Investors on the Philippine Stock Exchange (PSE) are all that; “Bewitched, bothered and bewildered”. This 1940 show tune about love—covered by almost every one from Frank Sinatra and Ella Fitzgerald to Rod Stewart and Lady Gaga—includes the lyrics “Burned a lot, but learned a lot”. That may also describe stock-market investors.
So what is going on with the local stock market that has “cast a spell” over participants who are bothered by falling prices and bewildered by the causes? Why are the “experts” desperate to find explanations?
The Manila Stock Exchange was founded in 1927. The PSE began in 1992. I am now calling 2016 as the year the “Filipino Stock Exchange” came into existence.
The PSE had a two-decade history of some glorious successes and some disastrous defeats. The 1989 coup attempt nearly destroyed the stock market, but it came back. Companies with great prospects disappeared into dust because of bad management decisions. Others, facing catastrophe, took massive short-term losses to weather the storm for long-term victory.
But the local stock market that we had come to know and love and sometimes hate, in my opinion—for all intents and purposes—no longer exists. I believe we have entered a new era of the “Filipino Stock Exchange” (FSE).
Having traded this stock market since 1989, there were certain qualities and factors that you and I could count on. Stock prices reacted to the economy and to growth and prosperity both higher and lower. The market looked to regional and mainly the US stock market for guidance. The PSE was 100 percent an “Old Boy’s Club,” not only in terms of the players but maybe, more important, in terms of the listed companies. There were the “Blue-Chip” household name companies, the “second-liners” and the “basura” stocks.
Gradually over a number of years, the stock market changed. Online trading platforms changed both the players and the number of investors. Mutual-fund investments are no longer exclusively for the “rich” and have become part of the middle-class portfolio along with insurance. Companies listed on the exchange now include those from industries never before represented and are raising money for more “legitimate” purposes rather than putting money in the pockets of the members of family-owned corporations.
In the last two years and particularly in 2016, the changes became obvious. No longer would the market boom higher on good economic numbers. No longer did the Dow Jones movement determine where local stock prices would go. Investors became almost equally concerned and involved in companies where it is “Sarap to the bones” as the biggest bank in the Philippines.
Traders began looking at gaming, agriculture and package-delivery services. We can now buy shares of the company that provides supplies for the consumer product company and not just the consumer company itself. From the PSE that focused on the “oligarchic” companies, the new FSE most realistically represents the Philippine economy and wider business sectors.
But as different as the game and rules of American football and global football, so also are the PSE and FSE. What was a successful investment strategy on the PSE may not enjoy the same results on the FSE. However, as with any new venture—and the PSE is one—there will be a learning curve before being bothered and bewildered will pass.
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E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.