This is more for people who are not investing in the market and for those relatively just starting to invest. There have been a lot of misinformation lately in social media and I want to just help people out so they get the right information so they can make the right decision. Please share as needed. I’ve received a lot of questions whether it was Duterte who caused the drop in the market or not because of his statement yesterday. Just a heads up, I wasn’t really a fan of what happened but nevertheless I support president and now is the time for us to be united as a nation. We may have voted for different people but we all have one president. It’s just sad that some want to tear each other down instead of helping all of us move forward. Let’s value relationships more than just wanting to being right. After all your prosperity and abundance should not be defined by who sits in the government. Each of us has his/her own purpose and destiny to fulfill in this world. Let’s not waste it on things that wont even matter months or years from now. Now to answer the questions:
1. First and foremost! No, Duterte did not cause the drop in the market. The market was already correcting weeks before the issues started. Market’s drop. That’s normal. That’s the way markets work. Markets no matter how good the economy is won’t go up forever. Investors will always find an excuse to sell to park their cash and take profits off the table. I don’t want to get too technical about it but we broke down from 2 support levels already and we are moving amidst a short term counter trend.
2. Foreign funds are pulling out money Yes that’s true. But that’s also normal. Foreign funds are just like any local investor. Like them, we want to buy low and sell high. The market hit highs and failed to breakout several times in July and August and as prudent managers their goal is to transfer it to another market thats relatively cheap. They will come back still to the Philippines because are economy is still awesome. This is not the only time the PSEi is down and rest of our region is up. It has happened several times before. In contrast, there also have been times in the past where our market was up and the entire region was down.
3. No, the statements made by Duterte, does not change our economy. Without any economic data to support that our economy is going bad, at best it’s just speculation. Our economy will rock and continue to go up. We still have the 2nd best economy in the region, with tons of USD and gold reserves, we have low interest and inflation rates which speaks well of where we are. We are no longer the sick man of Asia. Case and point, people will still spend in Jollibee, Puregold, SM, etc regardless of this statement. These companies will earn no matter what. But does that protect them from a foreign sell off? And no, people did not lose jobs because of the sell off. This is just hot money and we did not lose any foreign direct investment.
4. As markets drop and hit support levels, I encourage everyone who have not invested yet to do so now. This is your best time to buy cheaper! Why can you buy cheaper? Because there is value in our economy. Our economy is consumption driven, fueled by OFW remittances, BPO growth and the prospects of greater infrastructure spending in the next years. One statement does not change all of that. As the support level at 7,714 was broken, the market could possibly correct to 7,520 over the short term. The market will remain bullish as long as it holds above 7,200 levels. Another thing about the PSEi is that whenever it drops it always bounces back higher than where it was before. The market survived and bounced back from the Asian Financial Crisis, EDSA 2 , EDSA 3, failed attempts in PGMA’s, administration, the 2008 Global Financial crisis.
Those were all legit problems that brought the markets down. All that we have now are just “concerns” and nothing concrete yet to basically alter the fundamentals of our country. Should there be anything that could change the dynamics of our fundamentals rest assured I will update you. There will also be a lot of views from analysts and traders that may be different from mine. I respect them all as that’s what makes the markets amazing. We all have different views and opinions but its really all about managing risks, maximizing gains, minimizing loses and using the market to hit our financial goals.
Originally written by: Marvin Germo at Uptown Bonifacio BGC.