MY concerns about the price movement of the Philippine stock exchange began in the middle of March with the column titled “The coming months.” The incredibly profound analysis that I presented at that time was, “The picture is not pretty.”
A little over a week ago I said, “Prepare to travel on a bumpy road for the next months.” I know that my comments are not as sophisticated as what the experts say and write but I hope you were able to get the idea.
Now April has borne witness to that forecast. The Philippine Stock Exchange index (PSEi) ended April falling 2.9 percent for the past week. That is the worst weekly performance since the second week of December 2013, when the market was down 4 percent. But December 2013 also saw a drop of 3 percent in the first week.
In fact, both November and December 2013 were really bad months, with the PSEi down 5.7 percent and 5 percent, respectively. April 2015 only saw a decrease on the PSEi of 2.8 percent.
But that does not matter at all if you were holding Banco de Oro shares from the beginning of the month and saw the stock lose nearly 12 percent. There were plenty of nasty stocks in April. EastWest Bank went down 10 percent. Jollibee was off about the same percentage. Vista Land shed 12 percent of its share value. But then again, maybe you bought Globe Telcom at the beginning of the month and saw the share price rise by 8 percent. That’s the way the stock market moves.
You are going to read and hear a lot of reasons why the PSEi was down in April, and particularly this past week. But I told you the week before what was going to happen, and why. The PSEi is anticipating, with both confusion and concern, what is
going to happen as the economic cycle reverses to the downside at the end of September.
The US just reported incredibly bad economic growth and activity results for the first-quarter 2015. The gross domestic product (GDP) rose by 0.2 percent. The excuses the financial press and media are giving for this result are all nonsense. No, they are worse than that; they are all garbage.
The headline reasons are bad weather that cut consumer spending; a weeklong port strike on the West Coast; and the fact that the oil industry has cut back on capital expenditures.
Weather had nothing to do with the almost nonexistent increase (0.9 percent) in consumer spending. Americans were supposed to be dancing in the street—and dancing to the nearest department store—because of low oil prices. Instead, they put in their bank account what they saved on gasoline. The personal savings rate has gone up from 4.4 percent last November to last month’s 5.8 percent.
Consumer confidence in April suffered its worst drop since the US government shutdown in October 2013, falling from 101.4 to a four-month low of 95.2.
For a year-and-a-half, starting with December 1, 1989, the Philippines had big economic problems. In July 1990 the Baguio-Central Luzon earthquake hit. Mount Pinatubo blew in June 1991. The Philippine economy was just going through the motions. Companies were producing products from hot dogs to shoes, not expecting to make money but just to survive and keep the doors open.
The nominal amount of the US GDP went up by $6 billion. But inventories of unsold goods increased by $122 billion, now with the total of unsold goods at a record high. In other words, if manufactures had not just kept on producing goods that they did not sell, the actual GDP result would have been a negative 2.8 percent.
The US Federal Reserve just ended its meetings and said it would be raising interest rates. When asked when that would be, someone mumbled something about “Important dinner reservations, you know,” and left the room.
The Philippines is going to suffer an occasional anxiety attack in the weeks—maybe months—to come. I can only recommend a shot of fine Don Papa rum or a cup of home- brewed Iron Goddess tea, depending on your preference.
After we pass through to the other side of this coming storm, you will realize that it was not a big deal for you or the nation.
E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter
@mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.