Political concerns behind market drift
The market zigzagged last week, starting with an advance on Monday, followed by a decline on Tuesday and, then, proceeded with this order of trading results all the way to Friday.
By the end of the week, the zigzagging produced a small gain for the market which may not be considered of any significant consequence. The market’s gain was only 20.88 points or 0.27 percent.
Small gains (or small losses) cannot just be dismissed or taken lightly as market norms dictate, at times. This is because any uptick (or downtick) is always a potential turning point for the market. This is especially true when value turnover is relatively low (or markedly high) like in last week’s market.
Total value turnover during the week was only P31.95 billion, which translates to an average daily value turnover of P6.39 billion.
Comparatively, this daily average of the market for the week was low. The market’s year-to-date daily average—after 26 weeks of trading since the start of the year—remained high at P10.07 billion.
Several observations may explain why: Except for Friday, foreign investors were net sellers for the rest of the week. Their market activity also remained high at 55.55 percent of total business transactions. At the times of high trading activities, market results often followed the trading leads made by foreign investors.
For instance, trading results on Thursday ended lower from the previous day even if daily value turnover was 26.13 percent higher at P8.09 billion. The market’s resulting loss was 61.42 points or 0.80 percent. Of note, foreign investors were net sellers for the day.
Incidentally, the percentage of foreign investors’ market participation to total market business transactions on Thursday rose to a high of 58.92 percent.
In addition, as soon as foreign investors’ market activity tipped over 50 percent of total market business transactions early this year, daily trading results have since noticeably followed foreign investors’ leads: The market always ended with a gain whenever foreign investors were net buyers. Likewise, trading results ended with a loss whenever they were net sellers for the day.
Underlying factors
Over and above related trading issues, it’s not for the lack of good fundamentals that the market has softened and drifted downward since April. On the contrary, it is precisely for its good fundamentals and present gains that it is now trading as such.
To reiterate, the market’s decline has been due to foreign investors’ selling activities. Their market activities had been significant enough to influence market results. Amid it all, they were pocketing earned profits.
This is happening largely on account of the growing concern on what will happen after the expiration of President Aguino’s term, especially to the administration’s priority projects and programs that had produced growth headways for the country in the last five years.
As of today, the answer is unclear. What is clear, however, is that aside from the serious corruption issues hurled against Vice President Binay, the long-time front runner for the presidential race, he comes from a political party (other than the present ruling party in government) that undeniably bears his personal seal of leadership.
This is compounded by his recent resignation from the Cabinet and his critical comments against the administration despite his personal ties with the incumbent president and active participation in government decisions and initiatives in the last five years. It also raised alarm bells for a possible déjà vu.
After the Edsa revolution that saw the fall of Marcos, all presidents that followed rolled out policy goals that did not continue, much less supported, Marcos’ priority projects and programs. As a result, meritorious efforts of the past were put in the back burner or, worse, replaced with entirely new projects and/or programs that effectively threw away gains that did not reflect their hand.
The same fear is also felt with the possible ascendancy to the presidency of Sen. Grace Poe, the recent front runner for the position. She does not belong to any political party and is obviously without a ready machinery to govern.
Though her being party-less is perceived to be a personal advantage in the favor of Senator Poe, it does not augur well for the country’s long-term prospects. Like the candidate with a political party, her being without a party could hamper her personal appreciation to continue and support good projects and programs of the previous administration. The lack of a team ready to perform will be one big limiting factor in accomplishing wide-ranging goals in the shortest possible time, too.
In the end, this will cast her in the same situation as a candidate with a political party and political agenda.
Bottom line spin
As defined, “a political party is an organized group of people with at least roughly similar political aims and opinions, that seeks to influence public policy by getting its candidates elected to public office.”
Referring to the experiences of other more politically mature and advanced economies, we find the practice of continued election to power of a political party and its representatives as a key factor to development growth and general progress. It fostered stability and produced cumulative long-term development gains.
Individual popular leadership rarely produced lasting gains. As we have seen it ourselves in the local scene, they have always rendered good but previous efforts to naught.
Foreign investors fear this inevitable consequence. The general electorate is still perceived to be largely focused on personalities. Unchecked, this kind of mind-set will still definitely determine the outcome of the next presidential election.
It is, therefore, very possible that much of the headways earned from the current administration’s projects and programs will again be wittingly or unwittingly put in the back burner or completely put to waste as they were in the past.
Admittedly, there are no clear signs yet where the remaining 270 days or so of the Liberal Party-led government will go from here. Until then, market conditions will remain soft. Foreign investors’ trading activities will be confined to practical short-term considerations like taking the profits they have earned, so far. This will, in turn, drive the market to continue moving sideways to lower in the coming days.
(The writer is a licensed stockbroker of Eagle Equities Inc. You may reach the Market Rider at [email protected] , [email protected] or at www.kapitaltek.com)
