Why news trading fails

Global political tensions are on the rise in the Middle East.

- KEITH LIM

Global political tensions are on the rise in the Middle East. Many investors are tempted to quickly sell their portfolios in response to recent news, and while this reaction seems reasonable, it likely won't be profitable. Let's look at a local example to understand why you should be wary of trading based on news.

From 2020 to 2024, ABS-CBN reported losses exceeding P30 billion. In May 2020, the company lost its broadcasting rights, which was the core of its business.

To stay afloat, ABSCBN had to sell properties to cover debts and renegotiate loans with banks. It was an awful time for the company.

Then, after four years of substantial losses, on Jan. 7, 2025, after markets closed, great news arrived. The Philippine News Agency published an article titled: "Bill granting ABS-CBN new franchise filed in House." This was the best news the markets had seen for ABS-CBN in recent memory, and everyone was ready to pounce the next day as soon as markets opened.

The stock was at P5.06 per share. The next day, after the news broke, the stock instantly opened at P6, bypassing any intermediate prices. Within the first 20 minutes of trading, it rose to around P7.