On the day the Islamic State (IS)-inspired Maute terror group launched the Marawi City siege on May 23, most people thought stock-market prices would fall.
It did not happen.
During that week, the market gave up points just once, with the benchmark Philippine Stock Exchange index (PSEi) falling by just 4.16 points to 7,867.49 days later after the fighting started.
Martial law—a development usually dreaded by investors—was declared, yet the market was not shaken.
It was the same story during the following week, with the market further gaining points toward the all-time high for the year at 8,000-point level.
On that same week on June 2, however, a lone gunman attacked Resorts World Manila (RWM). There were dozens of casualties, but mainly from suffocation from smoke, as the gunman attempted to torch the casino.
The market finally fell on that day and shares of Travellers International Hotel Group Inc. of businessman Andrew Tan plunged 8 percent to P3.13.
These were the two events that may have—but failed—to rock the market, and scuttle its upward trend during the past months that left some analysts wondering.
Positive outlook
“The positive outlook of investors accounts for the resilience of the market and its growth in May,” according to a paper called “Capital Markets Research” by the First Metro Investments Corp. and University of Asia and the Pacific.
Not even the lower-than-expected first-quarter GDP of 6.4 percent announced earlier in May failed to make a dent in the market.
“The local bourse continued its upswing, albeit moderated, as investors, especially foreign ones, paid little heed to the Marawi terrorist attack and the lower-than-expected first-quarter GDP growth. Rather they used their liquidity to buy-in on downturns,” the paper said.
Investors were actually more focused on international events in their trading, such as falling long-term US interest rates that reflect growing skepticism on the ability of US President Donald J. Trump to ramp up fiscal spending in the world’s biggest economy.
“[Investors are] less concerned about local inflation in the face of weakening crude-oil prices supported that sustained gains. Corporate earnings came in respectably, mostly in line with analysts’ consensus,” it said.
Mixed responses
Luis Limlingan, head of research of broker Regina Capital and Development Corp., said the Marawi incident also posed “quite a challenge” on the market, although it got mixed responses.
“On one hand, the battle has still been ongoing, but on the other, the military has been quite aggressive at trying to contain the situation. The areas that are also affected are presumed not to hamper the country’s growth. This, however, is still contingent on how much of the fighting can be contained, and how speedy this would end,” he said.
The attack on RWM battered the shares of Travellers, which canceled its annual stockholders’ meeting as a result of the incident. The company, however, has now recovered to become one of the top stock picks, as its price is now cheaper, while the gaming sector remained robust. It is now trading at P3.38 per share.
“Investors were quick to rationalize that the event was not a terrorist act, rather an isolated case. Furthermore, the hotel has already begun operations, while the casino operations are still being held under investigation. Following the news, there were several reports that the Philippines’s total GGR [gross gaming revenues] as of the first quarter grew by 48 percent, which was rather encouraging,” Limlingan said.
Setback for Mindanao
For now, the most immediate effect will be on how Manila-based firms will be encouraged to expand in the Mindanao area, where development has been scarce for the last few decades.
Jose Victor Paterno, president of Philippine Seven Corp., which holds the master franchise of 7-Eleven stores in the country, said the company may still pursue its push to expand to Mindanao, but it will have to avoid the eastern part of Mindanao, where most of the conflicts have erupted, including Marawi City.
Retailer Wilcon Depot Inc., meanwhile, said it is still confident on the Philippine economy even with the ongoing conflict in Mindanao, and is pushing through with its store openings in Zamboanga City and Cagayan de Oro City this year.
William Belo, the company’s chairman, said the two Mindanao stores form part of seven stores to be opened around the country this year that include Iloilo, Tacloban and Bacolod City in the Visayas, and Cabanatuan City and Silang, Cavite, in Luzon.
“We’ve been operating for 40 years. We’ve gone through so many ups and downs, crises during the 1970s, 1980s. You have the martial-law years; then the Asian financial crisis during the 1990s, yet we survived. So in our case I don’t see any external factor that will significantly affect us. And internally we are well prepared for all these eventualities. I don’t see any factor that could really affect [us], except if it’s an international crisis,” Belo said.
Better than last year
The LT Group Inc., where most of the businesses of tycoon Lucio Tan are being held, said it expects the business environment this year to be better than the previous year, with the Duterte administration’s infrastructure plan providing a boost.
Company President Michael Tan said the government’s infrastructure plan will increase employment, especially in the countryside, which, in turn, will increase the purchasing power, resulting in continued demand for the group’s products. But a lingering concern is the stiff competition and rising inflation that may translate to higher costs.
Liquid market
Securities and Exchange Commission Chairman Teresita Herbosa said she believes that the country’s fundamentals—for now —have been helping weather the crisis.
“If you have a liquid market and that people are confident about the performance of the companies, you have corporate governance in place, measures to protect investors’ rights, even incidents like we have in the news right now will not really
affect the market. All these points to a more stable market,” Herbosa said.
Herbosa believes that the PSEi may not end at the 8,000-point level by the end of the year, with all what’s happening both local and international fronts.
“I’m even more worried if it reaches 10,000 points immediately. I’m not really sure if we can reach 8,000 within the year. It’s a good [sign]. A slow, but sure, growth,” she said.
Image credits: AP/Bullit Marquez