Philippine stocks are down. Should you panic?
Why should you panic if one of the main triggers of our market going down was primarily based on foreign investors taking profit and selling?
OVER the past two weeks, we’ve seen our market plunge to as low as 6,114, or a 16.41-percent drop from the highest of our market as of this year. One of the biggest contributors to that decline was the June 13 sell-down, which marked one of the biggest one-day declines since 2008, where we saw the Philippine Stock Exchange index (PSEi) drop by a whopping 6.75 percent just in one day.
Given these conditions, should you panic? Should you be scared?
Certainly not! As what I always tell my clients over www.marvingermo.com, the best place for you to be in as an investor is a place where you have bought your stocks with conviction, based on your own analysis and trading plan. Basically, conviction comes from knowing more about what’s happening in the market as a whole. Knowledge is still power and the more you feed and know the better your investing decisions will be.
Why should you panic if one of the main triggers of our market going down was primarily based on foreign investors taking profit and selling? At the end of the day, people are in the market to make money and to take profit. So when foreign investors saw the opportunity to transfer their funds back to the US, because of signs that their economy is recovering for the better, we saw the gut-wrenching effect of their selling and bringing our markets down. This is a normal cycle in investing. Stock prices go up because of new buyers entering while stock prices go down because investors choose to massively take profit.
With that, I’m here to tell you that there is nothing wrong with our local market! Our market went down heavily just because of the selling, which is normal and all part of investing in the game. What is happening now is not like the sell-down caused by the global recession in 2008. We started the year at around 5,800 and even if the PSEi goes down to 6,000 at the end of the day, the market as a whole is still a gainer. When you dig deeper, does this change the remarkable earnings posted by our blue chip companies? Does this even hamper our economy, which is now the best and top economy of Asia? Does this revoke the investment grade rating upgrades that we got at the start of the year? Does this stop the ongoing progress of the projects already laid out by the government and the private sector?
Certainly not!
What we are seeing now is a bargain discount sale from the high prices that we used to see our stocks trade in. If BDO went to as high as P99 per share this year and dropped to as low as P78 per share during the slide, it just tells you one thing. You as an investor can get the same company that had a 257-percent first-quarter, year-on-year income at a very big discount! But now instead of you buying it at P99 a share, you get to buy it almost 20 percent cheaper than before!
Knowing that, here are some things you can do:
If you are a long-term investor, you can confidently buy into our markets as there is value in it. If there is value, stock prices will always follow and will always rebound faster than the usual. This drop is just a set-back which allows you to accumulate and position yourself in strong and quality stocks.
If you use peso-cost averaging, things like this should not bother you. Just continue to stick to your plan, continue to contribute and buy the stocks that you set out to buy. Fluctuations like this will no longer matter if you are looking 10, 15 or even 20 years down the road. Peso cost averaging works! The trick is to not be swayed by your emotions once you see some of your gains being wiped away.
If you are a trader and use technical analysis, there is value on our markets as long as the stocks that you would want to buy are still bearish. I suggest that you continue to stay in the sidelines until you see a significant reversal. The best place for you to buy is when you see the stock reverse from a downtrend to a newly formed uptrend.
All in all, the best is yet to come for the Philippines as a whole. Our market is strong, robust and still has a long way to go in the years to come.
Learn how to invest properly at the iCon 2013: The No Nonsense Investments Conference at the SMX on June 22. For inquiries, e-mail icon2013@ephesians.ph
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Marvin Germo is a Registered Financial Planner of RFP Philippines. He is a Stock market trader and investor and a columnist of Business Mirror. He is the best selling book author of Stock Smarts.
Source: http://www.businessmirror.com.ph/index.php/en/business/banking-finance/15137-philippine-stocks-are-down-should-you-panic
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