9:00am Wednesday 7 April 2010 Philippine Stock Exchange Index 3253.48 (+2.093)
It was a day when absolutely all the most actively traded stocks had closed up for the day. I really liked the market as I came to the office Tuesday morning, but I did not expect for the index to rise by 66.71 points. What puzzles me more is that, in the face of the uncertainty of the coming elections, stock prices continue its march forward. The market may be telling us something here.
There are a few things that contribute to this positive outlook. There is the economy that looks like it is sustaining its recovery. If you recall, Meralco power output was up 22.4% in January. Well, the same economists who use Meralco power sales as a surrogate for economic activity told me this morning that the number is up again in February, this time by 14%. The telling information is that the growth is coming from industrial sales of electricity. That indicator is consistent with the export volumes that are also increasing.
Of course, there is also the pumped up consumer spending arising from the campaign activity among candidates. All around the country, we see printing presses humming loudly, T-shirt makers busily cranking up more of their colorful rags and eating places full of campaign volunteers who mill around after campaign sorties. Everybody is using their cell phones more frequently and surfing the internet more frequently. This is on top of the raised level of spending on soft drinks, juices and in some occasions – beer. There seems to be a level of enthusiasm and possibly hope that accompanies this election in spite of all the fears and anxieties that have been raised about failure of elections, GMA machination to extend her term and even a possible post-election Junta.
We had expected that consumer spending would be raised, but the Meralco sales that I mentioned earlier, if you break it down by type of consumption, indicates that the increase in use did not come from consumers but from industrial users. You can view a monthly economic and market publication at called “The Market Call” at http://www.fami.com.ph
to get more details of economic indicators.
So is the market “irrationally exuberant”? Are investors throwing caution to the wind unmindful that things could go wrong between now and May 10. For one, I do not think that and punters alike do not read the newspapers or watch news broadcasts on television. Practically all possible post-election scenarios have been expressed by our highly opinionated newspaper columnists and radio/TV commentators, so everything looks to be out in the open. This to me is the process of “discounting” where investors look at the possible even risks, super-imposes the information against macroeconomic and company fundamentals, makes their own conclusion and vote with their money. Yesterday’s market had value turnover of over Php 4 billion which is a high level of participation in this market so the sentiment appears to be widespread. Judging further from research coming from both local and foreign stock brokers and investment firms, it appears that investors are looking beyond the election already.
The question is “does this make sense?” Personally, I would still be prudent because investors should always be and that is 100% of the time. This means that I would not be fully invested at this point of time. If I have good level of profits, I would top-slice, i.e. sell part of the portfolio to cash in. Furthermore, I would sell all of my weak issues even if it were at a loss and just stick to strong liquid issues.