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SINCE reaching a historic closing high of 7,392, the Philippine Stock Exchange composite index (PSEi) has fallen approximately 10 percent.
This past week investors were nearly flooded with expert analyses and opinions on why this drop happened. How could the stock market be falling, with the Philippines receiving an investment-grade credit rating? Why did stock prices go down, with the economy apparently booming? If the Philippines is more favorable for foreign investment, what is compelling foreign funds from selling out?
Perhaps the most sensible response to why the market is down came from someone on social media: “I don’t know why the stock market is down; I’ve only been investing since 2010.”
The “everyone-should-be-an investor” crowd has mightily struggled in the past week to explain to the people they encouraged, if not induced to buy shares, why the value of those stocks are less than what they paid for them. And no, I strongly do not believe that everybody should invest in the stock market. Everyone should not invest in the stock market in the same way that not everyone should own a food kiosk, a taxicab or a pig farm.
Yes, everyone should make investments, but only in something that they work hard to understand well enough to manage themselves and make their own decisions about. Investing in the stock market is a business, not some sort of magic ATM. To believe that there is some sort of almost foolproof method or formula for stock-market investing is to make yourself a fool.
In the past week we have been told that the market went down because of the Two Serendra explosion. The market fell because all Asian markets are falling. Stocks are down because the SM group has decided to merge its property units. Investors “sold on news” of the GDP data release. The best “reason” is the emergency landing of the Cebu Pacific airplane in Davao.
These are not “reasons” for investors selling; these are made-up “excuses” that try to explain why investors are selling.
So why has the PSE been going down?
Investment money is very similar to the description of the alien villain in Men in Black: “Imagine a giant cockroach, with unlimited strength, a massive inferiority complex and a real short temper.” Like the giant cockroach, this money seeks the biggest, fattest and easiest lunch it can find. It cares only about one thing: return.
Investment funds have only three immediate and liquid choices: debt, currency or stock market. These three cannot all move in the same direction because they are like water and oil; they do not mix well. You can have high interest rates, a depreciating currency and a rising stock market, but you cannot have all three at the same time. You can have a rising stock market and even high interest rates, but then you must have an appreciating currency. If you have high interest rates and a depreciating currency, you get a falling stock market.
Since May 15 the Philippine peso has been on a down trend, a depreciating currency. Since May 15 Philippine government debt has seen a trend of higher interest rates. Since May 15 the Philippine stock market has been on a down trend. Rising interest rates, a depreciating currency and a falling stock market.
Here is the opposite comparison. From November 30, 2012, Philippine interest rates were going down. The peso was in a slight but definite uptrend. The PSE went from 5,600 to 7,500. Decreasing interest rates, an appreciating currency and a rising stock market.
The PSE has been going down because the peso has been weakening and interest rates have been going up, not because of any excuse.
http://www.businessmirror.com.ph/index.php/news/opinion/14608-why-are-you-down-pse-why
bagsak ang stocks ngayon.... mas marami ng nag invest sa US kasi nakakarecover na sila.... how can you encourage to invest sa PSE?
Subscribing...
Kamusta naman ung ininvest ni TS? Lumago ba?
Nag attend nako ng seminar regarding PSE, ung nag conduct ng Training Sun Life Insurance, What do you suggest about it? Worth it ba na mag invest sa Insurance?