MANILA, September 30
, 2004 (STAR) EVERYONE KNOWS By grace Crisostomo-Cerdenia - Stock trading in the Philippines has drawn foreign fund managers’ attention, making the bourse the second-best performing market within the region lately. Over and above our Chief Executive’s warning of the nation’s fiscal situation, investors were quick to realize that such admission puts economic mending at a commendable start – change, after all, starts with an admission of a need to rectify problems. The second step takes us to two broad choices: stay by the wayside and look aimlessly at the problems, or take bolder steps in resolving issues. What became interestingly significant is the willingness of Filipinos and fiscal leaders to push for painful yet necessary reforms, providing solid building blocks for the bourse’s recent momentum. Measures are underway to get eight priority tax bills approved by Congress ahead of its recess, which is seen to provide P80 billion in revenues to the government coffers.

Set against this backdrop, how does one profit from the market?

First, reassess your portfolio. You can do this by making a checklist of how returns fared, and see if your waiting paid off in terms of return. On the average, if your investment basket, regardless of size, provided you with at least 8.5 percent net return per year, chances are you’re typically classified average. Remember, consumer prices are also on the upswing. This simply means you need to factor in inflation to get real returns from your funds. The interesting fact is that there are those who make at least 12 to 15 percent return on net investments, especially for players who have done their homework. You will lose nothing by collating all necessary information when investing, and dig deep into prospective investment choices. The age of information technology has brought wider channels where people can access just about all information that would keep prospective investors well-informed. This prompted several investors aiming for good returns from their funds not to stay idle by focusing on their single portfolio basket, and exploring avenues where calculated risks are inherent.

To put things rather simple, diversification is key. Decide the percentage of excess funds you need to allocate for fixed-income investment, and those that you can readily trade in equities online. If the ratio is 60-40 percent in favor of fixed-income funds, for example, the next step is subdividing 40 percent in sectors that are likely to outperform the bourse in 2004.

Although there are no quick guarantees if proposed tax bills will obtain sweeping approval from legislators, most investors see fiscal authorities working on schemes that would help improve direct investment flows required in capital-intensive sectors. Over and above prospects in the telecommunications and power-related sectors, most see opportunities in infrastructure and mining which have historically created multipliers relative to addressing sustainable employment. These sectors will likewise provide vehicles for authorities to earn recurring royalty receipts than having to rely on interim tax measures.

Second, rely on your instincts. If you’re looking into buying shares from a listed company that just doesn’t feel right no matter how much background research you’ve done, chances are it isn’t. Third, look into prominent industry leaders. If your appetite for risk isn’t too heavy, it would be best to concentrate your portfolio on a handful of best ideas. Lastly, it is important to always stick to a disciplined approach. Learn to weed out "noises" or those that are driven by news or rumors that do not make any sense. Have predetermined criteria in making your stock selection, specifically those that have good pricing power over the long term. It is always handy to remember getting into a stock where you buy good businesses rather than treating these on short-term basis. Remember also to have an exit strategy. It is always best to be content with modest gains than aim for excessive returns.

Lastly, when plunking in that extra cash into equities, make sure you’re convinced of buying Philippine-listed firms. That way you do not only reward yourself in number terms, but appreciate the "survivor" characteristic inherent among Filipinos throughout generations.

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Grace Crisostomo-Cerdenia is the general manager of and chief operating officer of 2TradeAsia. For your comments or queries, e-mail her at

Reported by: Sol Jose Vanzi

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