Where the Philippine market is now
No one can know what the bottom of the market is
THE Philippine Stock Exchange index (PSEi) started the year at around 5810 and went to as high as 7385 in May. This gave the market 27 percent in just almost five months! This brought the market in a frenzy making investors so excited about the market!
Then the sell down happened. Where investors saw all of the gains in the past five months wiped out in one go! The market dropped to as low as 5,562 which is about -4.42 percent!
What triggered all of this? Is there something wrong with the Philippines?
The story that has been dragging for months is the possibility of the US Fed to taper off quantitative easing. For those that don’t follow what it is, quantitative easing is the US Fed bond buying program designed to further stimulate their economy. The trigger for their government to slow this down is when they see that their economy is getting better. And now signs are showing that their economy is rebounding and turning around. So when they gave hints that they will lessen the quantitative easing, it brought the markets into a spiral. Because if the government would lessen the bond buying program this would mean that there will be lesser money circulating in the US which is not good for stocks in general.
Because of that foreign funds have been selling at a record pace. As foreigners sell in big blocks they can influence the market in a massive way. That’s why I have been dreaming of a day to see more local investors come in and invest so that we would not be affected this much when foreigners come in and sell. This is our time and our moment to unite as a nation and invest in our country.
Another issue that has brought uncertainty in the market is the possibility of war between America and Syria. War is not good for markets in general. As war creates a negative sentiment and builds a sense of panic for traders and investors alike. Of course, attached to this is the possibility of oil prices to go higher and higher oil prices impacts businesses globally. You may check an in depth study I created on this in www.marvingermo.com.
Where does this leave the Philippines?
This leaves us at a position to buy stocks at cheaper prices. Valuations have been better than ever as our favorite stocks have gone down in price. If you compare this to a mall, this is a mall wide sale of epic proportions!
Should you be sacred? Certainly not, our economy is booming and zooming, we have an economy that is in the top five for 2013 and further growth is still expected in the future! If you are in the market for a very very long time downtrends like this should it matter in the grand scheme of things. What’s important is you have a financial plan when you invest in the market and what your are investing is an excess and something you do not plan to touch for a very long period of time. It’s up to your discretion though whether you want to buy while the market is going down but have the risk that you may see your stock go even lower. No one can know what the bottom of the market is.
When will the market go up? Currently the market is still bearish and selling and anxiety is still in the markets. One thing is for sure that our valuations are good and all of this selling are just sentiment based. When sentiment clears out that’s when value emerges. That’s why it’s very important to buy stocks with value. Those that have value are the first that goes up once rationality and technique comes back in. Will it be up soon? Let’s look at the amount of money traded in a day. The amount traded daily should be almost at the same pace when we started the year. We should hit around 10 billion to 12 billion a day if we would want to see the PSEi again move around 7,400 or even go past it.
If you are an investor look for value and buy selectively. You should have patience though if you would want to buy now because it may take time before the markets go up again. If you are a trader better wait until the down trended ends and until you see the sentiment moves from bearish to bullish. At the end of the day the winner in all of this is a trader and investor that has a plan and does not base his decisions on emotion.
I wish you all the best as we enter the bear months of the market and I know with all my heart that the best is yet to come for the Philippines!
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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/19129-where-the-philippine-market-is-now
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