tack of foreign investors into slowly becoming more of net buyers — in the market to overcome a 300-point or 4.5% deficit when the market dropped to the 6,158.48 level on June 21, and bounce higher by another 147.88 points at 6,606.36 by the end of July, despite foreign investors’ net-selling activities.
As the market entered the month of August, most weak hands gave in to the fear factor brought about by the Ghost Month. This led the market to slide down to 6,434.23 on August 5.
However, in 17 days, the market climbed higher to close and end the month’s trading on August 22 at 6,961.99, with a total net gain of 527.76 points from its lowest low in August.
More significantly, the market is now at least 260 points above its vaunted 6,700 level that served as its longtime resistance line since the beginning of the year.
However, the finish line is still far in sight. We have another four months before the year ends. For those who took the opportunity to buy stocks for cheap, hoping they can sell for a bigger profit once the next month rolls over is still uncertain.
Market outlook this week is turning anxious, again. Remember, September is another dreaded month at the NYSE.
Nevertheless, this does not mean that there are no good potential trades at the moment. Jofer Gaite, president and chief trader of Westlink Global Equities Incorporated, has some good stock recommendations in mind that may outperform anytime. One of these is the Bank of the Philippine Islands (trading symbol: BPI).
As disclosed, BPI reported a record net income of P30.6 billion for the first half of 2024. Year-on-year, this is up 21.5%, due to strong revenue growth and high operating leverage, which meant that the bank’s profit came from sales that had high gross margin and low variable costs.
As of last August 22, BPI’s last traded price was P124.80 per share which is about its immediate resistance price. Stock brokerage houses, however, estimate that BPI may be able to hit a return of about 14% at the target price of about P143 apiece.
Another is Metropolitan Bank & Trust Company (trading symbol: MBT). MBT also reported a record net income of P23.6 billion resulting from well-managed costs, stable margins, and strong loan growth.
This is a stock favorite also recommended by Joel de la Peña, market strategist and chief trader of H.E. Bennett Securities Incorporated.
Among the most sought banking stocks, owing to its long history of high dividend yield, MBT is estimated by many stockbrokerage houses that it could hit a target price of P100 or a little more. At this price, together with its last traded price on August 22 of P74 per share, the stock promises a profit return equivalent to no less than 34%.
In the meantime, the market’s first support-resistance lines are respectively placed at 6,680 and 6,980, while its second support-resistance lines are estimated at 6,400 and 7,120.
Presence of AI in the stock market, and more at the Monday Circle
I recently had the good chance to meet Dominic “Doc” Ligot, one of the leading experts and proponents in the use of “Artificial Intelligence” or AI. He is the founder of Cirrolytix, a company focused on social impact through AI.
Together with his team, he won three times in the NASA International Space Apps Challenge, the largest global annual hackathon, a two-day event that provides an opportunity for participants to utilize NASA’s free and open data and its Space Agency Partners’ space-based data to address real-world problems on Earth and in space.”
He has further distinguished himself with his award-winning project, AEDES. This is a dengue surveillance app for determining in real time the site and time of a dengue outbreak anywhere in the country — or, maybe, even any part in the world.
Since AI is basically about data operation, it is now in use in the stock market as a tool that has now “significantly transfigured the way stock markets function and thus have impacted the way securities are actively traded.”
In particular, investors have started to mechanize their stock trading processes leaning heavily on algorithmic trading, and financial markets have likewise also restructured themselves as virtual order books.
AI is now also in use in managing investment portfolios. AI Advisors, as they are called, are now utilized as stock pickers to replace human advisors in actively managed equity funds. One of the largest US investment management firms has started to replace human stock‐pickers with the full automated investment program based on self‐learning artificial intelligence algorithms.
Algorithmic trading may further move into more pragmatic machine learning (ML) dexterity that can manage real-time deciphering of large volumes of data from many different sources.
Doc Ligot will be speaking at the Monday Circle next September to further enlighten its members on the pros and cons on the use of AI as it grows more sophisticated and widespread in various concerns and interests such as public health, food security, and — believe it or not — on human rights.
As AI is already disrupting jobs, posing security challenges and raising ethical questions, it could be used for more nefarious purposes, if unregulated.
It would be interesting to hear from Doc Ligot how the technology will continue to develop and what measures governments should do to cope up and exercise more control over AI production and usage, on one hand, and what businesses should do to fully capitalize on the use of the technology without sacrificing human labor, on the other hand. – Rappler.com
(The article has been prepared for general circulation for the reading public and must not be construed as an offer, or solicitation of an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise. Moreover, the public should be aware that the writer or any investing parties mentioned in the column may have a conflict of interest that could affect the objectivity of their reported or mentioned investment activity. You may reach the writer at densomera@yahoo.com)
