According to Investopedia, bear market is a
market condition in which the prices of securities are falling, and widespread
pessimism causes the negative sentiment to be self-sustaining. As investors
anticipate losses in a bear market and selling continues, pessimism only grows.
Although figures can vary, for many, a downturn of 20\% or more in multiple
broad market indexes, over at least a two-month period, is considered an entry
into a bear market.
Based on the prevailing sentiment that I have read through various articles, the common theme is that the current downtrend is just a correction but one must stay on the sidelines until the tide is over. I believe there is no widespread pessimism among the investors right now but rather opportunities to start accumulating for the long term.
Here are some of the statements made after the biggest sell-off occurred last Jun 13, 2013:
BSP Governor Amando Tetangco Jr. expected the pullout of foreign funds to be short-lived, saying the country’s macroeconomic fundamentals remained strong and attractive to investors.
“What we saw was just a healthy correction in the equities market. People were thinking that the price-earnings ratio was becoming high, although there are fundamental bases supporting the expensive equities given the strength of the Philippine economy,” BSP Deputy Governor Diwa Guinigundo.
“I know it looks really bad. I’ve never seen it that bad (in terms of single-day decline in index points), but in terms of percentage, we’ve seen worse. Neither should we be entirely concerned because there’s no change in the country’s macroeconomic fundamentals, with a 7.8-percent growth rate still the best in the region and we have record-high GIR (gross international reserves) level,” Jose Mari Lacson, head of research at the local stock brokerage Campos Lanuza & Co.
"Nothing has changed fundamentally. We know where investors are attributing the selloff: concerns that the Fed will scale back its bond buying. It's externally driven in that respect so what we're seeing today is an opportunity to buy," Before we end the bull cycle, we'll see higher highs. It's still difficult to say if we'll return this year to record levels, but we think the bull cycle is still intact. said April Lee-Tan, head of research at COL Financial Group Inc.
See below chart. From the peak of 7,403.65 to the recent low of 5,678.73, the PSEi (Philippine Stock Exchange Index) lost 23%. Technically, we already hit the bear market because the PSEi breached the 20% downturn.
However the 20% downturn must at least stay for two months in order to conclude that we are in the bear market. The low of 5,678.73 occurred last June 25, 2013 and it must stay down until Aug 24, 2013.
Fortunately, the PSEi is already back in the 6,500 level, above the 20% level. From hereon, analysts expect the market to consolidate in the short term before making its next big move. That big move can either be up or down. According to Prof. Benjamin Diokno the worst is yet to come. “It would be a mistake to assume that the equity markets and currency markets will be sailing smoothly from hereon. I see the present situation as more of a lull before the storm. I expect more volatility in the next few months.
When the Fed starts to tighten, and the tightening will surely come, the tapering process will be sustained for a few months. When that happens, the risk of major corrections will increase.”
Perhaps, the worst is yet to come. The recent sell-off maybe a correction
only but keep in mind that a correction can be a precursor to bear market or a recession.
Amid the bearish tone of some market pundits or cautious optimism of the others, in stock market nothing is set in stone. The PSEi may break the previous high of 7,403.65 registered last May 15 if the foreign investors will come back again in the market or it may go lower than the 5,678.73 registered last Jun 25. The market will dictate what course the PSEi will do in the next few months and a big part of this market are the foreign investors.
I am of the opinion that the current market action is consolidating and is waiting for a lead to make its next move. I’m staying with some cash just in case the market finds a way to complete its five year cycle. Based on the graph posted below, we are in the return to normal phase. We are still a long way from the bottom of the market.
Based on the prevailing sentiment that I have read through various articles, the common theme is that the current downtrend is just a correction but one must stay on the sidelines until the tide is over. I believe there is no widespread pessimism among the investors right now but rather opportunities to start accumulating for the long term.
Here are some of the statements made after the biggest sell-off occurred last Jun 13, 2013:
BSP Governor Amando Tetangco Jr. expected the pullout of foreign funds to be short-lived, saying the country’s macroeconomic fundamentals remained strong and attractive to investors.
“What we saw was just a healthy correction in the equities market. People were thinking that the price-earnings ratio was becoming high, although there are fundamental bases supporting the expensive equities given the strength of the Philippine economy,” BSP Deputy Governor Diwa Guinigundo.
“I know it looks really bad. I’ve never seen it that bad (in terms of single-day decline in index points), but in terms of percentage, we’ve seen worse. Neither should we be entirely concerned because there’s no change in the country’s macroeconomic fundamentals, with a 7.8-percent growth rate still the best in the region and we have record-high GIR (gross international reserves) level,” Jose Mari Lacson, head of research at the local stock brokerage Campos Lanuza & Co.
"Nothing has changed fundamentally. We know where investors are attributing the selloff: concerns that the Fed will scale back its bond buying. It's externally driven in that respect so what we're seeing today is an opportunity to buy," Before we end the bull cycle, we'll see higher highs. It's still difficult to say if we'll return this year to record levels, but we think the bull cycle is still intact. said April Lee-Tan, head of research at COL Financial Group Inc.
See below chart. From the peak of 7,403.65 to the recent low of 5,678.73, the PSEi (Philippine Stock Exchange Index) lost 23%. Technically, we already hit the bear market because the PSEi breached the 20% downturn.
However the 20% downturn must at least stay for two months in order to conclude that we are in the bear market. The low of 5,678.73 occurred last June 25, 2013 and it must stay down until Aug 24, 2013.
Fortunately, the PSEi is already back in the 6,500 level, above the 20% level. From hereon, analysts expect the market to consolidate in the short term before making its next big move. That big move can either be up or down. According to Prof. Benjamin Diokno the worst is yet to come. “It would be a mistake to assume that the equity markets and currency markets will be sailing smoothly from hereon. I see the present situation as more of a lull before the storm. I expect more volatility in the next few months.
When the Fed starts to tighten, and the tightening will surely come, the tapering process will be sustained for a few months. When that happens, the risk of major corrections will increase.”
Amid the bearish tone of some market pundits or cautious optimism of the others, in stock market nothing is set in stone. The PSEi may break the previous high of 7,403.65 registered last May 15 if the foreign investors will come back again in the market or it may go lower than the 5,678.73 registered last Jun 25. The market will dictate what course the PSEi will do in the next few months and a big part of this market are the foreign investors.
I am of the opinion that the current market action is consolidating and is waiting for a lead to make its next move. I’m staying with some cash just in case the market finds a way to complete its five year cycle. Based on the graph posted below, we are in the return to normal phase. We are still a long way from the bottom of the market.
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