IF the current trend continues over the next two weeks, the Philippine Stock Exchange (PSE) will post its worst monthly performance for 2014.
To hear most commentators and even local stock-market analysts tell it, the PSE is like a dead leaf blowing in the wind. The stock market goes up or down because of what investors and traders are doing in New York, Hong Kong, Bangkok or Taipei.
The experts are sure that both local and foreign participants in the local market make their buying and selling decisions by looking at the movement of other stock markets. If South Korean investors are buying Samsung Group shares, well, it certainly makes sense to buy SM Investments Corp. shares. They both start with the letter “S”, and if you say their names really fast, they almost sound alike.
But investors in the local market are not always mimicking other markets. Buying pressure that causes prices to go higher is due to investors buying stocks at bargain prices. When prices go down, it is because of profit-taking. Obviously, no one with any sense ever loses money on the PSE because he or she is always buying at a bargain and selling at a profit.
Since prices usually go up for a few days, and then down for a few days, all you have to do is catch the flow by reading the commentaries to know when you should start bargain-hunting or taking profits.
Apparently, though, sometimes stock-market movement happens because investors are actually paying attention to something that’s happening in the Philippines and not in Shanghai. Positive economic news, like inflation going down or exports going up, seems to affect buying and selling. But here, too, local investors are totally unpredictable. The market can go up or down, depending on whether investors reacted to or unexpectedly ignored the news.
Perhaps, both Filipino and foreign stock-market investors who put their money in the market, whether it’s P10,000 or P10 million, might have other considerations that we don’t know about. Maybe investors are wise enough to look at the bigger picture and trends, and not just at today’s newspaper.
The PSE index has been down for three of the last four weeks, and may make it four of five by the end of this week. While we have been told that local stocks are too expensive, there is much more to it than that. The ones investing P10 million or P50 million are looking at months and years down the road at corporate value growth, and they have been moving out, just like the short-term speculator.
For the last six weeks, I have been warning subscribers that, at some point, the local political climate might affect the stock market. The PSE does not react to short-term political developments. Even during the tumultuous times before and after the 2004 elections, which gave us the “Hello, Garci!” scandal, the market continued rising.
Remember that foreign investors do not care about Philippine politics at all. What they do care about, however, is Philippine political stability. Right now, the country’s political scene does not appear to be very stable.
Philippine politics is always “exciting”, but how much of the current excitement is hurting the country? Is politics keeping infrastructure projects from moving forward? Is the government focusing more on the 2016 presidential elections than the transportation problem in Metro Manila? Are the mining law and investment-incentive changes being held up because of political, and not economic, considerations?
The share price of the Philippine Long Distance Telephone Co. is down more than 13 percent in the last six weeks and, perhaps, the commentators are correct in saying that it is because some stock trader in Tokyo ate some bad sushi for lunch yesterday.
However, there is now a strong negative sentiment that goes beyond corporate developments and economic outlook. Sometimes, the best commentary about the stock market is found on the front page of the newspaper and not in the business section.
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E-mail me at mangun@gmail.com. Visit my website at www.mangunonmarkets.com. Follow me on Twitter at @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.