02 downmove of stocks 2013 june
DESCRIPTION
TRANSCRIPT
Philippine (& ASEAN) Stockswere Affected by Fed Chairman,
Ben Bernanke’s …statements
Investor: searching, where to invest…
Low price, good potential
UP 62% since Jan 2012
Philippines:DOWN 16% since May 22
Reasonable to expect a “rest –period”
June
330
200
50
300
1600
2800
5
25
40
595
450
200
1200
4000
6100
Marathon
Level of
2000
7300
No pause, for rest… ? Even
Runners pause to rest...
Year 2009
January 2013December
2013
“Shot uptoo soon”
Fundamentals are Intact.
Mostly U.S. Investors, have fled…
7300
25%
5800
Good News
Credit rating: investment grade.
? June-AUG ?
January 2013December
2013
It was a “SPIKE UP”
Possible Path ? till December
7300
25%
5800
TOO SOON !
? Sideways Move?
0%
US $
IF U.S. Economy...
“I think, I MIGHTSTOP...Q-E”
IF...?grow-ing fast?
1%
?Last week:
Bonds!
Stocks!
Zero %US $
U.S. Economy
Lower Interest Rates
“Very Slow”$ “escape” to Asia
Back- ground to the Story
How to ... REV UP ...the ENGINE
Zero %US $
U.S. Economy
Lower Interest Rates
REV UP ENGINE
“Very Slow”$ “escape” to Asia
Why ‘REV UP’ the engine?
U.S. Economy is growing, too slow.
Stimulate it!
Overheating: inflation
Depression: No Jobs
bad
badbad
US economy: cycle
“Cool OFF” the Overheating
“Stimulate” to ward off Depression
Best Case!
“Cool OFF” the Overheating
“Stimulate” to ward off Depression
Best Case !
Two ways to stimulate the economy: 1. Government spends
2. Lower... interest rates
“Stimulate” to ward off Depression
Government spends, to “prime
the pump”
Lower Interest
Rates
If ...US Economy is WEAK … Growth is SLOW...
“Stimulate” to ward off Depression
Government spends, to “prime
the pump”
Lower Interest
Rates
If ...US Economy is WEAK … Growth is SLOW...“Quantitative Easing”
… “Q.E.”
0%
US $
IF U.S. Economy...
“I think, I MIGHTSTOP...Q-E”
IF...?grow-ing fast?
1%
?Last week:
Bonds!
Stocks!
ASIA
USA
US $
US $
Dollars “FLED” to the Mainland USA
ASIA
USAUS $
Asian Markets
FELL
Philippines:-16% since
May 22Indonesia:
-5%Thailand:
-6%
First time to see RED?
Philippines:-16% since
May 22Indonesia:
-5%Thailand:
-6%
Declines happen, every year !
Get used to it !
2010: -14%
2011: -14%
2012: -7%
Three DECLINES. In every instance, the market recovered,
and moved up higher.
One or Two, per
year
2010: -14%
2011: -14%
2012: -7%
RESILIENT AND TOUGH
One or Two, per
year
DESPITE ...30...typhoons ....every year
Once this market
recovers...
HOT MONEY
will come galloping
back
+
PSEI Index
2008
2013
Observation: the market RECOVERS
Survival against Earthquakes
PSE “index” of the top 30 stocks
1988 - 1991
PSE “index” of the top 30 stocks
1992 - 96Survival against Pinatubo
PSE “index” of the top 30 stocks
1993 - 98Pinatubo, Asian Fin’L Crisis
PSE “index” of the top 30 stocks
1997-2002Money fled to USA internet bubble
PSE “index” of the top 30 stocks
1997-2002Europe Crisis. Greece...
PSE “index” of the top 30 stocks
2009- 13
Spike UP +Ben Bernanke
Mouse on the edge
Decision-making, under uncertainty
Will it rain tomorrow?
I will bring an umbrella
I will bring an umbrella
I won’t bring an
umbrellaNO
Maybe
Yes
Decision-making, under uncertainty
Will the market
rebound?
I will avoid stocks forever
Buy stocks, between 6000 and
5000
Buy stocks, between 7000
and 6000Yes, at 6000
Yes, at 5000
No.
6000
Yes, the market will rebound at 6000
This implies, the economy is still growing, Business is still good.
New batch of investors will
arrive...
5000
Yes, the market will rebound at 5000
This implies, the economy is still growing, Business is still good.
New batch, was delayed, due to traffic.
1500
“No, the market will never rebound”
This implies “total devastation.”
Even the locals are emigrating.
Extreme pessimist:
Intramuros
*BACKGROUND TO THE STORY
Interest rates have declined in the Philippines: > good news for businessmen,
> bad news for lenders or for bond investors who “hold to maturity.”
Interest Rates Less Risk factors Lower Cost of Borrowing…
2002 2008 2015
10%
6%
1%
2013
14%
Time Deposits, Cash …
PHIL. Bonds… PHILIPPINES
High vs LOW PER
Expensive Stocks Cheaper
Stocks
Money USUALLY flows from the
Towards the ....
QUIZ
Philippine PER : if deemed HIGH
Rest-of-the-World PER: if
perceived to be LOWER
What is likely to happen ?
What will happen next?
Using the PER of Phil Index = Market Cap / Earnings.
??
Philippine P.E.R.: if LOW
Rest-of-the-World P.E.R.:
if HIGH
IF so, then Money would flow to_____?
Proxy variables are PER of theUS indexes, UK, Japan indexes.
Using the PER of Phil Index. = Market Cap / Earnings.
??
Expensive Stocks
Stocks with great
Potential
Cheaper Stocks
QUIZ: what if the money keeps flowing into the expensive market?
Why is the Philippine stock market –continuing to rise?