BLOG: What’s Up with the PH Stock Market

We’ve just achieved a 7.8% GDP growth for the first quarter of the year. We’ve just jumped in ranking in terms of global competitiveness. Now why would the PH stock market be as bloody as it is at the end of yesterday’s session?

Growth track

Since I’ve started this blog (six months after P-Noy came into power), the Philippine stock market has been on a growth track.

Over the past three years, I think there had been a confluence of several factors that have brought the stock market to where it is today. And along those factors are a few funny realizations that I came to. But we’ll come to those realizations.

Let’s start with what I would consider the growth drivers.

When P-Noy got elected, many doubted him. I won’t list down the whys. But despite those things thrown at him, there’s this one thing that seems, at the time, to be a flickering light in a very long, dark tunnel. Hope. I don’t know. Change. Perhaps.

Since then, there were indeed changes. The cleaning up of the government has started to happen. It definitely is slow, but it is happening. With that follows confidence in the country. Confidence is slowly, but steadily, coming back. As foreign businesses observe the changes in the housekeeping happening at the seat of the powers that be, they are starting to get bold in terms of putting their money to invest in the country. And as they said, the Philippines now is healing; it is no longer the “sick man of Asia”.

The next, I would still credit to PNoy – who else would approve and sign these things anyway? That item is infrastructure. We’ve seen a strong boost in infrastructure spending.

Call centers. Or BPOs. We’ve been head to head with India on this front. The boom in this industry has definitely resulted in a lot of young Pinoys being employed in these companies.

And then there’s the sharp increase in the number of OFWs abroad. Well, I could only base it on my experience. Been here in SG during the past seven years, and oh boy, you’d definitely see how the number of Pinoys working here had increased exponentially. Well, okay, I may be exaggerating here, but definitely it has increased a lot. And the thing about that is, most Pinoys here are working on the IT industry. So that means big bucks. And that means a heck of a lot more remittances. And that’s just SG. There’s the Middle East, Hong Kong, UK, US… I think we’ve become the human version of globalization. Whatever.

Then came the credit ratings upgrade. We’ve achieved two investment grade marks from two of the world’s biggest credit ratings agencies already, as they noticed the growth that is slowly happening in the country. So that definitely would be a further boost to the growth as well.

There are still a lot of factors that would have driven the growth of the country’s economy. But I’d leave that to the analysts and economists and whoever else is in that line. I would just mention a few here. A few fundamentals, if you will. I am not an economist anyway. Nor a statistician. Never been a financial analyst also.

So just fundamentals. In laymen’s term: common sense.

Let’s summarize this subtopic, shall we? Okay.

1. P-Noy took office. Started cleaning the house. Slowly, gradually, and steadily.

2. Foreigners started noticing. They started putting in money to create businesses in the country. So, jobs for Pinoys. Not a lot, but an improvement just the same.

3. Infrastructure spending. Construction everywhere. More jobs for Pinoys again. And the infrastructure themselves – roads, bridges, highways, etc. – will increase the ease of doing business in the country (hopefully).

3. Credit ratings upgrade. Basically says “Look, PH is growing, en route to strong recovery, there’s stability in the foreseeable future. Growth is happening. It’s a great time to invest there.” So, more foreign investors are starting to take a look at the country.

4. Call Centers. More jobs. More Pinoys becoming middle class.

5. OFWs – and remittances. There’s been a strong growth in remittances over the past few years. And these billions of dollars in remittances coming into the country – are being spent in the country. Housing. Food. Healthcare. Leisure. Luxuries. Gadgets. Families of OFWs are spending. Pinoys are spending. There is business definitely to be made here. And indeed most businesses are thriving now more than ever (I think. I hope I am not just being carried away with what I am saying.).

So definitely, there is growth. And growth is real. As real as the money that I am sending over to my family back home. And as real as the bills that they have to pay there.

The funny part

So, what’s up with the PH stock market?

Here’s the funny part. Pinoys being Pinoys, they are entering the market, or trading/speculating in the market, mostly with a herd mentality. Or, let’s say, whatever the “fad” it is as of that moment or session.

At least that’s how I look at it. I may be wrong. I am no expert after all.

I am not saying that because the growth is there and that all the positive market forecasts out there are one our side, then there should be no declines in our index. No. Money made won’t be real unless you lock your gains in. And why shouldn’t you lock your gains when you have gained already? Unless you’re like investing hundreds of thousands of pesos, then I think you’re really the investor type who’s not being swayed by the momentary blips of ups and downs in the market.

But like I said, Pinoys are Pinoys. Always go with the herd. Always eager to find some “tips” that they could “trade” on. As if they are an expert trader.

That’s what’s happening, I think. And I can attest to that. I am always hearing things such as the buy signal, or sell signal, from friends who expect to win big, or lose less, in every market cycle. Or, to be able to know what stocks they would have to buy or sell, they would have a list of companies or brokerages that have placed a huge order or sell order on a specific stock. And then they will follow.

I’ve nothing against them. That’s how they want to do it.

But definitely – and again this is only me thinking out loud – I see something at play every time these things happen. I know there’s this HFT that’s being done by computers. It depends on speed to make the trade. State-of-the-art computers with sophisticated tools and algorithms. Whenever someone sneezes, the computer picks it up as a buy or a sell, and then it’s gonna place a humongous buy or sell order on a specific stock. So these guys, who are following these traders’ movements, then will also do the same. And so do other mediocre traders who are desperately looking for the same, and, upon seeing slight blip on their screen, will then do the same. And so on and so forth.

Let’s say yesterday morning, the computer has picked up that the US markets suffered a decline the previous night because of such and such. Then definitely massive selloff begins. That is on top of the profit taking that is already happening because of the strong recovery the day before.

And then we got the buy and sell signals. In my previous life, I’ve wanted to become a spy, so I’m always addicted to conspiracies of global proportions. So anyway, I am into this belief that whoever is offering these buy and sell signals has a different agenda. Knowing that most of their followers are trusting of whatever they want to say, then they could say that this stock is going to fall (when in fact the fundamentals of the company say it is strong), then the sheep (Is that why Gordon Gecko call the small timers “sheep”? To be slaughtered?) will follow and sell – all the while these people who told them to sell will just buy the stock at the resulting lower prices – thereby building their position for a killing at the moment that they will say that the stock will rise again.

Good business huh. It is not unlikely. There’s money to be made. And it’s business. It’s not fair, but it’s not wrong. If you got the balls and the guts to take whatever beating your portfolio may have, as long as you are confident that you’ve done your homework, then great. You don’t need to follow them. You won’t lose. For others, well, it’s business. Either you’re in or you’re out. They don’t care.

After the bloodbath, you will see the market will turn green again as these speculators scoop up bargains again. Of course that’s the way of the market. And that’s just like that in the PH. We may be one of the strongest growing equities market in the region, but it’s still the stock market just like any other. With the investors and speculators and gamblers.

Perhaps I shouldn’t dislike the word market correction after all. It’s got a nice twist into it. They’ll claim market correction when the market went up and people sell off because of their gains. I’ll say market corrections when people realized their mistake in that they should have been “long” in their investment instead of speculating (They lose more that way). And so they will correct their actions and come into the market again. Whatever.

With all my blabbering above, just feel free to thrash-talk me in my email: richard@phstocks.com.