We hear a lot about how an infinitesimal percentage of Filipinos invest in the Philippine stock market. That is a fact. What we do not hear about that—also a fact—is that virtually the entire Philippine banking industry is listed on the Philippine Stock Exchange (PSE).
The same can be said about the property development, gaming and telecommunications industries. The majority of companies involved in power generation, shipping, retail, food and beverage, construction, consumer goods and infrastructure are all publicly listed companies. Mining and oil companies have always been a key sector of the PSE.
Everyone of those companies must submit quarterly and annual reports of their financial condition to both the PSE and the Securities and Exchange Commission. The annual reports, at the least, are subject to an external audit. Further, each of the corporations usually provides a statement from its board of directors and president as to what its business activities and changes in the company’s business were for the previous year.
If you want to understand the state of the Philippine economy, you need to look at the business section, not the front-page. In fact, looking at the front page may give you a false or distorted view of the nation.
You may have to spend a little time to understand what the corporate reports are saying and how to interpret them. But at least you will have a clearer picture of Philippine business that you will not find through the nonsense from most of the politically driven pundits. The presentation of corporate numbers may be biased in one direction or another, but the numbers themselves never voted for or against any politician.
Here is another fact about listed companies. Scandals, scams and frauds are few and far between; that is why they are front-page news. Some involve accounting fraud where the books are cooked to take bad things from the mother company and hide them in off-the-
books subsidiaries.
Enron Corp. in the United States and Victorias Milling here in the Philippines are examples of that. Sometimes, the financial numbers are simply falsified as recently in Japan with Kobe Steel and Toshiba Corp. A slightly similar situation occurred here with 2GO Group Inc. and the LBC courier group’s defunct banking affiliate LBC Development Bank. Note that these were “slightly similar.”
Smaller investors can sometimes be collateral damage in a Clash of the Titans as happened long ago with BW Resources when one side wants the price higher and another wants the price to go down. And don’t believe everything you read on the front-page when the words “stock manipulation” is used. Sometimes it is true; often it is not.
However, even if these things happen only once in several blue moons, you do not want to be the foolish idiot holding the bag at the end of the day. The solution is easy and simple. Remember these lyrics from US country singer Tom T. Hall: “Greed kills more people than whiskey.”
Occasionally, an average investor will be caught in a situation that could not be avoided. But then again, which blue-chip issues—none of which are “get-rich-quick” stocks—have cost anyone the family fortune and the kid’s educational fund?
“But I wasn’t trying to get rich quick when I bought XXX and the company was delisted.” Maybe, but if you had bought a boring company with “boring” management like D&L Industries Inc. In 2014 your money would be tied up with a 300-percent profit instead of in cash and available to buy XXX.
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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.