ECONOMIC MANAGERS ON THE LOOKOUT AS STOCKS, PESO FALL
MANILA, JUNE 24, 2013 (PHILSTAR) By Aurea Calica, Marvin Sy - Economic managers are on the lookout as Philippine stocks and the peso weaken due to recent global market developments.
However, Malacañang said yesterday there is no cause to worry about the country’s economic stability.
Deputy presidential spokesperson Abigail Valte said over radio dzRB the Bangko Sentral ng Pilipinas is on hand to track and monitor the movements in stock markets and currencies.
Valte said although most regional stock markets had experienced a fall as they were reacting to speculations that some central banks would raise interest rates, “ours are stable.”
The situation “is causing some fund managers to either liquidate or take their money out of the market,” she said.
“The fundamentals of our economy are strong and it seems it will not be adversely affected,” she added.
The peso touched its lowest level in more than two years on Friday before bouncing back to close at P43.72 from a 17-month low of P43.80 last Thursday. Dollars traded reached $1.084 billion, down from $1.407 billion the previous day.
Analysts said investors would be able to figure out which countries were economically sound in terms of fundamentals and would eventually stop reacting “emotionally” to developments.
Financial markets around the globe have been rattled since Thursday by pronouncements from US Federal Reserve chairman Ben Bernanke that stimulus measures would be scaled down later this year.
On inflation, monetary officials said consumer prices would remain stable despite the peso’s weakness.
A weak peso makes imports more expensive, thus may prompt importers to raise local prices to recoup their costs.
Foreign selling also further depressed share prices, with the local market mirroring a sharp decline in Wall Street that is also reeling from the potential pullout of the US Federal Reserve’s stimulus measures.
Tapering off the stimulus program is seen to jack up interest rates, encouraging foreign funds to book profits in emerging markets and return to advanced economies.
Earlier, Presidential Communications Development and Strategic Planning Office Secretary Ricky Carandang said investors were balancing their portfolios and keeping their profits.
“For example, 50 percent for stocks, 50 percent for bonds. If your stocks go up, and your bonds go down, your 50-50 starts becoming 60-40, and you have to start unloading to rebalance your portfolio,” Carandang said.
‘Sin taxes failed’
Meanwhile, Sen. Ferdinand Marcos Jr. said amendments to excise tax on tobacco and spirits or sin taxes have failed to bring about desired results for the government.
Marcos, who questioned the revenue projections of the Department of Finance (DOF) on revised sin taxes, particularly on tobacco, during hearings in the Senate, said the government failed to meet its target collections in the first quarter.
As a former governor and congressman of Ilocos Norte, where a significant amount of Virginia tobacco is produced, Marcos said smuggling of tobacco products has increased since the law was implemented.
“The sin taxes have not collected a single centavo because smuggling has flourished,” Marcos said. “And that is why the collections, both as a quantitative solution and as a qualitative argument, clearly are flawed.”
During the debates on the sin tax, Marcos argued that the DOF calculations were incorrect and the impact of the law would be “ruinous to the industry.”
He said he would stand up in plenary one year after the implementation of the law to let people know whether it has been effective or not.
[Cars drives through heavy rain and floodwater in Manila on June 17, 2013. The Philippine Atmospheric, Geophysical and Astronomical Services Administration(PAGASA) is monitoring tropical depression 'Emong' (local name). At 4:00 p.m. Today, the center of Tropical Depression "EMONG" was estimated based on all available data at 250 km East of Virac, Catanduanes (13.9°N, 126.8°E) with maximum sustained winds of 55 kph near the center. It is forecast to move Northwest at 09 kph. According to PAGASAT the Philippines average of 20 typhoons every year that claim hundreds of lives and cause billions in damages. AFP PHOTO]
[Slow moving - Cars are packed as they would have been in a parking lot as motorists brave the EDSA traffic on a rainy Friday afternoon in this photo taken in Mandaluyong City.]
Spendthrift elite said signaling equity slide
LONDON -- Record prices at art auctions in recent weeks and oversubscribed holidays by private jet are among signals that a stock market slump is approaching, if followers of behavioral finance are to be believed.
They insist social mood governs human action, including investment on stock markets, and their theories are gaining ground as tools for financial analysis.
To gauge the mood and the likely impact on markets, behavioral analysts look at traditional measures such as investment polls and options but also at social media, including Twitter and Facebook, and even at developments in art and sport.
The theory goes that people make bad decisions at moments of extreme fear or optimism and that studying their behavior could provide clues to where equities are headed.
Now may be just such a moment.
"Markets either have topped or will soon top, based on the behaviors I see outside of the markets, especially in art, automobiles and residential real estate," said Peter Atwater, president and chief executive of Financial Insyghts, a firm based in Mendenhall, Pennsylvania that advises on how social mood affects decisions.
Mr. Atwater cited an Aston Martin car fetching a record $4.85 million at auction in May, a New York sale of Christie’s Post-War and Contemporary Art setting 37 records last month, and holiday firm Abercrombie & Kent adding a second departure to its 19-day tour of Africa by private jet after the first sold out.
Behavioral analysts term the 140% rise in major indexes since 2009 the "rich man’s rally," and say the behavior of the uber-rich reflects peak-of-the-market sentiment.
Their views are in sharp contrast with many traditional analysts, who bet an improving global economic outlook, along with better company fundamentals, will take indexes to new highs in coming months despite recent "healthy" corrections.
One non-traditional expert who accurately predicted 2007’s stocks bust and the recovery in 2009 is Robert Prechter, whose Socionomic Theory of Finance suggests social mood causes economic and political events instead of the other way round.
"Two dozen stock market sentiment indicators show record or near-record optimism, suggesting the stock market is a lot closer to a top than a bottom," said Mr. Prechter, founder of the US-based Socionomics Institute.
To measure mood, Mr. Prechter looks at investor polls, buying in stock option contracts and polls of feelings of well-being.
"In the past century at least, optimism this extreme has occurred only twice before, in 2000 and 2007," said Mr. Prechter, whose theories have influenced many others.
The S&P 500 index slid 50% in two years from August 2000 after the dot-com bubble burst and sank 55% in 17 months from late 2007 amid the financial crisis. It surged 33% in a year to a record high last month.
Terry Burnham, author of Mean Markets and Lizard Brains and associate professor of finance at Chapman University in Orange, California, is a recent convert.
Mr. Burnham initially held the traditional notion that economic fundamentals led market moves.
"Twenty five years later, I have come to the opposite view. Prices move first and fundamentals adjust later," he said.
"My sense is that we are pretty close to a turn in equity markets and people will be given no gentle opportunity to sell stocks." -- Reuters -
Stocks still in the red BUSINESS WORLD ONLINE JUNE 23, 2013
STOCKS FELL on Friday following a sharp drop the day before as investors continued to fret about the US Federal Reserve's pronouncements that the reduction of its stimulus program is looming.
The Philippine Stock Exchange index (PSEi) fell by 144.50 points or 2.28% to close at 6,182.17 while the broader all-share index dipped by 98.64 points or 2.52% to settle at 3,821.01.
On Thursday, the PSEi lost 186.53 points or 2.86% to end at 6,326.67 while the broader all-share index dipped 102.47 points or 2.55% to 3,919.65.
"For today, we still tracked Wall Street. Dow Jones fell overnight amid concerns over the Fed's announcement on the reduction of quantitative easing," Abbygayle M. Estrella, analyst from AB Capital Securities, Inc., said in a telephone interview.
Fed Chairman Ben Bernanke said after the Federal Open Market Committee meeting on Thursday that the US central bank may start scaling down its bond-buying program or quantitative easing within this year.
This, as the Fed expects continued recovery for the US economy, with inflation expected to move up toward the goal of 2% and unemployment seen falling closer to the target of 6.5%.
The US central bank has been buying $85 billion worth of government bonds and mortgage-backed securities every month and has kept interest rates at near-zero levels to spur lending and create more jobs in the world's biggest economy.
News last month that the Fed could reduce its quantitative easing spurred an exodus of funds from emerging markets that used to provide a haven for investors seeking higher yields than those found in the West.
Ms. Estrella said the local market slightly recovered from a heavy drop in the morning session due to a rebound in Japan's Nikkei.
"The market was losing more than 200 points in the morning but we ended up losing 144 points, as we tracked the recovery of Nikkei," she added.
The Dow Jones industrial average fell 353.87 points or 2.34% to 14,758.32; the S&P 500 index shed 40.74 points or 2.40% to 1,588.19, while the Nasdaq composite index lost 78.57 points or 2.28% to 3,364.63.
Meanwhile, Nikkei gained 215.55 points or 1.66% to 13,239.13; Hong Kong's Hang Seng dropped 119.56 points or 0.59% to 20,263.31 while the Shanghai Stock Exchange Composite index shed 10.36 points or 2.76% to 2,317.39.
At home, all sectoral indices ended in the red, led by mining and oil, which plunged 1,416.18 points or 9.55% to 13,409.60 as gold prices in the world market dropped.
Industrial fell 373.72 points or 3.83% to 9,385.75; property slid 66.70 points or 2.65% to 2,448.22; holding firms dropped 123.67 points or 2.18% to 5,542.52; financials lost 22.09 points or 1.36% to 1,606.36; while services shed 20.57 points or 1.09% to 1,873.00
Value turnover stood at P13 billion on Friday from P7.6 billion the day prior. Net foreign selling was higher at P2.26 billion from P927 million on Thursday.
Losers outnumbered gainers, 31-141, while 23 issues were unchanged.
The daily list of 20 most actively traded stocks showed that 16 issues lost while four gained.
Leading the losers were Philippine Long Distance Telephone Co, which dropped P32.00 or 1.13% to P2,788 apiece; SM Investments Corp., which plunged P34.50 or 3.48% to P956.50; SM Prime Holdings, Inc., which went down 62 centavos or 3.94% to P15.10 apiece; Metropolitan Bank & Trust Co., which plummeted P4.00 or 3.42% to P112.80; and Universal Robina Corp., which dipped P1.60 or 1.42% to P111.00.
The four gainers were BDO Unibank, Inc., which added P1.00 or 1.22% to P83.00 per share; Ayala Corp., which gained P5.50 or 0.92% to P602.00; Metro Pacific Investments Corp., which rose 11 centavos or 2% to P5.60; and Ayala Land, Inc., which increased by P1.00 or 0.35% to P29.00
Ms. Estrella said the market's downward movement will continue up to next week.
"The impact of the announcement regarding the quantitative easing will still be felt next week as we wait for stronger market-moving news locally," she said. -- Cliff Harvey C. Venzon -
Chief News Editor: Sol Jose Vanzi
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