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Political smoke
chokes stock market The US stock market is in a rally mode, hitting its highest level in nearly two years, and driving other markets elsewhere in the world upwards as hopes are high for an expected economic recovery by the early part of next year. The Philippine stock market, on the other hand, is still in the doldrums. After reaching the 1,400 level, the main composite index is now back at 1,300 points, a drop of a little less than eight percent in just two weeks. In an earlier column entitled, "Real or Artificially Induced Rally", (Philippine STAR, 30th June 2003), I noted that many were non-believers of the stock market buoyancy then. The view was that the market rally couldn’t be sustained as conditions that dampened market sentiments in the past are still very much around us. Too much political bickering, the alarming state of peace and order condition, unabated smuggling and illegal business activities, among others continue to plague us. The current state of the stock market just confirms once again this view. Negatives Overshadow Sterling Results From early indications, it seems like portfolio investors are heading to the exit doors, unmindful of the fact that most of the leading local companies have in fact reported better-than-expected earnings for the first nine months of the year. Take for instance top-performers and market favorites PLDT and Globe Telecom, both of which reported sterling performances on the back of the continued growth in their wireless subscriber base. PLDT, the country’s largest telecom network, posted a third quarter net profit of P4.01 billion, several fold higher than the P958 million it registered a year earlier. It added close to 1.2 million wireless subscribers in the third quarter alone to increase its total subscriber base as of end October to over 12 million. Its shares in the local bourse are however headed towards the opposite direction. After having risen to over P845, the stock was last reported at P725. Globe Telecom, for its part, booked a 70 percent year-on-year surge in net profit to P7.5 billion in the nine months to September, after recording its highest-ever quarterly wireless subscriber take-up in the third quarter. As of end-September, its wireless subscribers totaled 8.10 million, up 36 percent from the year-earlier level. Globe’s share price, however, is down to P770 from its previous high of P840. Analysts described the market’s early declines as profit taking after recent gains. But as the drop goes deeper and with the charts showing that it was mostly foreigners who were selling out, analysts themselves have started to doubt their claim. It Isn’t Just The Stock Market The sad part of the story is that the listlessness is not just in the stock market. The exporters are in the dumps as well. Immediately after the July military uprising at the country’s premiere business district, overseas orders started to post a decline, ever more worried about Filipino exporters’ capability to satisfy demand amid lingering political and security concerns. Exporters with manufacturing facilities also started rethinking their plans for expansion and seriously looked at relocating out of the Philippines. Apart from the political instability, there were also the nagging issues of uncompetitive power cost, labor restiveness, and inadequate infrastructures, among others. How far are we from the country’s export growth target of five to eight percent for the year? As of end-September, sales overseas have grown almost flat at 0.4 percent over last year. Higher Interest Rates Forthcoming On the other hand, the cost of doing business is on the upswing with the series of oil price and electricity rate hikes. With the political environment heating up, there are also ominous signs of interest rates escalating, prompting government to scrounge for funds this early to meet next year’s requirement. Prospects for local industries to go ahead with planned expansion projects are also getting dimmer. With a laggard stock market and lower exports, new foreign investors not in sight while existing ones are on the verge of leaving. Any wild guesses where our economy is going? FPJ, Kabayan, Comelec Computers Sadly, however, the public nowadays is pre-occupied with whether FPJ or Kabayan will run or not. And no one, not even the national leadership, will take corrective action to cure our economic ills for fear that it may be politically unpopular. In the meantime, we watch and ponder what lies ahead after the smog of politics clears the air. Will the ugly head of politics vanish after the May 2004 elections? Well, it depends on what results the Comelec computers will churn out.
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