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Market Rider

It’s not about being right, it’s about making money

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Even with a shortened trading period of four days last week—in observance of the birth anniversary of Philippine hero Andres Bonifacio on Friday, Nov. 30—the market still managed to make a major advance equivalent to 88.11 points or 1.59 percent on the main index at 5,640.45 which, incidentally, was another all-time high.

The market has been posting record highs since Friday the other week, all the way to Thursday last week.

What fueled this strong performance of the market was the news on the economy’s third quarter growth record.  It surprisingly surpassed all expectations as it grew by 7.1 percent, logging a record pace regarded as “the fastest ever posted by the economy in the last two years.”

In this connection, National Economic Development Authority (Neda) Director General Arsenio M. Balisacan additionally described it as “the highest in the Asean.”

In comparison with neighboring countries, the Philippines indeed did very well.  Indonesia, the biggest economy in the region, was second only with 6.2 percent.  This was followed by Malaysia and Vietnam with their respective performance results of 5.2 percent and 4.7 percent, to take third and fourth place.

Thailand followed as far fifth with 3.0 percent; and Singapore, lagging much further behind to be the region’s bottom dweller for the period, with only 0.3 percent.

China, however, remained as the top performer for the whole of Asia with its 7.7 percent GDP growth record in the third quarter.

 

Source of growth

On the “demand side,” more than half of the country’s growth in the third quarter was said to have come from household spending which was enhanced, accordingly, by the “slower movement of prices, as headline inflation averaged 3.5 percent from July to September 2012.”

Also, household expenditures were apparently stimulated by the “continuous improvement in consumer confidence.”

As reflected in the report of the Bangko Sentral ng Pilipinas on its “Consumer Expectations Survey in July,” respondents expressed approval for the economic direction of the country.  They “cited greater availability of jobs and more employment as one of the factors for their positive outlook.”

Contributory to higher household expenditure was “the steady inflow of remittances.” This was supported by the continued rebound of the export sector which, as previously reported, stood at negative 14.8 percent in the same period last year.

Per findings, remittances from overseas Filipinos “grew by 4.2 percent in peso terms” while the export sector grew by 6.7 percent driven by “the surge in the overseas sales of metal components (466 percent), telecommunications (473.8 percent), and office equipment (106 percent).”

In his briefing with the press, Balicasan further reported that export receipts of semiconductors and electronic data processing equipment grew to 8.3 percent from a negative 1.8 percent in the same period last year.  He went on to explain that this may mean that manufacturers have been stocking up on intermediate inputs in anticipation of a recovery in the global demand for electronic products.

Per record, too, growth in the export of goods was reinforced by the increase in the export of services which grew by 7.6 percent due to growth in the business process outsourcing (BPO) sector and “miscellaneous services, which grew by 10.2 percent, up from 6.6 percent last year.”

The economy also experienced what Balisacan described as “a huge turnaround” in connection with the spending for construction of physical capital.  It increased by 24.3 percent from a negative 8.8 percent of the same period last year.

Growth was led by both private and public construction.  Public spending on construction grew as “backed by the 38.4-percent expansion in government’s capital outlay for roads and irrigation projects.”

Private construction was generally accounted for by “the demand for office space due to the strong outlook of the BPO sector [and] of residential properties” by individuals riding on the favorable condition of the economy.

To cap the report on the demand side, government spending also expanded by 12 percent largely due to the increase in the cost of personnel services which “grew by 11.9 percent due to the implementation of the last tranche of the Salary Standardization Law.”

On the “supply side,” services had the biggest share.  As reported, it amounted to about 58 percent of GDP led by trade which grew by 7 percent.

Transportation grew by 5.5 percent.  The decline in domestic petroleum prices was cited as the main reason behind the said growth.  Communication storage, on the other hand, additionally boosted further growth with its 9.6 percent performance record.

Agriculture also posted good performance.  As described in the report, the sector experienced a “big increase in palay and corn outputs following the government’s food security program.”

For the industry sector, manufacturing grew at 5.7 percent.  This was “a marked improvement from the 2 percent increase in the same quarter last year,” Balicasan said.

“Hopefully, the industry would expand much faster” with the manufacturing sector to provide higher quality jobs that are also more stable and remunerative, he added.

He expressed the same sentiments with the fishery sector which was still a big letdown up to the third quarter, as it registered negative growth.

Due to the foregoing report, popular GDP growth forecast for 2012 has been adjusted to 6 to 7 percent.  The government, on the hand, is sticking to its original forecast of 5 to 6 percent.

Bottom line spin

Amid this performance of the economy, our local market has been trading better than most equity markets in the region and the world over.  Its record close of 5,640.45 last week was the market’s 32nd high established for the year.

When it closed at 5,424.51 in October, too, the market has chalked up a total of 215.94 points or 3.98 percent as of the end of trading last week at 5,640.45.

At last week’s trading close, too, the 2012 popular market objective of 5,600 was breached in the process.  With the way our local market continues to be influenced by trends on Wall Street, it is very likely that the market will continue to advance.

This advance, though, may not be broad or across the board as the market is propelled by a select number of stocks only, which could be indicative on how the economy is working.  As such, some factors may now be working against its further expansion.

For one, the peso is becoming too strong.  Last Thursday, the peso stood too high at P40.90 to the dollar.  This may affect the competitiveness of local products and services and, ultimately, consumer spending ability if not properly addressed.  Added to this, the possibility of cutting interest rates—which reciprocally augurs well for the stock market—would lessen as the economy expands.

The government should, therefore, act faster on urgent measures to support the higher growth rate of the economy and to continue to enjoy its benefits.  Until then, the market may suffer from what is called “anti-climatic outcomes.” Like in the stock market, trading “is not about being right but about making money.”

(The writer is a licensed stockbroker of Eagle Equities Inc.  Market Rider can be reached at marketrider@inquirer.com.ph, densomera@msn.com or www.kapitaltek.com)


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  • http://pulse.yahoo.com/_47AS3MXEHKUW6IEMD5W3CCDWKQ gary

    In Stock Market Investing, Degree of Difficulty does not count. The best Investments are the easiest to make. It is best to be approximately right than precisely wrong. A fall in price is a buying opportunity if the basis of the initial purchase is fundamentally sound. Buyers of equities in the next 5 to 10 years should wish low prices as it is only sellers who wish a high price. Money is made in the stock market by buying and owning outstanding businesses for  a long period of time.

  • http://profile.yahoo.com/EM2FA65QYG7PNMLCHAHWS5WE5M Conrado JrC

    Sir Somera,

     

    Can you make money from the stock investment that you make if you
    are not right in the first place?  

    In the stock market you don’t need to be 100% right to make money.
    but you need to be right in your decision what equities you need to buy, even
    you are only 1% right but you are in the right place and right time for the big
    moves, then it will offset your losses on those 99% trades that you made
    losses.

    If you are not right you need to push your stop loss, because it
    did not turn out the way you expected it to be. So you are not right, then you
    did not make the money so you need to cut your losses. So, if analysts are not
    correct that economy will only grow only between 5-6 percent then they only
    underestimate their projection of the economy. But still, they are correct that
    the economy will grow so in essence in your stock market analogy they still
    make money if you put your money on an equity that will move upward. Just like,
    technical analysis will tell us, it cannot tell you the absolute high and
    absolute low of the equity but it will tell you the portion of the high and low to make the right decision to make money.

     

     

    pwede ba ako mag apply sa eagle equities? as
    salesperson J Just passed the SCRE last August 2012 first time J

     

  • Topioquin

    The author of this article is clever enough to send a statement to his clients that he is going to make their money make money. When a bloodbath happens in the stock market, I’ll wait for him leap from the 40th floor. 

  • rem_rod

    Still manufacturing lags in expansion at 5.7%. Mr. Aquino should address this shortfall as only manufacturing can bring long term assurances of growth and decent jobs in the future. All industrialized countries went through the same birth pains of an emerging economy but once this is addressed we maybe in for a smooth sailing. Congrats to all Pinoys..   

  • help_our_country

    If the writer of this article…Den Somera likens our economy to stock market,then our economy should be handled by above average trader who knows the importance of winning the market.Not to be handled by just average trader who just want to make money not about of being right.

  • investor888

    A good report as it details the sectors that contribute most to our economy at this point.  The profitable business where an investor should invest.  Also, I think that we should now focus on sustainable growth rather than faster growth but unsustainable in the long term esp. with the fast appreciation of the peso.  I believe BSP has the tools to achieve this.

  • http://pulse.yahoo.com/_47AS3MXEHKUW6IEMD5W3CCDWKQ gary

    The author is not advocating anything illegal. In the stock market, you  can do a lot of right things and still lose money. In Investing, our chief enemy is likely to be ourselves. There are no moral values involved in the stock market for the average Investor that will get you to hell or prison , it is a market , there is a buyer and seller. Its either you lose or make money.Predicting rain does not count, building the ark does.

    • http://www.facebook.com/flowsotelo Florenz Ryan Sotelo

      I agree, in the context of Stock Market, it doesn’t matter if your Analysis of the Economy is “Correct” or “Right,” because making money in the stock market is also about the trader’s Gut Feel. So, in effect, I agree with the title that it is not about being Right as long as you make money. It is not about having the right moral, but having the right market decisions that matters. This is what a lot of Filipinos lack in this country, the ability to Invest Effectively.

  • TagaMlang

     ”Like in the stock market, trading “is not about being right but about making money.”
    To the writer of this article, I hate to say this, but I think you have a distorted sense of moral values.  What you are saying is, you don’t care if you are not doing it right as long as you make money.  This is a sure way to go to hell (or to prison).  If you have children, please don’t teach them this way.

  • http://pulse.yahoo.com/_47AS3MXEHKUW6IEMD5W3CCDWKQ gary

    We have good news here.NEDA just approved major Infrastructure projects well worth over 100B . For that , we should be thankful as a nation as these Projects finally got legs to stand on . Our economy is fundamentally right, we got 82B in foreign reserves , an investment rating that is just a notch below investment grade, booming real estate, high approval ratings, the stars are aligned in our favor, all the stakeholders have to do is execute which is now finally happening. In any argument the pessimists always sound convincing.

  • EdgarEdgar

    Like in the stock market, trading “is not about being right but about making money.” — Den Somera

    NEDA Chief Balisacan is the exact same opposite of his predecessor Mr. Paderanga. The latter has a clear dislike for fudging, flattering and flowery pronouncements. Mr. Balisacan on the other hand feels very much at home in playing ball with the administration and playing up the numbers at the pleasure of the president. The author of this article misleadingly likens the economy to the stock market as if they are one and the same, or reflective of each other. Even in developed economies like the US, stock markets do not necessarily reflect the overall performance of the real economy, lag effect or not. And more importantly, the real economy is not a trading floor where everything is about making a quick buck regardless of the harm and unforeseen ramifications on others. Our real economy has to be fundamentally right to spur and sustain long-term growth. Anti-climactic or not, Mr. Somera should just keep his short-sighted irresponsible statements to himself.

    • help_our_country

      “The incumbent NEDA chief misleadingly likens the economy to the stock market as if they are one and the same, or reflective of each other.”as you said.Is it NEDA chief or the writer of the news…Den Somera likens the economy to stockmarket,just asking?

      • EdgarEdgar

        You´re right. Thanks for pointing this out. (corrections made).



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