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AT the
risk of sounding clichéish, a favorite analyst of a
Bloomberg TV anchor recalled to Asian viewers Wednesday
morning the classic Roosevelt, Depression-era line, “We
have nothing to fear but fear itself.” He was providing
some background on how much panic, and a self-fulfilling
fear, played a role in Tuesday’s market meltdown around
the globe, on fears that the United States, the world’s
biggest economy, was recession-bound.
The man
was right on the button as far as the fear factor is
concerned. For months, even before the subprime crisis
fully broke into the open in August 2007, there had been
talk in various economist and expert circles about a
possible slowdown in the
United States;
and the subsequent credit crisis that ballooned from the
subprime mess merely lent velocity and magnitude to the
sense of terror.
As for
the Asian markets, which started wilting
across-the-board even before the markets opened in an
America
celebrating Martin Luther King Day on Monday, the fear
of a US slump was also not the whole story. For the
longest time, there had been talk that the sizzling
markets this side of the globe were due for some
correction.
And yet,
as the classic gnashing and gnawing of teeth played out
in the United States, it was apparent that it would take
some time to quiet things down a bit, notwithstanding
the Fed’s emergency rate cut of 75 basis points and,
earlier than that, the Bush administration’s
announcement of an economic-stimulus package with the
vaunted tag of $1.5 billion. Experts explained that
these two moves, along with other minor measures taken
to ease the pain, normally take some time to really make
an impact; hence, even before the tangible benefits are
felt, the declaration of the prescription itself could
have the double-edged effect of fueling the fear, i.e.,
things are really so bad we’d have to do this and that—a
situation akin to a patient in an emergency room who
hears snippets of what doctors plan to do, and imagines
the worst, say, “we’ll amputate” instead of “we’ll
sedate” the patient. This is not to say, though, that
those measures should not be done if they risk fanning
the fears; it’s just the way things are.
Meanwhile, back to the local markets, perhaps the best
attitude to take is pursue the line began by two people:
the first is Amcham’s executive director here, Mr. Rob
Sears, who saw both threat (exporters being hurt more)
and opportunity (more US firms outsourcing to the
Philippines, among others, to cut operating costs) from
a US recession. The second is Philippine Stock Exchange
(PSE) president and CEO Francis Lim, who said that while
the immediate, underlying reason for the market’s fall
was adverse developments overseas, certain things are
within our control. Namely, make sure the PSE and
government reforms earlier put in place would indeed
serve their purpose as shock absorbers while the global
market rides out the turbulence. He took the occasion to
remind those concerned there are several stock
market-friendly bills still pending in Congress.
And what
are these bills? For one, there’s the Personal Equity
and Retirement Account, appropriately acronymed Pera,
which has hurdled second reading at the Senate but still
needs House support.
Mr. Lim
sees the Pera as “additional enticement for ordinary
Filipino workers and employees to save, invest, earn and
prepare for their future.”
A
buildup in savings is crucial, he explains, as capital
to bankroll more projects, which in turn would provide
jobs for workers and business opportunities for small
entrepreneurs—or, right down his alley, “funneled to our
stock market.” Such an investment will be good for the
stock market, he explains, “because the Pera investments
would add more liquidity” to it, while allowing the Pera
contributor to also benefit from the market’s sustained
growth.
Last
August, as the world markets started to take a beating
while loan defaults rose amid the subprime mess, the PSE
also began pitching another bill, one designed to lessen
credit risks and loan defaults, called the Credit
Information System Act (Cisa).
The PSE
had a major stake in that one: the selling frenzy in
August had wiped out the record-breaking gains in 2007
of the PSEi, the main barometer of local stock price
movements.
The
proposed Cisa would lessen the likelihood of such loan
defaults happening here by making the
credit-investigation process less tedious, and less
costly, while increasing the accuracy of credit
information.
He
linked it to a vaccine shot to immunize the local market
from a subprime-like ailment.
Cisa
will create the Credit Information Corp., which would
set the standards for credit-reporting operations.
Speaking
last August, the PSE head had made it clear then that
“notwithstanding the PSEi’s setback, our stock market
still stands on solid macroeconomic ground.” Meaning,
“listed companies remain profitable; interest rates,
along with inflation rates, remain stable; while the
country’s economic growth forecasts look attainable.”
And yet, such strong fundamentals notwithstanding, he
stressed that a Cisa is needed just to make sure the
financial system has an additional layer of support as
buffer, “if global repercussions from the US subprime-lending
problem were to linger.”
As of
Wednesday morning, the consensus of many experts was
that the repercussions would still linger in these
parts, so this is still the time to be vigilant, but
without being devoured by paranoia.
Meantime, there’s homework to be done. |
