Rainy yet still a busy week

The rains took much of last week’s regular activities as office hours were shortened and classes in schools on all levels were suspended from Wednesday to Friday.

But this was not the case for the market: Trading was not suspended and trading hours were maintained throughout the week.

Daily average value turnover for the week, however, dropped to P7.12 billion.  This was lower by P0.03 billion from the market’s performance the previous week but still higher than the daily average the week earlier of P6.39 billion.  Total volume was also down to 51.98 billion from 54.77 billion the week before.

No-school day policy

Over the weekend, the Department of Education (DepEd) suggested that to enable students to catch up with school lessons, they should be made to go to school on Saturdays.  Another suggestion is to hold additional school hours, like how it was done back in my time, and to provide take-home lesson modules similar to those used in home-study programs of today.  Schools may also use the extra days of the year earlier allotted as “buffer days” in cases of class disruption.

The DepEd says the current academic year consists of 201 school days.  This is inclusive of the so-called five-day “In-Service Training” break.  Make-up classes are, therefore, required to compensate for the “no-school days” suffered either from natural or man-made calamities.

This is also to comply with the required 180 days per school year policy of the DepEd for students in line with its goal for quality learning.

Speaking of no-school days, a worry among school kids is lost baon (allowance).  This was some kind of a difficult dilemma to young kids. The only exception was when the announcement of the suspension of classes was made after the baon was already given.

Last week when the rains were pouring, I felt myself smiling when I heard over the radio how a town mayor jokingly handled the question as to why he had not yet declared a suspension of classes.

The dialogue went this way:  Radio reporter: “Mayor, kalian ba daw kayo magdi-declare ng suspension of classes, tanong ng mga bata?” (Mayor, the kids are asking when are you declaring a suspension of classes?)  Mayor: “Sige, tanong mo sa mga bata kung ngayon na o pagkatapos na maibigay ang baon” (Okay, ask the children if they want it now or after they have received their allowance).

Grexit

Another matter that occupied the market last week was about Greece’s debt crises and its possible exit from the European Union (EU).

Local observers share the same familiar sentiments expressed by creditors that Greece’s present financial woes were the product of faulty mindset and lifestyle.  They likened them to the grasshopper in the story of “The Grasshopper and the Ant” of Aesop, the fabled “slave and storyteller believed to have lived in ancient Greece between 620 and 560 BCE.”

The story gave a lesson on the virtues of hard work and planning for the future—virtues, paradoxically, taught by a Greek to the world but missed by Greece itself.

Greece is estimated to owe more than US$300 billion.  Its latest annual GDP is estimated at $240 billion.  Unemployment is at 27 percent and some 300,000 small businesses have reportedly failed since 2008.

Last Friday, the government of Prime Minister Alexis Tsipras prepared a new bailout package that purports to take into account demands of creditors on spending cuts, pension savings and tax increases.

The package was overwhelmingly approved the following Saturday by the Greek parliament with a “yes” vote of 251 out of 300 members.  Despite the outcome, however, some stalwarts from the ruling Syriza Party from where Tsipras belong abstained or voted against it.  Like most Greeks who recently voted against new spending cuts and austerity measures, they felt betrayed by the move.

They still believed that past austerity programs have shrunk Greece’s economy.  It has shrunk the gross domestic product (GDP) of Greece faster than it reduced Greece’s debt.  As opposing quarters insist, “it drove up Greece’s debt ratio rather than down.”

The acquiescence by Greece, also present another collateral challenge to creditors: This is about taking another haircut or write-off on Greece’s debt for the sake of fostering unity and providing for the stability of Europe as a regional bloc.  Greece may still not be able to service its liabilities without significant debt relief.  Without which, it is claimed that Greece may “continue to be condemned to repeat indefinitely this pointless cycle of assistance, austerity, and more assistance.”

But Greece is still in real danger of being forced out.  It is only about 2 percent of the total economy of the euro zone.  And the cost to creditors of keeping Greece in the union is still higher than the benefits they may receive.

Yet, the option of keeping Greece in the euro zone appears to be a better alternative.  A modified but immediately denied proposal of temporary exit by Greece (like a five-year suspension but with “aids”) is going the rounds.

As of late, both parties appear to have settled for an agreement that will somehow allow creditors’ demands and which is soft enough for Greece to recover and repay creditors.  Present geopolitical developments also point to a stable and united Europe.

Bottom line spin

Closer to home, China’s stock market is also in trouble.  As of last Friday, reports say it has “left investors US$3 trillion poorer.” The good news is that—after a series of interventions that culminated in suspensions of trading and strict instructions of preventing management members and big stockholders of listed companies from selling—the market managed to be “still 70 percent up” on a year-to-date basis.

The bad news is that stock prices are still within the price-earnings multiples (price-to-earnings ratio) of 100x or thereabouts.

In the US, forward estimates for S&P 500 stocks point to a 16.5x price-earnings multiple as of last Friday.  This is said to be 10 percent more expensive than its historic average of 15.

Last Friday, too, price-earnings valuation of benchmark PSEi stocks is estimated at 20.22x while it was 17.33x for the broader All Shares index.

(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)