The first transaction I made in the Philippine stock market was buying shares of San Miguel Corp. on the Makati Stock Exchange 34 years ago, one week before the 1989 coup attempt. Timing is everything.
Of the total number of current retail accounts, some 1.6 million individuals, 75 percent were either unborn or had not reached puberty in 1989. Not to worry. If you are a member of that demographic, you have not missed much. The local stock market is about the same as it was then. Except that a seat on the exchange was then priced at P1.5 million.
The Philippine stock market was considered an “Old Boys Club” and based on the composition of the current Philippine Stock Exchange, Inc. Board, you might say that it is now an even older “Old Boys Club” with the average age of 67. Eleven of the 15 members are probably beyond the compulsory retirement age for most corporations.
Back then, the “float”—the percentage of public ownership of a listed company—was pathetically small. Nothing has changed. There was no viable common “margin trading,” borrowing funds to buy stocks, the same as today. “Short-selling” of issues is still not allowed.
Note that I am not recommending either “margin trading” or “short selling.” This is part of the reason. According to the PSE, investors with an annual income of less than P500,000 make up 54 percent of retail accounts and 73 percent of online accounts. Those who earn up to P1 million have a 25 percent share. Investors whose annual income is above P1 million comprise 21 percent.
I am a firm believer in the words of COL Financial founder Edward K. Lee that “every Filipino deserves to be rich.” I am absolutely against the idea offered by some of the “Where-Are-They-Now?” stock market gurus who preached that “everyone should invest in the stock market.” I also believe that some people singing karaoke publicly should do so only in the privacy of their own homes.
I am a professional stock market trader using my own funds. It is my “day job” and as such I must find profitable opportunities no matter what general market conditions happen to be. Not everyone can do that even as not everyone can paint a picture for sale. My sons are also in the “family business.”
Every organism, living and institutional, must go through a “purge” from time to time. “Purge: to get rid of whatever is undesirable; to make free of something unwanted.” It is healthy even if difficult. The “PSE Purge” may have started when the “gurus” started to disappear.
I said on “ANC Market Edge” two months ago that the delisting of Metro Pacific Investments would not harm the market. In fact, it gave retail investors some much-awaited profits. There may be more issues to follow the delisting path. From last week: “Toshiba Corp. said more than half of its shareholders participated in a $15 billion buyout, meeting the threshold to take the electronics group private and end a 74-year-long run as a listed company.”
The PSE is always “looking for innovations” to attract “foreign funds that would boost liquidity and modernize an exchange whose product offerings lag behind its Southeast Asian peers.” That’s fine.
“Finance Secretary Benjamin Diokno is urging the private sector to tap more REIT offerings involving a wider variety of assets in a bid to revitalize the economy.” I seriously doubt if Sec. Diokno has looked at the REIT investor performance.
Here are the best and the worst total returns based on stock price Profit/Loss and the cash dividend. AREIT: +42 percent, RCR: +15 percent and DDMPR: -31 percent, and FILRT minus 45 percent. Had you bought an equal amount of all the REITs, your investment would be an “unrevitalized” negative 0.60 percent. No magic bullets, I’m afraid.
So where are we? Nowhere pleasant for the moment. Oil prices are going higher and interest rates will stay high. Neither are stock market confidence builders. We will probably hear more talk of company delisting, which creates confusion. Nato and the US will be forced to admit Russia has “won” the war and move on. Or there will be a bad escalation. Nothing good to be found there, and China may step up pressure in our region.
If you have the Time, Energy, Discipline, and Focus to trade the short-term movements, you can make a reasonable profit. If not, take a vacation and come back when the market stops going down and starts going higher. You should know by now to stay away from The Purge.
E-mail me at email@example.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis provided by AAA Southeast Equities Inc.