Further stock market meltdown seen
Closing one day earlier to observe a national holiday in honor of the 32nd death anniversary of President Aquino’s father, Sen. Benigno “Ninoy” Aquino, the Philippine Stock Exchange index (PSEi) and All Shares index respectively closed lower last Thursday at 7,278 and 4,158.12.
The PSEi ended with a weekly loss of 129.46 points or 1.75 percent, while the All Shares index lost 83.16 points or 2.05 percent.
Unsettled by more negative developments like China’s ongoing economic issues that observers say will slow down worldwide growth “and even hit the relatively strong US economy,” Asian markets also closed lower last Friday “with losses of more than two percent.”
The US and Europe followed suit.
The Dow Jones Industrial Average index fell down sharply by 530.94 points or 3.12 percent. The S&P 500 and Nasdaq were down 3.19 and 3.52 percent, respectively. The fall was described as “its worst week since September 2011,” and reportedly was lower “more than 10 percent from its all-time intraday high in May.”
But the trading did not seem to be a total mess after all. It saved, or at least mitigated, another certain market decline. It also kept investors away from unnecessary risks and/or problems from Typhoon “Ineng” (international name: Goni). As it hammered the northern part of Luzon last Friday, the typhoon made it also difficult for normal activities to go on in other areas like Metro Manila.
Considered also as a negative development, but may still prove positive not only for the Eurozone but for markets around the globe, was the decision last Thursday of Prime Minister Alexis Tsipras of Greece to resign and call for snap elections, to be held as early as September 20.
If it works out, the snap election is expected to eliminate the rebellion in his leftist Zyriza party that is already weighing him down. It may also seal a stronger public support to Greece’s third bailout program.
The rescue package was all that kept Greece from a disastrous Eurozone exit. It came, however, with a price. It had strict terms on spending cuts and additional taxes—the very measures Tsipras pledged to fight when he won the elections in January. His move now leaves the government of Greece in some standstill position until the vote.
In like manner, our market may continue to be in some standstill position as it awaits more developments to unfold in the following days.
TNCs and partners
The Bureau of Internal Revenue (BIR) and the Land Transportation Franchising and Regulatory Board (LTFRB) will review ways on how to track the earnings and tax payments of transportation network companies (TNCs) like Uber and Grab Taxi, which may also extend to tracking the earnings of its contractors or “partners.”
This came after Uber filed accreditation papers and got approval last week from the LTFRB to legally operate as a TNC, prompting the government agency to also advise TNC partners to seek franchises under the transportation network vehicle service (TNVS) category.
As the BIR will now look more closely into TNCs’ earning records, it will also effectively make the days of “fabulous earnings” of TNC partners numbered—that is, if we are to believe the claims posted on social media.
These public posts boldly claim “their earnings are far from prying eyes” of other parties, including related government functionaries involved in tax levy and collection.
Partners of TNCs are considered non-fixed income earners. They issue receipts to their customers online, which at the moment is apparently difficult to monitor.
With the recent development, “the BIR might soon come out with a regulation covering drivers of Uber vehicles and other TNCs,” BIR Chief Kim Henares said last Wednesday. “The TNCs and their contractors are considered all business enterprises that have tax dues that must be paid correctly,” she added.
TNC partners say the work is a lot of fun. With the platform, it would seem as if they have their own businesses. They own their time and they get to know a lot of interesting people.
While seemingly amazing, TNC partners are classified as independent contractors. As such, they receive no hourly wage or fixed compensation. They only make money when they have passengers and do not enjoy social security benefits that come with regular employment.
The job is also tough on their cars. As their vehicles gather mileage, future maintenance would cost them a fortune.
Users also claim “horror stories,” which negate anecdotal testimonies in favor of the ride-sharing services.
These “horror stories,” some of which became viral on social media, show that despite TNCs’ claims of proper due diligence, they still fail to secure the safety and comfort of the riding public.
“When you agree to Uber’s (and similar TNCs) terms and conditions, you basically sign your life away,” US consumer advocates have complained.
Journalist Dara Kerr has an interesting article on CNET last October on the subject. The article entitled “How risky is your Uber ride? Maybe more than you think” quoted lawyer Chris Dolan as saying, “What exactly do passengers agree to when they use Uber? That depends on whom you ask … People don’t know what they’re getting into when they get into one of these cars, they don’t know what they’re getting into when they download the app.”
Dolan represented a 6-year-old girl struck and killed by an Uber driver earlier this year. “They’re giving Uber a free pass—up to death,” he said.
Bottom line spin
In summary, the market was down last week by 1.75 percent at 7,278.98. Compared to four weeks ago, it was down by as much as 5.04 percent. Compared to where it started at the beginning of the year, the PSEi’s performance last week was only ahead by 0.67 percent.
In the meantime, average P/E (price-to-earnings) ratio has substantially gone down to only 19.96x.
The same story goes for the All Shares index. At 4,158.12 last Friday, it was down for the week by 2.05 percent and lower by 4.96 percent from where it was four weeks ago. The market is now actually 2.50 percent below its starting point at the beginning of the year. The average P/E ratio has likewise gone down to as low as 17.23x.
As indices appear low enough, reentering the market may still have to be postponed. Lingering global growth jitters continue to rattle world markets that “more market weakness is expected to come.”
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
