Tuesday, 7 February 2012

The Philippines needs PSE investors

Business Mirror

DURING the last couple of weeks, the green haze of envy has touched my heart.
All the nonbusiness columnists have been able to feast at a five-star buffet of subject matter surrounding the impeachment, with the public hanging on their every written word. Even the Showbiz and Lifestyle people have a new presidential girlfriend that everyone is interested in. Now, the hard-news folks have the Negros earthquakes to cover.

All I have to write is that the Philippine stock market has reached the highest level in its 84- year history on trading value of an unprecedented $175 million (not pesos) per day. Tweet about the impeachment and have 5,000 followers. Tweet about the stock market and have…significantly fewer followers.

Nevertheless, that is exactly the way it should be.

You see, we are not interested in something unless we have a vested interest, some skin in the game, so to speak.

For the political participants in the impeachment hearing, this is an opportunity to present themselves to the electorate, in a way a thousand times more exciting than talking about all the things they did for the republic in the legislature.

Media practitioners have the chance to display their insight while showing their wisdom in discussing a sometimes complicated subject. The opinion writers can rally those of a simple point of view to the cause whatever it might be.

And everyone else who is interested is only an observer because they do not necessarily gain anything from the proceedings. But anyone who is interested in the stock market is there because they have some money in the market. We are not observers; we are participants. We are the 1 percent. Well, actually we are the 0.01 percent of the Philippine population with an invested stock-market interest.

Stock-market investors are misunderstood. Nonparticipants really do not understand why we buy shares.

Someone asks if the increase in Philippine stock-market prices reflects the state of the Philippine economy.

The state of the economy is only a minor part of the price of listed issues. The stock market does not trade the Philippine economy. It trades the ownership of Philippine companies. The economy grew at 3.7 percent last year. BPI’s profits grew over 13 percent in 2011. And the share price of BPI reached a historic high yesterday.

There are economic worries about a property glut. Ayala Land just announced a 25-year, P60-billion investment in Fort Bonifacio Global City. The Ayala Land share price traded at a historic high yesterday.

Stock investors are criticized for merely being speculators and not building businesses. Excuse me. When I put my money into any venture from which I strive to reap a profit, it is a business. Sure, I could buy and sell dead pig meat, but I know more about buying and selling shares than I do about swine. And the piggery owner and I do our business for the same reason—to make money that we then spend on goods and services provided by other people who also spend their profits and income.

“But stock-market investors do not create anything.” Not true. We help create corporate value and wealth. The foundation of any business is the money put into that business. Businesses are given birth because of capital: money.

When you buy shares at a higher price than the day before, you have increased the value of that company. The company is worth more today because of your buying. That fact affects their borrowing costs as well as their book or intrinsic value.

The bottom line is that a person invests in the stock market to create personal wealth the same way that any business owner does. But isn’t the stock market a clear indication of non-inclusive economic growth? Yes, absolutely. And absolutely not.

Yes, absolutely in that no economic group has a direct share in my profits any more than at Shoemart.

Absolutely not in that all personal-wealth creation makes the economic pie larger and directly provides at least some inclusive growth. Where did part of the P21 billion come from to pay for the cash transfer to the poor? Investors, check your stock-transaction confirmation. You paid VAT. Your stockbroker pays taxes on the commission you paid.

The Philippines needs you, PSE Investor.

On a personal note, my one-day stock trading seminar “Your Money: Preservation and Profits” on March 3 in Cebu. E-mail me at john@mangunonmarkets.com and I will send you a brochure. Registration is strictly limited to insure you have the opportunity to get all the answers and information that you need.

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